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Zimpler has appealed an order from the Swedish Gambling Authority (SGA) to cease the provision of payment services using BankID to companies without a Swedish gambling licence.

Order background

The SGA issued the order on 6 July as it said: “It is clear that Zimpler cooperates with and offers its payment service solution containing BankID to gaming companies that lack a Swedish gaming licence.

“In light of the fact that BankID is an e-identification service that is only used by Swedish customers, the SGA assesses that the gambling companies [in question] are targeting the Swedish market.”

The regulator therefore demanded that Zimpler stop offering its services to any unlicensed operators by 31 July, and suggested the company would be issued with a SEK25m (€2.1m) fine if it did not comply.

Zimpler response

Zimpler already announced that it would follow the SGA’s order in May, but added in a statement today (21 July) that it has opted to appeal the decision “as it affects Zimpler and raises legal issues that are crucial to clarify, not only for Zimpler but for the entire industry”.

The process of ending its business relationships with operators that do not hold a Swedish licence began in Q2, with the intention of concluding the process in Q3.

“Zimpler’s decision to terminate the agreements with the affected iGaming companies is part of the company’s strategy to contribute to a sustainable payment market through financial services with increased consumer protection,” it said. 

However, the supplier will appeal the decision as it believes it is “misdirected and incorrect with far-reaching consequences. The decision affects the company negatively because its commercial ability to act is limited in a way that is not supported by law”.

Points to clarify

Zimpler said the decision also contains several legal issues to be clarified in court, in order for payment service providers to be able to conduct their business without risking interventions from Swedish authorities.

One of those questions is to what extent the promotion of a gambling offer which is not in itself illegal can be considered “illegal promotion”.

Further, Zimpler hopes to clarify under what conditions a gambling operator without a Swedish licence can be considered covered by the Swedish Gambling Act, and the significance of the use of BankID in the payment chain when making that assessment.

Finally, the company wants to determine how Swedish gambling legislation relates to the free movement of services, including payments, under EU law.

“The appeal is also a measure to ensure legal certainty in companies’ relations with the authorities,” said Zimpler CEO Johan Strand.

“Companies must be able to plan and conduct their operations with predictable application of laws and regulations. It is a fundamental principle – both in Sweden and within the EU,” he concluded.

The Swedish Gambling Authority (SGA) has ordered payment solution provider Zimpler to cease providing its services to gambling firms without a Swedish licence.

Specifically, the SGA demanded Zimpler stop providing payment solutions which use Swedish identity verification system BankID to unlicensed operators.

In a statement released today (6 July), the SGA said that according to its own assessment, “it is clear that Zimpler cooperates with and offers its payment service solution containing BankID to gaming companies that lack a Swedish gaming licence.

“In light of the fact that BankID is an e-identification service that is only used by Swedish customers, the SGA assesses that the gambling companies [in question] are targeting the Swedish market,” the regulator added.

Effective immediately, the SGA demands that Zimpler stops offering its services to any unlicensed operators before a 31 July deadline.

If Zimpler does not stop providing its services to those operators, it will be issued with a fine of SEK25m (€2.1m).

Investigation background

The SGA said it had received an anonymous tip-off that Zimpler offers “specifically developed payment solutions for certain gaming companies that provide games in Sweden without the necessary licence.”

After receiving the tip, the SGA initiated a supervisory case against Zimpler and sent a request for information to the company.

The regulator discovered “several unlicensed websites” where users can deposit via Zimpler, and some where Zimpler is the only deposit method that can be used.

Further, it found that while the Zimpler logo appears on licensed operators’ websites, it does not appear on unlicensed sites and that in some cases, “the user does not see information that the deposit is mediated by Zimpler except by clicking on the terms of use.

“All in all,” the regulator continued, “it appears from the tip that Zimpler has a close collaboration with gambling companies that lack a Swedish gambling license but which target the Swedish market.”

Zimpler response

In response, Zimpler told the regulator that it does not consider its actions to constitute unauthorised promotion of unlicensed operators.

However, it said, it “will terminate its customer relations with EU-licensed gaming companies without a Swedish gaming licence that accept Swedish consumers. 

“The process has begun and is to be completed in the third quarter of 2023 at the latest,” it added.

Zimpler also said, however, that the EU-licensed companies it works with cannot be considered to be targeting the Swedish market based solely on the fact that they use Zimpler’s payment service.

None of the firm’s customers can be found on the SGA’s list of companies illegally targeting the Swedish market, it added.

Further, Zimpler said it only offers its white label solution to EU-licensed operators which accept Swedish customers, so that its logo does not appear on the relevant pages and the services do not appear to customers to be targeting Sweden.

“As part of its process for approving new customers, Zimpler takes a large number of measures to ensure regulatory compliance and has the right to terminate a business relationship if anything comes to light that indicates that the customer is targeting Sweden without a Swedish licence,” it concluded.

Speaking to iGaming NEXT, a spokesperson for Zimpler added: “We have received the Gaming Authority’s order and are evaluating the situation. We will have to get back on how we approach it, but already in May we announced that during Q3 we will offboard the customer contracts that are targeted in the order.”

