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The government of Ukraine has wanted to legalize the gambling business since January 2016. Economists believe that this will bring several billion hryvnias to the budget and allow the entertainment industry to emerge from the shadows.
Ukraine needs alternative sources for replenishment of the state budget. Gambling can serve as one such source. If it is legalized, it will bring several billion hryvnias. The Cabinet of Ministers of Ukraine offered this initiative.
According to its members, this offer can finally bring the gambling business to light. By the way, a certain percentage of funds obtained from its legalization is promised to be spent on some cultural projects, in particular, on the Ukrainian cinema. The corresponding draft law will be probably submitted to the parliament before the end of this year.
In addition, the government submitted three draft laws, which legalized gambling, to the Verkhovna Rada in December of last year. However, the deputies refused to include them in the agenda. They did not find these draft laws good, so it was decided to establish a task group and develop new draft laws. By the way, all kinds of gambling are allowed in Georgia, whose reforms Ukraine is trying to copy. And this provides enormous revenues. Is Ukraine worse? Of course, no!
Initiative of the Government
That is why the Prime Minister of Ukraine, Arseniy Yatsenyuk, offers to adopt a law on gambling legalization in the Parliament. The funds, obtained thanks to it, should be used to support cultural projects, in particular, the Ukrainian cinema. The head of government reported about such prospects during a meeting of the Board of the Ministry of Culture of Ukraine at the end of June. The Prime Minister said that he had already organized a meeting concerning this issue with deputies. However, they criticized such an initiative. Yatsenyuk believes that the budget will be able to provide funds for the Ukrainian cinema for 2016 in the last quarter of this year, thanks to the legalization of gambling.
Natalie Jaresko, Ukraine’s Minister of Finance, stated:
As soon as I became the Minister of Finance, I immediately brought in a bill that could solve the problem of gambling legalization. Unfortunately, members of parliament did not approve this law. Now we are working on this document. We meet with all the parties in order to submit new effective draft laws. I believe that gambling will have been legalized by 1 January 2016. Currently, we are trying to form a task group that will be headed by the Deputy Minister of Finance Olena Makeyeva. We are taking into account all possible international standards and practices. Now the situation has developed in such a way that the gambling business exists illegally and its representatives don’t bear any responsibility as taxpayers. Thus, we are losing possible revenues that we desperately need. Therefore, the legalization of gambling is our priority. We are also going to make lotteries, casinos, and betting legal. Since this business has not yet stepped out of the shadow, there are no forecasts concerning the funds that may be obtained from gambling.
Aivaras Abromavičius, Ukraine's Minister of Economy and Trade, also supports the legalization of the gambling business in Ukraine:
"I personally support gambling, since it is supposed to bring revenues to the budget. We know that there is an illegal gambling business. However, we close our eyes to it.", - the minister said.
According to him, the government wants to legalize gambling in the four-star or five-star hotels. The question of the legalization of one-armed bandits in the residential districts is not being discussed. Abromavičius believes that the legalized gambling in Ukraine will provide additional revenues thanks to foreigners. "We are talking about tourists, i.e. this is not even related to our compatriots. The foreigners will come, spend their money, and relieve stress." , - the minister added.
Entertainment is Intended for the Rich
The draft law "On Activities of Casinos in Ukraine" (№1,571) can become one of the ways found by the government to save the treasury. In particular, according to the logic of Prime Minister Arseniy Yatsenyuk, the legalization of gambling, banned 5 years ago, will help to bring to light casinos, one-armed bandits, and other games of chance, which the state cannot (or do not) prohibit. For her part, Natalie Jaresko, Minister of Finance, said that this business was "de facto existing and prosperous."
At the same time, gambling was defined as "an entertainment for the rich" in the explanatory note to this initiative. It must have been done to prevent Ukrainians from being shocked. Indeed, the turnover of each casino must reach sums with eight to nine digits to provide owners with the opportunity to afford to:
- Annually pay €1,300,000 (established by the law) for each gambling house,
- Pay for casino equipment,
- Pay salary to at least 120 employees (this paragraph is present in the license requirements),
- Earn something for themselves,
Nevertheless, the project has no restrictions for the visitors of gambling houses (except for age).
Unless the owners of five-star hotels, where, in particular, it is allowed to open gambling halls, will want to verify the financial capacities of gamblers (by a proof of employment or a bank account extract). However, according to the business theory, if you cannot earn by providing low prices or high quality, try to increase the number of customers.
