Is Sweden the next frontline for ex-player reimbursement claims?

Introduction

Following the recent avalanche of filed ex-player reimbursement actions sweeping through central Europe, a judgment from the Swedish Patent and Market Court of Appeal in favor of an ex-player has made operators worry that Sweden could be the next frontier. Unlike the judgments in e.g. Germany and Austria, the liability is not based on illegal/ unlicensed gambling operations, but – to put it briefly – on unsolicited marketing offerings to a customer with gambling issues. While the judgment has brought cheers in the ex-player community, the Supreme Court’s rare decision to allow an appeal has caused a litigation limbo pending its forthcoming ruling.

The ex-player lawsuit

The case concerns an ex-customer which enrolled on an operator’s platform in 2009, i.e. prior to the subsequent re-regulation of the Swedish gambling monopoly in 2019. At that time, there were no statutory RG requirements in Sweden. The monopoly-licensed, state-owned operators were, however, subject to certain RG obligations laid down in their respective gambling licenses. As with many others, the operator at issue provided its online betting services from outside of Sweden to Swedish customers. As in many other jurisdictions, this was somewhat controversial at the time and ultimately resulted in the re-regulation in 2019. However, the business model was fully legal as the operations were conducted abroad and thus not encompassed by the Swedish monopoly.

Due to frequent online slot gambling, the customer at issue was given VIP status in January 2012 which involved him being appointed a customer manager employed by the operator and from whom he received gifts, holiday packages, and special offers. In parallel, the customer also received generic marketing e-mails which included bonus offers and promotions of new games. The account was eventually closed by the operator in 2014 following information received from the customer that he was suffering from gambling abuse. In total, bets worth approx. EUR15 million were made between 2009-2014 which resulted in a net loss of approximately EUR700,000, including approximately EUR530,000 which took place during the VIP period.

The ex-customer brought an action against the operator to reclaim his total losses both before and during the VIP period, and collect further damages related to his gambling abuse. The action was based on multiple legal grounds, but for the purposes of this article, the discussion will be limited to the points made on the operator’s alleged violations of RG requirements.

The first and appellate court judgments

In short, the Swedish Patent and Market Court, i.e. the court of first instance, dismissed the customer’s arguments in this part, finding that sufficient evidence had not been provided that the operator was indeed aware or could be presumed to be aware of the customer’s gambling issues, even though it had at the time been possible to monitor his gambling patterns. The case was appealed to the Patent and Market Court of Appeal.

In a reversal of the original judgment, the Patent and Market Court of Appeal held that the VIP promotion manifested an awareness of the player’s gambling patterns, which in the Court’s view clearly deviated from “healthy gambling”. Considering the operator’s knowledge, the subsequent individualized marketing addressed to the player was considered intrusive given his vulnerable position and therefore constituted grounds to declare that all bets made during the following VIP period were void under a rarely applied statute in the Swedish Contracts Act. Briefly put, said statute, section 33, is a nullity ground prohibiting reliance on contracts in conflict with “faith and honor”. Historically, the statute has been applied in situations where one of the parties to the contract has deceitfully exploited a superior position to the detriment of the other party. In case law, taking advantage of elderly, and mentally weak people, or people in clear distress by pressuring them to enter into contracts have been subject to nullity under the relevant statute.

Accordingly, the operator was ordered to reimburse the ex-player’s net losses attributable to the VIP period, i.e. approximately EUR530,000, but not the net losses that occurred before the VIP appointment. The player was also awarded damages of SEK10,000 related to his physical suffering from the gambling abuse he incurred.

Key takeaways from the appellate court judgment

Aside from the many interesting points of contract law that the judgment presents, it also raises the critical question as to under what circumstances knowledge of problematic/unhealthy gambling can be assumed of an operator. Applying the Appellate Court’s view, such knowledge may seemingly be evidenced by any sort of reaction from the operator, e.g. a customer promotion, relating to an objectively risk-indicative gambling pattern, even though such reaction does not express any insight that gambling abuse might be at hand. Arguably, it is thus not necessary to prove that an analysis, thorough or not, of the gambling pattern has been carried out. While such reading of the judgment would indeed be far-reaching for Swedish operators, this is essentially the finding of the Appellate Court. Considering that the action was dismissed in the parts that related to losses that preceded the VIP appointment, the Court’s findings do not establish any strict monitoring responsibility for operators at that time which could have entailed presumed knowledge of any gambling abuse. The Court’s conclusion is reasonable in this part considering that there were no statutory RG requirements prior to 1 January 2019.

