The trajectory of the gambling industry in post-Soviet countries has been diverse. In the early 1990s, Eastern Europe emerged as a vast, entirely new gambling market. Due to ambiguous legislation, clandestine operational methods, and money laundering, numerous upscale casinos in the post-Soviet region shut down. In contrast, countries like the Czech Republic, Latvia, and Poland successfully developed the industry in alignment with international regulations.
Russia, Georgia, and Ukraine witnessed the prohibition of land-based casinos in the mid-2000s. In the Russian Federation, only five regions permit casino gaming; in Georgia, the industry thrives, generating substantial income. Meanwhile, in Ukraine, gambling faced a complete ban for 11 years, spanning from 2009 to 2020. Despite the challenging military-political situation, the gambling business in the country is now undergoing a revival.
What Prompted the 2009 Ban on Gambling in Ukraine?
Officially, the catalyst for the gambling ban was a fire that occurred on May 7, 2009, in a slot machine hall in Dnepropetrovsk. The incident resulted in the tragic deaths of 10 patrons, with another 10 sustaining serious injuries. YuliaTymoshenko, commenting on the incident, stated, "All norms and rules regarding the number of slot machines that were installed were violated. Of course, the electrical appliances were so overloaded that a fire broke out. I think we will be able to pass a law in Parliament that will significantly limit the spread of the gambling business."
Merely a week after the tragic incident, the Verkhovna Rada swiftly passed a law prohibiting gambling. Analysts suggest it was a well-coordinated campaign, with the media extensively covering the perils of gambling, and Rada deputies citing statistics: 75% of slot machine players were students, 5% of the population of large cities were addicted to gambling, and every fourth loser contemplated suicide.
In reality, following the closure of gambling establishments, over 200 thousand people lost their jobs and engaged in protests, leading to a yearly loss of 3.5 billion hryvnia in the country's budget. The most unfortunate consequence of the gambling ban was that the industry persisted in Ukraine but entirely outside the legal framework. It is widely acknowledged today that this move was politically motivated to create an environment conducive to money laundering. The illicit gambling market thrived for 11 years until 2020 when the government opted to legalize and regulate the industry, aiming to align with international standards and generate additional revenue for the treasury.
Successes in the Development of the Gambling Business in Ukraine
In Ukraine, the Commission for the Regulation of Gambling and Lotteries (CRAIL) has been established to oversee the regulation of both online and land-based gambling.
According to KRAIL, despite the challenging situation in the country, there has been notable progress in the licensing of gambling activities. In 2022, 603 licenses for organizing and conducting gambling were issued, and this number significantly increased to 1,869 permits in 2023.
The distribution of licenses in 2023 includes:
• 5 licenses for online casinos.
• 3 licenses for offline gambling establishments.
• 1851 licenses for gaming machines and slots.
• 8 licenses for activities providing services in the gambling sector.
• 1 company received permission for betting, joining two other official bookmakers in Ukraine.
• 1 new bookmaker's point.
Obtaining a license to legally operate a gambling establishment in Ukraine is a demanding and complex process, and not all companies succeed in securing it on the first attempt. In some instances, KRAIL may request additional documents and review applications again.
The legalization of gambling has positively impacted Ukraine's economy. In 2023, the gambling sector contributed 10 billion hryvnia to the country's budget through tax payments alone, excluding license usage fees. In the first year of CRAIL's operation, this figure was only 200 million hryvnia, indicating the rapid growth of the gaming industry over the past three years. In 2023, gambling establishments paid 1,969,001.54 thousand hryvnia to the country's budget for licenses related to organizing and conducting gambling. This amount is expected to increase in the future, as lotteries will also contribute to state revenue by paying for the use of operating licenses.
Challenges in the Ukrainian Gambling Industry
Having operated underground for 11 years, the Ukrainian gambling industry faces challenges as companies transition into the legal market. The primary difficulties in Ukrainian gambling include miscoding and monopolization.
Miscoding occurs when a company allegedly mistakenly provides incorrect figures in its tax return, misrepresenting its field of activity (e.g., categorizing a lottery as a casino). An error in such reporting can result in a significant revenue loss for the government. Numerous banks across the country facilitated operators in this scheme. However, the Ukrainian government has taken decisive actions against the gambling industry, characterized as a state 'campaign' against illegal gambling operations.
The tightening of state requirements has led to the exit of major players from the market. For example, Ibox Bank and Parimatchfaced government sanctions due to their involvement in masking the real origin of large gambling transactions.
Government sanctions yielded swift and effective results. Blocking gaming schemes had a positive impact on the state budget, with tax payments from the industry increasing substantially. In the first six months of 2023 alone, the industry contributed UAH 2.94 billion in taxes, a significant rise from the UAH 730 million paid in 2022. Notably, May 2023 recorded a peak with tax receipts reaching 851 million hryvnia, showcasing the effectiveness of the government's measures.
Regulatory Progress and Positive Trends in the Ukrainian Gambling Landscape
Despite these challenges, the Ukrainian gambling market is gradually becoming regulated and promising. Both land-based casinos and online establishments are experiencing positive development. Stricter enforcement of tax payments has contributed to a safer and more controlled market.