Therefore, experts believe that hotels will most likely provide only the dress code requirements (in order not to scare away the really wealthy guests). As for the out-of-town casinos, they will regulate customers by requiring a minimum number of chips.
Yet, if the main problem of gambling were to determine the client's financial capacity, it would not be banned or limited in certain regions all over the world. Even in "the most democratic country in the world", whose citizen used to be the Minister of Finance of Ukraine, there are specific requirements for running this type of business.
Ace Up Your Sleeve
Mikheil Saakashvili, the current Governor of Ukraine's Odessa Oblast, who is supposed to be a major Ukrainian reform figure, also supports the legalization of gambling. As you can guess, it should become legal in Odessa. He reported about this at the end of July, while opening the oil-extracting complex in Yuzhny port called Allseeds Black Sea.
"I am sure that it is necessary to allow gambling activities in Odessa," - Saakashvili said. According to him, the police provide a crime-sponsored cover to the gambling business in Ukraine. Its legalization in Odessa will increase revenues to the local budget. The governor added:
I don’t gamble, and this entertainment has never been interesting to me. However since there are those who enjoy this pastime, it is necessary to provide them with a legal opportunity. I know that there are underground casinos in Kiev and Odessa. Why we should feed the illegal economy? We should make such activities legal and provide revenues to budget. There is no need to invent anything. For example, Georgia successfully uses gambling to provide the country with profits.
Controlled Gambling
Actually, the Gambling Ban Law, which was adopted six years ago, was not based on the provision of limits to the excessive revenues of casino owners. Technically, the aim of the law "On Prohibition of Gambling Business in Ukraine", adopted on May 15,.2009, was to protect citizens from gambling addiction and threats to morals and values. Deputies believed that it would be valid for only three months. During this time, the Cabinet of Ministers was supposed to develop a draft law that would define the principles of gambling and determine special gambling zones. Experts predicted that this populism could really force the business into the shadows and cut more than 200,000 jobs.
By the way, this law caused confrontations between Prime Minister Tymoshenko, who was lobbying for the adoption of this law, and President Yushchenko. The President Viktor Yushchenko vetoed the law and commented on the document, indicating substantial losses of the state budget and the inevitable numerous lawsuits for returning payments made in advance for licenses. After all, the authorities issued licenses and permits whose total sum exceeded €30 million. Roughly 400 million hryvnias were earned by taking fees for patents. However, one month later, a presidential veto was overcome by 390 votes. All parliamentary groups (from Communists to Yatsenyuk’s Our Ukraine–People's Self-Defense Bloc) supported the gambling ban.
At the moment, Yatsenyuk explains the need to make casino legal by "protection of the population from the harmful effects of uncontrolled and illegal gambling games, as well as a decrease in the number of crimes motivated by receiving funds for gambling" .
What is the difference between the negative influence of legal gambling and the impact of illegal games of chance? How will legal casinos be able to prevent crimes committed by addicted gamblers who have a higher number of opportunities to spend the money they have obtained? Probably, it is a question of some kind of psychological discomfort.
It is interesting to note that the aim of prohibiting gambling and the purpose of making casinos legal are supposed to be the same: "protection of the population from gambling addiction." However, in all the requirements for gambling houses registered in the project, the aim of "protection" seems to be mentioned only in the need to "take measures to oppose problem gambling." And according to the authors of this document, posters with appeals to fight problem gambling will be the most efficient measure. Development of the other protective measures will most likely depend on the imagination of the casino owners. Perhaps they will offer something like Charcot's douche to losers to appease them. It will be a bonus for participating. Or they will receive a commemorative chip with the inscription: "You gamble, the budget wins."
Not a Bit of it
The Ukrainian Gambling Business Association emphasizes that, according to the law adopted six years ago, the government offers new rules for this industry. But not a bit of it...
"This is the duty of the Cabinet of Ministers! We can say that the Cabinet of Ministers under the leadership of various Prime Ministers over six years has not supported this law!" - Gregory Tripulsky, a vice-president of the Ukrainian Gambling Business Association, said.
It is necessary to choose good locations, in particular, recreational areas and tourist places of interest for the development of the gambling business. However, politicians and officials don’t want to determine gambling rules due to the unpopularity of this topic, since those involved in developing this law are blamed for lobbying for someone's interests. In this regard, we can mention the case observed in the previous year, when the Prime Minister faced such accusations.
