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Should gambling be legalized in Ukraine – lawyer’s opinion

The questions of legalizing gambling raised several years ago by the Ministry of Finance of Ukraine, are still relevant for the parliamentary agenda. Unfortunately, this issue is still a matter of future.

Complete ban on gambling in Ukraine was introduced by the law in 2009. Gambling is defined as any game, an indispensable condition for participation in which was the payment of money by the player, including through electronic payment systems, which allows the participant to receive a prize in any form or not to receive it at all, depending on chance.

The provisions of this law apply to all types of gambling activities, including casinos, slot machines, computer simulators, betting shops, and even virtual gaming halls on the Internet. However, in accordance with this law, the lottery is not considered as gambling.

Contrary to the expectations, the law in question hardly helped to protect society from threats that gambling industry create. Turning in a moment into persona non grata, a significant part of the market previously legally providing its services was forced to go into shadow. As a result state and local budgets have been deprived of tax revenues and licensing fees. This resulted not only in the emerge of uncontrolled and untaxed financial flows, but also in serious violations of the rights and freedoms of citizens, especially minors, as they are frequent gamblers.

Another factor affecting the ban is that significant technical changes on the market took place. Hundreds of mobile applications providing access to gambling at a distance of one touch appeared on Ukrainian market.

Volatile status quo

The current status quo which on the one hand can be explained by the struggle for a return from the shadow of the profitable sphere of activity and on the other – by difficulties in reaching a compromise between its main participants, does not suit either side of the longstanding "gambling debates".

In the clashes for the "proper settlement" six draft laws on legalization of gambling were submitted to the Verkhovna Rada of Ukraine for consideration. It is interesting that the initiative on legalization of gambling was raised by the state on behalf of the Cabinet of Ministers (draft No. 3632 dated 11 December 2015, withdrawn by it in 2016, and draft No. 4663, filed as a substitute for the first one) and members of parliament (drafts 1807, 2441a, 3094, 3632, 4663-1). At the time of this article all submitted drafts are being considered by relevant parliamentary committees.

To change the tactics the Ministry of Finance of Ukraine decided to start with regulating the lottery market by publishing in early May a draft of licensing terms for conduct of commercial activity on issuance and running of lotteries and setting the amount of fees for the issue of license. Adoption of the license conditions will give the opportunity to revive the mechanism of withholding of license fees from lottery operators and to direct these funds for the needs of the state and local budgets.

New gambling law

The next logical step shall be passing the complex law regulating the gambling business. This is important from several points of view.

Firstly, a uniform law will allow to establish common standards and rules for operators of any type of gambling activity including rules on "responsible gaming".

Secondly, such approach significantly decreases uncertainty in classification of related types of activities in gambling sphere. This especially relates to the "game of skill" concept, which is popular in foreign countries. Winning in such a game to the great extent depends on skills and abilities of the gamer rather than on chance. The prominent example of game of skill is poker.

Unfortunately, absence of such concept in Ukrainian legislation keeps the status of poker uncertain. Numerous public organizations acting as non-commercial associations of experts are working on these and other issues and even advise the Ministry of Finance on key aspects of future legalization of gambling.

According to the information provided by the Ministry of Finance of Ukraine the volume of the gambling market in Ukraine in 2008 amounted to UAH 6,4 billion, 73% of which accounted for slot machines, 16% for betting, 7% for lotteries and 4% for casinos. In 2008 about 38 thousand people were engaged in gambling business. According to the forecast of the Ministry of Finance for 2016 in case the law legalizing the gambling market is passed the budget revenues (license fees and taxes) will annually bring around UAH 5 billion to the budget.

The public-private cooperation in this sphere becomes even more important in terms of the latest Memorandum between Ukraine and IMF. According to the terms of the Memorandum Ukraine shall legalize gambling not later than by 2018. The statistics of the last years repeatedly confirmed that Ukraine prefers performing its obligations before IMF.

No matter how controversial the topic of gambling is, it should not be regarded only as a new way of patching the budget holes. In this case, we are talking about a global change in approaches to the regulation of many spheres of business activities.

One can certainly say that social and political conditions have never before allowed to organize a truly opened and equal dialogue in this sensitive issue between all interested parties.

Today, each party has a trick up in its sleeve. The state is equally open to both the society that wants to get a civilized gambling market and to the business that provides such services. In case the Ministry of Finance manages to find a consensus there will be no losers in this game.

 

Alina Plyushch

Counsel at Sayenko Kharenko Law Firm,

Board Member of the Ukrainian Gambling Association 

31.05.2017