Ukraine promised IMF to legalize the gambling business. Would it happen in 2018?

Author : Ksenia Tsyvirko

Source : 112 Ukraine

The legislative ban on gambling on the Internet is not effective, and online casinos operate quite freely
13:00, 16 August 2018

112 Agency

The legislative ban on gambling on the Internet is not effective, and online casinos operate in the country quite freely. At the same time, the government promised the IMF to legalize this type of activity before the end of 2018: the country's budget requires additional tax deductions. Experts skeptically assess these prospects.

Gambling in Ukraine has been prohibited by law since 2009. In 2011, the deputies have introduced taboos on the online casino, regardless of the country in which the game server is located. Such methods turned out to be ineffective: gambling has not disappeared, but it has ceased to be taxed. According to the calculations of the Ministry of Finance, gambling could bring at least 0,185 billion USD in additional revenue, and the share of online casinos in this segment is about 20%.

Gambling in Ukraine is not a problem at all

More than 50 Russian-speaking sites formally forbidden in Ukraine and working under the international game licenses are accessible for the “jackpots hunters.” “Theoretically, it would be possible to limit access to online casinos in Ukraine, but to do this technically, an ISP would need to purchase equipment worth about 2 billion USD. It is doubtful that the provider would get such money. We do not have enough money even for paying social benefits,” InternetUA editor-in-chief of Dmytro Sizov said.

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However, any legislative restrictions in Ukraine could be bypassed; not only technically, but also legally. Speaking about the traditional gambling, only a lottery is officially permitted. Three operators operate in this service market: "Ukrainian National Lottery" ("UNL"), LLC "Patriot" and LLC "MSL" According to the Anti-Corruption Committee of Ukraine, the license period for them has expired in 2014, but they are still working on the legal grounds, allegedly obtaining a new permit. Under the guise of lottery operators, companies work with the sports bets, although bookmakers in the country are also banned.

Maneuvering in the legislative field, operators of state lotteries somehow remain within the permitted lines, which cannot be said about Internet gambling. Several years ago, on the expanses of the World Wide Web, the "first Ukrainian licensed online casino" Sloto King has appeared. "Fans of video poker or slots and roulettes from Igrosoft, MegaJack, and Novomatic are given the opportunity to play in the "native" Internet space for their "native" currency - the Ukrainian hryvnia! Also, based on legislative realities, it was possible to play slot machines in ground halls quite legally - only in 2009, gaming halls began to be called "Immediate state lottery," as said in a statement of Sloto King.

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"It is clear that the online casino is illegal. But how can we implement this prohibition? The law does not allow us to make bets through payment systems. But in fact they still play for money. To ban some transactions on a certain site, the bank should receive a special order from the Security Service," Oleksandr Okhrimenko, director of the Ukrainian Analytical Center, explains.

Legalization: Ukrainian scenario

Given the low effectiveness of the laws passed almost 10 years ago, about a dozen new bills, which propose legalizing gambling, are waiting in the Verkhovna Rada. The last one was registered as early as 2016."

Related: Gambling in Ukraine: How to organize it with benefit for the country?

Some of the bills have not been reviewed and analyzed by the parliamentary committees, some have not been approved by the Antimonopoly Committee. According to experts, the norms prescribed in the draft laws create prerequisites for the emergence of monopolies and a negative business climate, which meets the interests of the pro-government groups. For example, the first draft of Law No. 3632 suggested that only one operator should be licensed. During the registration of the bill in 2015, this was "UNL" operator of the lottery market, as "MSL" and "Patriot" were included in the sanctions list, from which they were excluded only in May 2018.

The second way to form a market according to its rules is to assign excessive financial obligations. So, the bill number 4663 prescribes that the annual fee for a license is from 6 thousand to 15 thousand minimum wages (that is, from 0,83 million USD to 2 million USD), not including a separate fee for gaming tables and machines. In the next draft of this law (No. 4663-1) another price is indicated: 1,85 million USD for one license. However, gambling licenses are cheaper abroad.

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Speaking about the IMF memorandum, Ukraine promised to legalize gambling by the end of this year and thus receive an additional source of income in the budget. "Probably, this requirement will be fulfilled, the prohibitions will be lifted and appropriate regulatory norms will be adopted both in terms of activity control, and the mechanism of accounting for funds in circulation, taxation. However, without sufficient revision of the entire system of law enforcement agencies, permeated with corruption links, including on the part of representatives of the gambling business, it is unlikely that this work will be successfully carried out in the terms promised in the memorandum," Serhiy Senyk, managing partner of Worldwide LEX law firm, sums up.

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