Many jurisdictions struggle to curb offshore gambling. Offshore gambling originates from across national or jurisdictional border, and this makes the online gambling sector difficult to regulate with jurisdiction specific structures (Gainsbury et al., 2018a). As the online marketplace is highly competitive, regulatory policies in different jurisdictions struggle to keep pace with the technological development of the online gambling industry (also Banks, 2014; Järvinen-Tassopoulos, 2022). In more restrictive jurisdictions, including those operating a monopoly system for gambling (e.g., Norway, Finland, most Canadian provinces), a strategic tool called channeling has become increasingly important. Channeling refers to national authorities attempting to direct online gambling toward the regulated market with different measures. Channeling can be accomplished by making the regulated offer more appealing to consumers (e.g., offering attractive gambling products, higher return rates, and more intensive marketing). Conversely, channeling can be also accomplished by making unregulated offer less appealing for consumers. Measures to accomplish this may range from criminalizing playing on offshore gambling sites to softer measures (e.g., limiting or banning advertising) (Lycka, 2014; Hörnle et al., 2018; Egerer and Marionneau, 2023). National and state-owned gambling companies are more dependent of the jurisdiction’s channeling policy, as they cannot compete with the private gambling companies with a multitude of attractive games, welcoming bonuses, and intensive marketing (Nadeau et al., 2014; Littler and Järvinen-Tassopoulos, 2018; Borch, 2022).

This study scrutinizes channeling as a tool to curb offshore provision of gambling in a monopolistic regime. Previously, only a few studies (e.g., Nadeau et al., 2014; Littler and Järvinen-Tassopoulos, 2018; Borch, 2022; Selkee et al., 2022) have explored the operative and political consequences of the channeling tool. However, to our knowledge, no previous studies have explored the experiences, views, and challenges of channeling from the perspective of representatives of the regulators and gambling providers. The study is situated within the context of Finland, a Nordic Member State of the EU.

In June 2023, the recently elected right-wing Finnish government decided to reregulate the national online gambling market by introducing licenses to outside providers as of 2026. The move follows developments in most other European countries where gambling monopolies have already been dissolved and online markets have been opened to competition. The reasoning behind this decision was based particularly on the difficulty to control the offshore market and to channel consumption to the monopoly, despite attempts to strengthen the monopoly (Rydman and Tukia, 2019). In 2021, only an estimated 65 percent of the Finnish online gambling market was controlled by the monopoly (H2 Gambling Capital, 2021), up from 14 percent in 2019 (Veikkaus, 2018). According to different estimates, Finns lose between 300 million and 470 million euros to offshore websites annually (Sailas et al., 2023).

In total 18 public servants employed in different Finnish Ministries in charge of gambling related matters and representatives of the Finnish state-owned gambling company (Veikkaus) were interviewed for the purpose of this study between winter 2018 and spring 2019. During the time of the interviews, channeling was one of the cornerstones of the Finnish gambling policy, along with the prevention of gambling harms. However, curbing offshore gambling had proven to be difficult to achieve, even though the previous government of Prime Minister Sanna Marin outlined that Veikkaus should be able evolve in the changing online environment and improve its operation in a responsible manner (Rydman and Tukia, 2019).

Our study focuses on the thoughts and arguments of the Finnish stakeholders concerning the implementation of channeling measures in order to reduce offshore gambling and on the socio-economic consequences of the loss of the online market share. Our research questions are the following: (1) Is channeling considered an effective tool to curb offshore gambling offer? and (2) Is maintaining a monopolistic regime considered a sustainable solution to tackle the issue of offshore gambling?

What makes the regulation of online gambling especially challenging in the European context is the fact that some of the jurisdictions (e.g., Malta, Gibraltar, UK) serve as ‘online gambling hubs’, which issue gambling licenses to online operators (Zborowska et al., 2012; Myllymaa, 2017). It may be difficult for online gamblers to distinguish licensed operators from unlicensed ones when many of them offer gambling products and services in their native language (Gainsbury et al., 2018b). Thus, established approaches to gambling regulation no longer apply to online gambling and the prevention of gambling harms needs new, transnational measures (also Zborowska et al., 2012). Furthermore, most offshore gambling companies operate in the markets of the most harmful gambling products, such as online casino and online sports betting (see Gainsbury et al., 2018b).