"There was no reason to say that he was lobbying the interests of any structure. Any law is interesting to someone, but you can always find a parliamentary group that starts discussing this topic and stating that this is bad." - Gregory Tripulsky said.
We want to remind you that the gambling ban in Ukraine was catalyzed by a fire in the slot hall of Metro-Jackpot Ltd., which occurred on May 7, 2009, in Dnipropetrovsk. As a result, nine people died, and 11 people were hospitalized with injuries.
This tragic event was a good PR reason for the popular "struggle for spirituality and morality", but the real economic and social consequences of such a step were of no interest to either the officials or the deputies. On the same day, Yulia Tymoshenko, who was the Prime Minister of Ukraine at that time, issued a directive on inspections of gambling houses and suspended the licenses. She also closed all gambling establishments located in residential houses.
The current law "On Prohibition of Gambling Business in Ukraine" bans gambling in casinos, gambling halls, rooms, and bookmakers.
Populism Slows Down the Legalization
Experts on economics emphasize that the gambling ban was a big mistake. De facto, the gambling industry continues to flourish, but billions of dollars are not taxed and remain in the shadows, enriching only certain individuals.
This law was adopted against the populist background. Now it is necessary to change it, because gambling still exists. However, it is illegal and does not bring even a penny to the budget. If it is legalized, the treasury will receive some additional revenues. Thus, the complicated financial situation in Ukraine will be slightly improved. We must move away from populism and work in a civilized way. Abroad gambling is legal and open, - said Andriy Novak, the Chairman of Ukraine’s Committee of Economists.
According to him, " all types of gambling may exist, except for those that are associated with fist fighting without rules. However the age limits for players and locations of slot machines should be clearly determined. To do this, it is necessary to follow experience of Europe and learn from it".
Thus, political populism slows down the legalization of gambling. No one wants to bear the responsibility for unpopular decisions when the country is waging war. Gambling seems to be inappropriate at the moment. Nonetheless, as for filling the budget, such steps are necessary, since the state must seek additional sources of revenues. If gambling is fully legalized and controlled, it can bring Ukraine several billion hryvnias of income per year. And this mechanism can be improved. For example, it is possible to choose good places, in particular, recreation areas or tourism destinations.
Budget is Above All
Under the conditions of stagnation, the economic theory recommends that governments should promote and support local businesses. However experts believe that the Ukrainian practice shows the choice of feudal methods: high taxes, sale of licenses, and restrictions on budget spending. And no one analyzes the social impact of innovations.
"Those who do not vote will support the underground gambling business," the Prime Minister Yatsenyuk declared, an irresistible argument. At the same time, experts emphasize that if you continue to adhere to this logic, you may legalize drug trafficking, which is also prosperous in Ukraine, according to the police. And the government will even be able to appeal to the European experience, for example, the Netherlands. It is also possible to recall that prostitution is legal in some European countries (such as Germany, Austria, Hungary, Latvia, and the Netherlands). Finally, there is a black market of firearms, which also brings billions of dollars. They may be considered to be additional sources of funds!
It is no wonder that the declarations of Ukrainian officials would have such sources of income as the huge winnings at casinos, instead of the current incredible royalties for copyright. The experts are confident that such certificates will be available. After all, gambling is often used for money laundering and the legalization of income, even in countries with less corrupt police than in Ukraine.
In addition, to make this kind of business profitable and generate billions in revenue for the budget and casino owners, it is necessary to take the same amount of money from the pockets of others. It is easy to understand that the actual budget will be filled by the funds of the impoverished Ukrainians, who will be motivated by the strong desire to get rich quickly and treat this opportunity as their last chance to survive.
Gambling Requires Strict Rules
Gambling can make some individuals addicted, but this fact should not become an obstacle to its legalization, - said Alexander Zholud, a senior analyst of the International Centre for Policy Studies.
I believe that all activities should be legalized. Otherwise, illegal gambling can flourish. For example, when the gambling business was banned, underground casinos became popular. To be sure, there are addicted people. If they want to gamble, the prohibition will not be able to stop them. Anyway, they will find a way to satisfy their needs. Therefore, we should rather provide them with the opportunity to gamble at the national level, as opposed to the black market.