Zimpler could pay price for payments approach

Swedish news outlet Dagens Industri (DI) has not held back in its reporting on payments provider Zimpler this week.

In a series of articles, the scoop-hungry newspaper revealed that Zimpler was pursuing a sale and potential exit for its shareholders – many of whom have links to Betsson and Cherry – after the company skyrocketed in value over recent months.

DI alleged the drastic upturn in value is because Zimpler has continued to facilitate iGaming payments for operators targeting Swedish consumers without a licence. These companies have no obligation to link to the country’s self-exclusion register and are free to offer attractive bonuses to customers outside of the regulated market environment.

Zimpler’s growth is now 200% year-on-year according to DI, with an operating margin of 50% during Q3 2022, for example.

In the piece, DI points out the valuation of rival payments provider Trustly has plummeted over the same period after it ceased to offer payments to Sweden’s unlicensed operators.

DI suggested a raft of new rules being implemented by the Swedish Gambling Authority this year might make it harder for Zimpler to work alongside unlicensed operators, which could negatively impact any potential sale.

Zimpler said it had not been allowed to comment in DI’s coverage and swiftly put out a release of its own to address the claims.

“Zimpler has zero tolerance for illegal gambling activities,” said the firm. “Therefore, we work rigorously to ensure that all our customers comply with the legislation in each jurisdiction.”

Hinting at a potential loophole, the statement read: “Since 2019, when the law was introduced, Zimpler has never provided payment services to any company that the Gambling Authority has banned and thus can be found on the Gambling Authority’s website.”

Zimpler said reports regarding a sale of the company were speculation, although admitted it has a “constant dialogue” with investors, which is “natural” for a firm in the scale-up phase.

Gambling industry professionals have likely been following this story for some time and will have made up their own minds by now.

Footballer calls on sport to boot out gambling

Professional footballer David Wheeler penned a piece for The Guardian this week, expressing his distaste at the over-exposure of gambling brands in the sport.

In nearly all of his 500 appearances in professional matches, he claimed, he has had an online gambling advert either on his own shirt or surrounding him on the pitch.

This is not news to regular viewers of English football, of course, where Premier League fixtures can feature gambling logos and adverts upwards of 700 times per match through in-stadium and shirt advertising, according to the piece.

Wheeler called out the counter argument that gambling money helps pay for footballers’ often exorbitant wages, claiming: “I’d rather be paid less if it meant not profiting from addiction, harm and suicide – and I’m not the only one.”

Recent scandals among gambling operators – including Betway’s £400,000 UKGC fine relating to the appearance of gambling ads on the children’s section of West Ham’s website – show that teams are willing to take the money of companies who are failing to protect the most vulnerable members of society, according to Wheeler.

“It says all you need to know about how a sport and a country treat a public health issue that we name our national league after a gambling company,” he wrote. 

“The EFL deal with Sky Bet ends next season and after Sky Betting & Gaming sent self-excluded gamblers free spins and exploited fans through sign-up offers, I would urge the league to look elsewhere for its next sponsor.”

And the fact that gambling firms contribute a relatively small proportion of their profits to supporting the sport while attempting to “lure in the next generation of lucrative profit makers” is “a bad deal for the sport and for fans,” he added. Tell us what you really think, David. 

Underlining a peculiar irony of the sponsorship deals, Wheeler pointed to several scandals involving professional footballers being punished for placing bets on the sport. 

“We are part of a strange world where we are expected to heavily promote products that could lose us our jobs if we use them,” he pointed out.

Japan’s betting boom

“All bets are off in Japan’s sports gambling craze,” argued Financial Times Asia business editor Leo Lewis this week.

Lewis shone a light on a curious growing trend in Japan, where legal options for sports betting are extremely limited.

There, boat racing, motor racing, horse racing and Keirin cycling are four of the biggest attractions for bettors, and growth in recent years has gone beyond what anyone might have previously imagined.

“All four sports, in terms of betting revenues and numbers of punters, have thrived to a remarkable degree over the past three years, primarily through online portals,” Lewis wrote.

“Some analysts attribute the growth to the pervasive (but possibly temporary), entertainment-hungry ‘nesting’ dynamics that Japanese households settled into during the pandemic.”

Since the onset of the pandemic, more time spent at home among Japanese residents has led to a pronounced proliferation of sports betting, Lewis argued, with revenues rising slowly and steadily since 2013 before soaring rapidly in 2020.

And the action has not subsequently slowed down. Since March 2020, the index covering the four sports mentioned above has risen 60%, Lewis said, while the index for boat racing alone has jumped a whopping 134%.

“This expansion jumps off the page among data for sectors in which contraction – latterly because of Covid but fundamentally because of Japan’s shrinking and ageing demographics – is rife.”

But the growth has not come without cost to Japan’s unique gambling sector.

Over the same period, the former king of Japanese gambling games – vertical pinball-style game pachinko – has seen revenues plummet.

The game’s 2020 revenues were roughly half their 2006 level of $207bn, Lewis said (although a quick Google search reveals Lewis was likely referring to total stakes here, and not revenue).

In any case, it seems the limited options available are far from preventing Japanese residents from having a punt. Whether the growth continues as post-pandemic habits subside, that very much remains to be seen.