Although the offshore gambling market is global, regulations are national. Even within the European Union (EU), gambling legislation has not been harmonized across Member States. On the contrary, the European Commission (EC) has an interest in safeguarding the EU treaties and in ensuring conformity across Member States (e.g., Littler, 2011). Gambling activities fall within the scope of article 49 of the Treaty of the Functioning of the EU (TFEU) on the freedom of services. This has limited the possibilities of Member States to restrict the fundamental freedom of providing services within the internal market. Any limitations need to be justifiable and proportional (see Miettinen, 2022). The regulatory reach of Member States regarding offshore gambling is therefore limited. In most of the Member States, the difficulties in justifying restrictions within the internal market have led to the dismantlement of monopolistic structures and their replacement with licensing regimes that allow operators from other Member States (often with a subsidiary in the country in question) to apply for an authorization to provide online gambling (e.g., Costes et al., 2016; Schmidt-Kessen et al., 2019). Malta is the key EU Member State that facilitate the establishment of private offshore companies by allowing them to operate online gambling from its jurisdiction (Zborowska et al., 2012; Myllymaa, 2017).

In addition to regulatory challenges, offshore gambling offer decreases gambling revenues across jurisdictions, as offshore companies do not usually pay tax in the jurisdictions they target (Gainsbury et al., 2018b; Borch, 2022; Järvinen-Tassopoulos, 2022). The global online market has grown over 100 percent since 2016 (H2 Gambling Capital, 2021). In 2022, the size of the global online gambling market was estimated at USD 75.2 billion, and it is expected to reach USD 217 billion by the end of 2031 (Growth Marketing Report, 2023).

Some measures are available for regulators to curb offshore provision. These measures include, e.g., blacklisting offshore websites, blocking IP addresses and monetary transactions to these sites, informing consumers, and charging offshore providers with fines and sanctions (Hörnle et al., 2018; Gainsbury et al., 2018a,b; Egerer and Marionneau, 2023). While in most contexts these measures have only been modestly effective, they are widely employed to advance the channeling objective. Channeling has therefore become a kind of a placeholder (Planzer, 2014) with varying contents depending on the interests of different stakeholders (cf. Selkee et al., 2022).

Previous research has shown that channeling policies are justified with at least three different rationales (cf. Van Den Bogaert and Cuyvers, 2011; Borch, 2022; Selkee et al., 2022): First, regulated markets are expected to have higher levels of consumer protection, making channeling a tool for gambling harm prevention. This of course presupposes that regulated gambling provision is indeed safer. Otherwise, increasing the size of the regulated market may result in more overall harms (cf. Nadeau et al., 2014). Second, regulated markets are expected to have fewer criminal activities (e.g., money laundering, fraud), making channeling also as a tool for legal enforcement. This objective is independent of the size of the regulated market. Then again, channeling is only justified in this regard, if the regulated offers are indeed sufficiently monitored. After all, legalized and licensed online gambling markets are also not immune to illegal activity or illegal competition (e.g., Spapens et al., 2008; Banks, 2017; Rolando and Scavarda, 2018). Third, gambling generates surplus of profits, which have traditionally directed to supplement national budgets and other beneficiaries (cf. Sulkunen et al., 2022). Offshore gambling challenges the premise of gambling as a means of revenue collection. Channeling can therefore also function as a tool for safeguarding public revenue. While not compatible with EU law, this objective may be behind many attempts to curb offshore gambling (e.g., Selin, 2019).

Despite various efforts to safeguard Finnish gambling offer against online offshore competition (Selin, 2019), Veikkaus’ online market share has been decreasing. During the period when the interviews were conducted, the business strategy of the state-owned Veikkaus relied of the principle of a ‘competitive monopoly’ (see Järvinen-Tassopoulos, 2022). The decreasing market share and the continuous loss of gambling profits to offshore providers had become a pressing matter. Channeling gambling demand without any proper measures to prevent offshore gambling seemed futile. The interviewees were simultaneously concerned with and aware of the pros and cons of channeling. Some of them were also well informed about how gambling, and channeling, was operated in other Nordic countries (such as Sweden and Norway).

