Gambling Business: Legalization, Failed Repeal of the Ban, Owners and Other Details

We explain what is happening with gambling in Ukraine.

After the failed vote to legalize the gambling business in Ukraine, President Volodymyr Zelensky and the current government headed by Prime Minister Oleksiy Honcharuk declared war on gaming halls.

We look at what happened, what bill Zelensky and the Servant of the People party wanted to pass, and how the gambling business works in other countries.

When and why gambling was banned in Ukraine

After a fire at a gaming hall in Dnipro in May 2009 that killed 10 people, a decision was made to ban the gambling business in Ukraine. Parliament passed the law banning the gambling business and participation in gambling by 340 votes. Before this decision, thousands of gambling establishments operated in the country.

The explanatory note to the law notes that its adoption was driven by the rapid growth in the number of gambling entities and venues. Crime rates at such venues also rose, and the number of crimes linked to gambling addiction increased.

Why there is a push to lift the ban

Over the past 10 years, dozens of new bills have been registered in the Verkhovna Rada of Ukraine that in one way or another restore the legality of the gambling business. It was expected that the previous parliament would also lift the ban, but this did not happen.

In 2014, during the presentation of the state budget, the idea of lifting the gambling ban was raised. Prime Minister Arseniy Yatsenyuk then argued that the state would only benefit from this. According to him, lifting the ban would bring 1.2 billion dollars a year to the state treasury.

Finance Minister (2014-2016) Natalia Yaresko also supported lifting the ban, estimating state revenue from the gambling business at 5 billion hryvnias a year. And a few years ago, Interior Minister Arsen Avakov estimated the income of illegal casinos at 1.5 billion hryvnias.

The main reason for lifting the ban was the existence of an illegal gambling business. Put simply, it exists despite the bans, so why not legalize it and start receiving contributions to the budget.

What is happening now

The current President of Ukraine, Volodymyr Zelensky, together with his party Servant of the People, has long spoken of the need to legalize the gambling business. The president instructed the Verkhovna Rada to adopt the relevant law by December 1, 2019.

Verkhovna Rada Speaker Dmytro Razumkov proposed sending the bill back for further consideration, which was supported by 243 deputies. The very next day, the Cabinet of Ministers voted to ban the distribution of lotteries under license conditions, which ruled out the possibility of distributing the gambling business in that form.

Prime Minister Oleksiy Honcharuk also instructed the police and the tax authorities to go after gaming halls. Interior Minister Arsen Avakov ordered all gambling establishments to be closed by 4:00 p.m. on Friday, December 20. President Zelensky said that they know “who is behind this”.

In addition, the police closed about 5,300 gambling establishments, and Parimatch and Favorit Sport stopped operating. It is still unknown whether they will resume work. Some premises that previously housed gaming halls are already listed for sale online.

What the failed bill proposed 

For management and oversight, a special body was to be created: the Commission for the Development and Regulation of Gambling, which would include 7 people appointed by the Cabinet of Ministers.

The bill also envisaged creating the Fund for the Support of Medicine, Sports and Culture, which would be financed by license payments from gambling establishments.

The money was planned to be spent on developing medical care, raising salaries for medical workers, building new hospitals, supporting sports and events promoting a healthy lifestyle, as well as creating libraries, museums, theaters, coworking spaces and holding concerts.

Who owns the gaming halls

All establishments in the Ukrainian gambling market operate under the licenses of 3 companies:

1. Ukrainian National Lottery (UNL): 100% foreign investment, ultimate beneficiary is Briton Michael Foggo.
2. MSL: 99.96% of investments belong to Cypriot company Evolot Limited, while the remaining 0.04% belongs to the company's president, Georgiy Lozhenko.
3. Patriot: 100% of investments belong to Cypriot company Cehriba Investments Limited.

The market volume is estimated at one billion euros.

How the gambling business works in other countries 

The gambling business is partially or fully legalized in many countries around the world. Often this is done to increase budget revenue, attract tourists and create new jobs.

For example, in Monaco gambling is allowed only for foreigners. Local casinos there earn about 210 million euros a year, and the gambling business is one of the main sources of state revenue, which allows residents not to pay taxes.

China has allowed the gambling business only in the Macau province, which brings the state about 37.5 billion dollars a year.

One of the most progressive laws regulating gambling is in force in the United Kingdom. It decriminalizes the sector, restricts access for minors and ensures honesty and transparency of financial transactions.

Today, the United Kingdom has 154 casinos, 3 racetracks, 8 bookmaker companies and 9 Bingo! halls. This brings the state more than 10 billion dollars a year and creates over 200 thousand jobs.