A briefing from Parimatch on the legalization of betting in Ukraine

Context

In 2009, after a fire incident in the gaming hall in Dnepropetrovsk city, gambling was banned in Ukraine. The ban, however, was supposed to be an intermediate “stage” in the development of the gambling market: it was assumed that gambling would be banned for a certain period and would be legalised with the adoption of new legislation. The goal of developing new legislation was to create a “civilised” gambling market that ensures the safety of players, protection from fraud and the banning of corruption.

After 10 years without such legislation, now there is a real attempt to change the situation and create a regulated r gambling market in Ukraine. A new draft law on legalization of gambling in Ukraine (draft law No 2285) was released on the official website of the parliament last week — on October 23. The law was drafted after President Zelenskyi promised to legalize betting as part of his agenda to liberalize the economy.

As stated by the Prime Minister of Ukraine Oleksiy Honcharuk, the regulation is aimed at a developing a fair and regulated market that also eliminates the illegal and corrupt betting shops and halls that are currently able to operate across cities. Finance Minister Oksana Markarova also said that they estimates that a regulated betting market will bring an additional 5-9 bln UAH of potential tax revenue to the state budget.

However, the bill was published over three weeks late from the initially announced deadline. Moreover, the text of the bill itself was released only one week later after the official records of its registration in the parliament. As stated by some Ukrainian journalists and parliament’s insiders, the delay was because of different interested stakeholder groups trying to influence the legislation.

As the head of the parliamentary majority faction ‘Servant of the people’ David Arakhamia noted: “MPs and an expert group worked on the one version of the document, and the Cabinet of Ministers suddenly submitted its own version to the Ukrainian parliament – there are a number aspects of the Bill which currently fall short of the best standards and regulation initially proposed by MP’s and the expert working group.” Later on, another MP from the same majority faction (Servant of the people) Oleksandr Dubinsky also announced his firm intention to register an alternative draft law on gambling regulation.

What is included in the legislation?

The current version of the draft law released on the parliament’s website proposes a new licence system for betting operators. However, the number of licenses will be limited. For example, there will be only 20 for the whole country for casinos, 80 for bookmakers, 10 for online casinos, 5 for poker clubs and 5 for online poker clubs and 160 for slot machine halls. There will also be 10 licences for online operators, covering both sports betting and online casinos.

The market will be overseen by a newly created “Commission for the development and regulation of gambling market” The commission will conduct the auctions and have the power to revoke licenses, as well as implement further regulation to the industry. This body will consist of 7 members (all from Ukraine). Its chairman and members are appointed and dismissed by the government of Ukraine – the Cabinet of Ministers. The commission’s members should be the citizens of Ukraine, who have higher (in public administration and administration, specialized, economic or legal) education, experience in management positions of at least three years over the last ten years. However, its chairman and members should not be the owners of the corporate rights of gambling organizers, manufacturers of gambling equipment, receive financial or material remuneration and assistance from them, or hold any position.

The licences will be obtained through electronic auctions. However, the rules and procedures for the auctions, criteria and requirements for the participation are not determined yet. They are expected to be determined by the new Commission for the development and regulation of gambling market.

One of the most important provisions of the draft law is that the licences will be given for all types of gambling, both offline and online: casino, bookmakers, poker games, offline lotteries and slot machines. The licences will be valid for 5 years.

The starting price for licences has been already determined and is tied to the amount of the monthly subsistence minimum for able-bodied citizens in Ukraine. The exception is a lottery license, the price of which is not indicated and will be determined by the Commission for the development and regulation of gambling market.

The most expensive licence will be for a casino in Kyiv city – around 37.5 mln UAH per year (approx. 1.5 mln USD). The licence for a casino in other cities, online casino and bookmakers will cost from 25 mln UAH (≈1 mln USD), license for slot machines – from 7.5 mln UAH (≈3 mln USD). The poker club will cost the organizers the cheapest price – both offline and online, the license price starts at 1.25 million UAH (≈50K USD).

Each gambling table in a casino for the year costs another 1.5 million UAH (≈60K USD) for roulette or 750K (≈30K USD) for other sports. Each slot machine will also cost UAH 30k a year. The annual license of a betting shop (land-based) will cost UAH 750k.

Such a high entry price threshold, together with the requirement for an authorized capital of at least 30 million UAH, should guarantee that only serious operators will enter the market.

For bookmakers, the draft law will allow 800 land-based facilities throughout Ukraine for all operators, the opening of which is allowed only in non-residential premises. There is also a city distribution – 32 licenses for Kyiv (capital city of Ukraine), 16 – for Odesa, Kharkiv, Dnipro and Lviv (but no more than 40 betting shops for each city), and another 32 – for other cities.

The legislation includes the creation of a special fund – a finance to support healthcare, culture and sports. This would be a special fund of the state budget of Ukraine, which will be financed through the license payments and will distributed to these areas.

There is a restriction of the access for foreign players as the draft law says that verification/identification of a customer requires an identity document and a copy of an Individual Taxpayer Number (which is issued by the Ukrainian tax services). As a result, this restriction makes almost impossible the access of foreign players.

With regards to responsible betting, the new legislation introduces the practice of self-restriction for players. Any player can ask an operator of a regulatory commission for a self-restriction for a period of 6 months to 3 years. If a person does not recognize the existence of a gambling problem, his relatives can also implement this restriction. The draft law requires operators to be socially responsible and take care of the players, including promoting material on gaming addiction and providing players with information about medical institutions. The operators will also be required to ensure customer service will be able to identify and provide counsel around gambling addiction

What’s next?

The draft law is going to pass through debates and the procedure of proposals and amendments in the Ukrainian parliament, but several MPs already announced their intent to submit alternative versions of draft laws on gambling regulation. There is a need to make a process more open to allow the participation of the expert community and public in further elaboration of the rules for the legalised market. Any approved regulation has to receive a public legitimacy as it sets the tone for the development of a transparent and fair industry.