The results of this study have shown that the rising importance of offshore gambling operation can have profound implications for the regulation of gambling at a jurisdictional level. Since 2018, the loss of market share to offshore providers has led Finnish stakeholders to emphasize the channeling policy. The channeling objective was used to justify varying policy approaches, including amending the Finnish Lotteries Act and by investigating for appropriate measures to block offshore provision (see Rydman and Tukia, 2019). In addition, some of the interviewees anticipated the possibility to move from a monopolistic gambling regime to a licensing regime. However, during the time of the interviews, no one seemed to be ready for this change. Particularly, many interviewees were aware of recent developments in Sweden where unsuccessful attempts to channel gambling demand to the monopoly eventually led to the introduction of a licensing regime in 2019. This change of regime was preceded by the decreasing of the monopolistic share of the Swedish online gambling market to 47 percent (Selkee et al., 2022). The results show that as the share of online gambling increases, channeling can become the guiding principle of national gambling regulation.

Previous research has suggested that channeling policies are justified in terms of higher levels of consumer protection, fewer criminal activities, and surplus of profits (cf., Van Den Bogaert and Cuyvers, 2011; Borch, 2022; Selkee et al., 2022). Our results partly support these findings. In our study, channeling was seen particularly as a tool of preventing gambling harms (the socio-economic hypothesis according to Nadeau et al., 2014). The representatives of Veikkaus believed that the online gambling offer of the state-owned gambling company was less harmful (and thus more responsible) than those of offshore competitors. For example, Veikkaus did not offer welcome bonuses or free spins to consumers (see Gainsbury et al., 2018b). The surplus of profits was also mentioned as a characteristic of the Finnish monopolistic gambling regime. Finally, none of our interviewees discussed criminal activity. Some representatives of Veikkaus did criticize offshore operators for being untrustworthy, but more systemic criminality, such as money laundering or match fixing, was not mentioned.

Approaches to gambling regulation vary across times and policy goals. In order to understand the regulatory and political circumstances related to the channeling approach, that also led the new Finnish government to decide to change its approach to the licensing of online gambling providers, we adapted Kingma’s (2008) theory on gambling regulation to our study. By creating different prototypes of regulatory models, Kingma (2008) has shown how the liberalization and the virtualization of gambling operation has changed the regulation of gambling in the Netherlands. In Kingma’s theory, the ‘alibi model’ refers to the legalization of gambling to avoid illegal markets, and restricted offer by discouraging private pursuit of profit. Under this model, gambling proceeds are allocated to ‘good causes’ (Kingma, 2008; Chambers, 2011).

Instead of using the ‘risk model’, which represents regulatory change from the ‘alibi model’ in the Dutch case, we propose a new model representing the Finnish online gambling policy starting from 2018 (see Table 2). Kingma’s (2008) ‘risk model’ offers a ‘liberal political approach’ (Chambers, 2011) to gambling, which is seen as a commercial entertainment. In the ‘risk model’, the economic importance of the gambling sector is acknowledged, and the controlled gambling market is preventing risks such as addiction and crime. Our ‘dam model’ captures gambling policy that aims to channel online gambling to the regulated offer, and to actively prevent offer from elsewhere. The ‘alibi model’ has illustrated the Finnish online gambling system well (Littler and Järvinen-Tassopoulos, 2018), but a shift in policy took place around 2018, spearheaded by the channeling objective.

Table 2 presents how the channeling approach, or ‘dam model’ differs from the alibi model in the Finnish context of online gambling regulation. In the 2000s, online gambling was considered as a potentially harmful activity, best regulated in a monopolistic regime. Competition from unlicensed online gambling operators existed to some extent, but policy makers were more concerned with justifying the monopolistic gambling regime to the European Commission stressing the importance of the prevention of gambling harms (Littler and Järvinen-Tassopoulos, 2018). The ‘alibi model’ indicated a “social democratic view” (Myllymaa, 2017, p. 233) of gambling, meaning that gambling was considered as an exceptional activity that does not produce any kind of added value necessary for increased economic growth and value. The ideal state is the Finnish welfare state in which welfare is provided by the public sector (state and municipalities), the private sector (market), civil society (third sector organizations, nongovernmental organizations) and family (Pessi and Grönlund, 2011).