Those who suffer from problem gambling should be treated. However, this should not lead to the prohibition of roulette or slot machines. Alexander Zholud’ summed up:
The fact that we ban does not mean that they will be unable to use services of illegal casinos. And anyway, they don’t want to be treated. On the one hand, I believe that it is necessary to provide open access to gambling for those who have reached a certain age and are responsible for their own actions. It is also necessary to implement certain social programs that will provide treatment for addicted gamblers, as it is used for patients with alcoholism or drug addiction.
Yet, everything will likely be organized in the standard way: only friends and relatives of the high-ranking authorities will get preferences for carrying out gambling-related activities. It is said that casinos will be legalized exclusively in five-star hotels with at least 250 rooms. Considering their small number, the budget revenues will be miserable, and the operators will have a monopoly on the market. However, the black market will not disappear. Nevertheless, legal casinos will probably appear in Ukraine in 2016.
The Resurgence of Gambling in Ukraine: A Look Back Since 2016
The history of gambling in Ukraine since 2016 is a story of dramatic change, marked by a shift from a complete ban to a regulated and expanding market. This period saw the country navigate complex legislative hurdles, economic incentives, and social considerations to bring the industry out of the shadows and into a legal framework. This article explores the key milestones that shaped the modern Ukrainian gambling sector.
From Prohibition to a New Vision (2016-2020)
The journey to legalization began years before the official law was passed. Following a tragic fire in a Dnipro gambling hall in 2009, all forms of gambling were banned in Ukraine. This led to a large-scale underground market for casinos and sports betting, with illegal operations proliferating across the country. By 2016, there was a growing consensus among government officials that this ban was ineffective and costly. The primary goals of a new gambling law were to:
- Increase state budget revenue through taxes and licensing fees.
- Create a transparent and regulated market.
- Attract foreign investment.
- Combat illegal gambling and protect players.
The Drive for Legalization
In 2019, President Volodymyr Zelenskyy openly called for the legalization of the gambling industry. This call to action provided the necessary political momentum to move forward with new legislation. The government began drafting a comprehensive bill to regulate various forms of gambling, including:
- Land-based casinos
- Online casinos
- Online and offline sports betting
- Slot machine halls
- Online poker
The Landmark 2020 Gambling Law
The most significant event in the history of Ukrainian gambling was the passing of the Law "On State Regulation of Activities on Organizing and Conducting Gambling" in July 2020. This law officially ended the 11-year prohibition and established a legal foundation for the industry. Key provisions of the law included:
- The creation of the Commission for the Regulation of Gambling and Lotteries (KRAIL) serves as the main regulatory body.
- Strict licensing requirements for all gambling operators.
- Specific location requirements for land-based casinos and slot machine halls include being limited to certain star-rated hotels.
- An age restriction, setting the minimum age for gambling at 21.
This legislation was a significant step forward, aiming to formalize and control an industry that had been operating without oversight for over a decade. It also laid the groundwork for a new tax regime to collect revenue from gambling activities.
Early Development and Challenges
Following the 2020 law, the Ukrainian gambling market began to take shape. KRAIL started issuing the first licenses to operators in 2021, and legal gambling establishments and online platforms began to emerge. However, the initial years were not without challenges. The new market faced hurdles such as:
- Delays in the full implementation of a state's online monitoring system.
- Complex and demanding licensing procedures.
- The need to establish a clear taxation framework for the industry.
- The continued existence of a shadow market despite the new regulations.
Despite these early difficulties, the gambling sector began to contribute a significant amount of money to the state budget through license fees and taxes. The market, including both land-based and online gambling, showed clear signs of growth and development.
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The Evolution of the Ukrainian Gambling Market
Since its legalization, the Ukrainian gambling industry has continued to evolve. The introduction of legal online casinos and betting sites has provided new avenues for entertainment for players. Meanwhile, land-based establishments have opened in major cities, often within upscale hotels as required by law. The regulatory body has been active in licensing new operators and overseeing the market. The main types of gambling now available are:
- Casinos, located in hotels in cities like Kyiv and Odesa.
- Betting, with both online and offline bookmakers accepting wagers on a variety of sports.
- Slot machines, which are permitted in dedicated halls.
- Online poker rooms and other online casino games.
The ongoing development of the market is focused on strengthening regulation, increasing tax revenue, and implementing measures for responsible gambling to protect consumers and address social concerns. The path from a complete ban to a regulated market has been complex, but it has ultimately transformed the gambling sector in Ukraine.