Another important takeaway concerns the type of operator actions that could trigger reimbursement liability once knowledge of a customer’s unhealthy gambling is evidenced, and ultimately, whether there was a duty to mitigate the situation even before the implementation of statutory RG obligations in 2019. Considering the weight placed by the Appellate Court on the ensuing, personalized marketing from the appointed customer managers in this case, it seems that a mere failure to take mitigating action would not have entailed reimbursement liability alone. Such a conclusion is also in line with the lack of statutory RG requirements in Sweden prior to 1 January 2019, although the absence of a duty to act at that time does not necessarily fully align with the legal concept of “faith and honor” under Swedish contract law. The Court’s reasoning does not discuss whether maintained generic marketing to a player with risk prone gambling patterns alone would have led to reimbursement liability, even though that seems unlikely. As will be discussed below, that conclusion is likely to have been reversed as of 1 January 2019, when the current statutory RG requirements were implemented.

RG liability – an outlook

While the scope of the case before the Supreme Court is limited to gambling operations before 1 January 2019, the forthcoming judgment may very well include precedential points on reimbursement liability for gambling operations under the current Swedish license regime. On that note, there are a few other civil cases pending before lower courts that cover gambling after the reregulation, and considering the regulatory RG burden put on operators as of the implementation of the license system, the outlook for those actions is indeed more sympathetic to ex-players. Namely, that the implementation of statutory RG requirements on 1 January 2019 entailed a sanctioned requirement to monitor and take preventive safety measures to protect players that exhibit risk prone gambling patterns. The current RG requirements thus effectively form a “regulatory squeeze” in relation to civil liability and vice versa. Should the circumstances in the Supreme Court case have occurred under the current license regime, the operator would have faced serious regulatory risks if it claimed that it was unaware of the customer’s gambling issues, as such a position would entail exposure to regulatory sanctions due to monitoring failures. Often, regulatory violations can also prove even more costly as sanction fees are normally set at considerable seven- or eight-figure amounts (SEK), and up to 10 percent of the operator’s GGR for the preceding fiscal year.

Conversely, a final judgment on RG violations in regulatory court proceedings arguably provides a promising springboard for civil reimbursement actions and/or damages. Here, the Swedish Gambling Authority has seemingly mobilized a new frontline as it has initiated several supervisory proceedings against operators based on purported RG violations. In short, the SGA has issued sanction fees against a handful of operators based on their lack of preventive measures towards high-volume customers with raised deposit/betting limits. So far, the lower courts have ruled in favor of the SGA, albeit at lower levels of sanction fees than those initially set. The regulatory cases are currently working their way through the administrative court system and, similar to the civil liability situation, one case is presently pending before the Administrative Supreme Court which is yet to rule on the issue of leave to appeal.

A floodgate ajar – in limbo

It is difficult to foresee how the Supreme Court will rule in the civil case as the case law on the relevant statute in the Swedish Contracts Act is extremely scarce and yet to be applied to gambling issues. The Supreme Court’s decision to grant leave to appeal has incidentally cooled off and halted the expected floodgate of lodged claims that was foreshadowed in the aftermath of the Appellate Court judgment. The litigation limbo is not expected to go away before the Supreme Court’s decision which should be expected in 2025, but prudent operators should indeed prepare themselves. The litigious trend in central Europe could soon become a reality before Swedish courts should the judgment stand.

Irrespective of the outcome, the ex-player community might in parallel be provided with additional oxygen depending on the outcome of the regulatory RG proceedings which are currently working their way towards the precedential court instances. Seemingly, the SGA has identified this as a key enforcement issue and more actions should be expected. As discussed above, any findings of RG violations in such proceedings should form a solid base for civil reimbursement actions.

In summary, 2025 is shaping up to be a decisive year for the Swedish gambling market and is likely to determine whether Sweden will follow the litigious path of Germany, Austria et. al.