Despite the many efforts to amend the Finnish Lotteries Act in the 2000s and 2010s (Selkee et al., 2022), the main political strategy in Finland was to maintain and strengthen the monopolistic gambling regime in order to limit the competition from inside (between three national gambling companies) and outside (between Veikkaus and unlicensed competitors). This strategy has influenced the moral meaning of online gambling and the rationale for gambling law in Finland. In addition, it seems that this monopolistic regime, as well as its strong regulatory model, has suited well the ideal of the welfare state in which gambling proceeds become ‘good causes’. Yet Hellman and Alanko (2021) have pointed out that using gambling proceeds to fund the third sector is problematic, as the public sector and third sector can have conflicting roles (e.g., nongovernmental organizations compensate the lack of services or they provide alike services), and the third sector’s work is counteracted by the gambling activity that funds the services (e.g., large part of the gambling proceeds come from individuals with gambling problems) (cf. Table 1, Hellman and Alanko, 2021, p. 96).

The amendment of the Finnish Lotteries Act started in May 2018 and its aims included the strengthening of Veikkaus’ channeling capacity and the blocking of offshore provision (Rydman and Tukia, 2019). The regulation of online gambling has therefore shifted to a new model (the ‘dam model’) that aims to improve channeling measures and protect the Finnish online market from unlicensed gambling providers. The moral meaning of online gambling has changed since 2018: As also highlighted by the interviewees in our study, offshore gambling was seen as more harmful to Finnish gamblers than gambling on a national, regulated website. To ensure the competitivity of Veikkaus in the face of offshore competition, as also highlighted in the company’s business strategy in 2018, the Finnish society (represented by the public servants in this study) would need to create new solutions to safeguard the monopolistic regime and to consolidate the channeling policy. The latter matter would succeed better if the state-owned gambling company was less regulated and granted the same means than offshore companies to entice customers (e.g., welcoming bonuses) (cf. Järvinen-Tassopoulos, 2022).

The ideal type of ‘competition society’ (see Heiskala and Luhtakallio, 2006; Rainio-Niemi, 2015) refers to the impact of globalization on the Finnish society and to the radical changes on economic (competitiveness), technological (development and spreading of information technology), institutional (pressures to renew regulation), organizational (spreading of networks), productive (virtualization of products, accentuation of competition and the quality of demand) and public policy (competitiveness and growth) levels in Finland (Heiskala and Luhtakallio, 2006; Rainio-Niemi, 2015). In Table 2, the term depicts the virtualization of gambling which has required a new political stand from the Finnish society regarding online competition and the evolution of the online gambling market. Internet is the metaphor of a globalized world in which a ‘corporatist political approach’ (Chambers, 2011), such as the ‘alibi model’, may not respond anymore to the continuous competition that rules the global online gambling market.

As the gambling proceeds will be transferred to the state budget without earmarking from 2024, it can be anticipated that this change will guarantee the consistency of the gambling regime with the values of the Nordic welfare state model (Hellman and Alanko, 2021). Nevertheless, competitiveness has been the keyword for the neoliberal governance and from the perspective of the Nordic welfare state, this has meant guaranteeing optimal conditions for the accumulation of capital and for the maximal utilization of the work force (Saarinen et al., 2014). This in mind, it is possible to presume that the ‘dam model’ will be a temporary model that will be replaced by a more adequate regulatory model when the current gambling regime will end.

The results have important implications on policy. When channeling becomes the guiding principle of gambling regulation, this can overshadow other regulatory concerns. Channeling suggests that regulated or domestic offer of gambling is a ‘safer’ or ‘better’ option although all forms of gambling, regulated or offshore, can lead to significant harms. By 2026, the Finnish gambling market is set to be partially opened for licensed online gambling providers. Nevertheless, the channeling objective is likely to remain a guiding principle. In other European countries that have recently adopted a licensing system, such as the Netherlands or Sweden, channeling rates to the regulated system remain a central policy concern and indicator of systemic success. Going forward, the channeling objective in Finland may become increasingly tied to the socio-sanitary hypothesis (Nadeau et al., 2014) according to which a wider selection of gambling operators may increase total consumption and harms. However, as the results have suggested, a monopoly is also not immune to competition. Rather than focusing on channeling the consumption of gamblers to regulated offers, future gambling policies should perhaps focus on channeling the consumption away from gambling altogether, or at least, away from the most harmful products.

The current study has some limitations. Our data consist of key informant interviews involved in the regulation and provision of gambling. Their perspectives on gambling can be influenced by their position and the ‘profile effect’. Furthermore, the study has been limited to the case of Finland to describe a shift in regulatory models from a ‘alibi model’ toward a new ‘dam model’. The Finnish case is unlikely to be fully representative of other jurisdictions in Europe or elsewhere. Notably, the ‘risk model’ has largely been missing in the Finnish context. Channeling has different meanings across contexts, and these have translated into varying modes of implementation (cf. Van den Bogaert and Cuyvers, 2011; Borch, 2022; Järvinen-Tassopoulos, 2022; Selkee et al., 2022). Also, the Finnish monopolistic gambling regime has been historically related to the funding of ‘good causes’ with gambling proceeds (cf. ‘common good’, ‘public interest’), which is not the case in jurisdictions where these proceeds are part of the state budget (Järvinen-Tassopoulos and Eräsaari, 2018; Sulkunen, 2018).

More research from other contexts would be necessary to ascertain whether a shift to the ‘dam model’ of regulation applies elsewhere and whether its underlying principles and rationales differ elsewhere. Furthermore, regulatory models are ideal types rather than clearly defined or mutually exclusive practical applications. As also noted by Kingma (2008), various regulatory principles can also coexist or compete. In some contexts, and particularly those in which the gambling markets have been opened to permissive licensing regimes, this might mean that the ‘dam model’ takes on more traits from a ‘neo-liberal view’ (Myllymaa, 2017, p. 233) according to which gambling is just another form of business activity and gamblers spend their money on what yields them most ‘consumer welfare’ or ‘consumer surplus’.

Channeling is a specific regulatory tool, the purpose of which is to direct online gambling from unlicensed offshore gambling toward the national online gambling market in order to prevent gambling harms online, and to protect the online market share of national or state-owned gambling companies. As a regulatory tool, channeling is not dependent on a specific legal system or gambling regime. In addition, channeling is composed of various policy measures, including making national offer more attractive, or outside offer less attractive. Following the channeling principle, encapsulated in the ‘dam model’, payment blocking measures were implemented in Finland in the beginning of 2023. However, and as our study has also shown, the channeling principle alone does not completely solve the issue of offshore gambling provision without additional measures. Furthermore, an overly emphasized focus on channeling can overshadow problems in the national market.

National stakeholders hold important information on the evolution of the online gambling market, on the legislative development in the jurisdiction, and on the regulatory challenges caused by online gambling. This study indicates that legislative and regulatory changes are lengthy political processes, which are defined by agenda setting, decision-making, and implementation (Zahariadis, 2014). Further studies are needed to document the full policy process related to the passage from one gambling regime to another and the shifts to and from the ‘dam model’ in Finland and elsewhere.

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation.

Ethical approval was not required for the studies involving humans because the executive team of Veikkaus granted permission to interview its employees for research purposes. The public servants accepted individually to be interviewed for research purposes. The studies were conducted in accordance with the local legislation and institutional requirements. The participants provided their written informed consent to participate in this study.

JJ-T: Conceptualization, Formal analysis, Funding acquisition, Investigation, Methodology, Software, Writing – original draft, Writing – review & editing. VM: Conceptualization, Funding acquisition, Investigation, Writing – original draft, Writing – review & editing. ME: Conceptualization, Funding acquisition, Writing – review & editing.