Forecast of Gambling Market Development in Ukraine after Legalization

According to data of the German company GIZ, the Ukrainian gambling market was worth €967 million in 2008 and tended towards further growth. The ban of the gambling activity halted this process but legalization in 2019 opens up new prospects for Ukraine. What may they be?

Ukrainian gambling market after the ban

Until 2009, Ukraine had not drafted full-fledged laws that would regulate gambling field in the country. Officially, only statutes and regulations (tax, license, patent) had influence on gambling. However, the government passed the law on May 15, 2009, which totally banned gambling activity and participation, with the exception of lotteries.

As a result, in 2009-2014, the gambling market started reshaping in the lottery market and related activities, most of the gambling business went into the shadow or was disguised as legal. According to the data of the Ukrainian Ministry of Finance, 80% of state lottery bets related to the segment of games similar to those beyond the law (but they were officially licensed) in 2013.

Speaking about state losses, the national budget lost tax payments for gambling patents. For example, gambling tax revenue reached €88 million in 2008. The next year, the Ukrainian budget received only €10 million in patent fees, and later there were no such payments at all.

Gambling business in Ukraine: past and present

Back in 2009, the country’s gambling market was worth €967 million, and today the real figure – even taking into account the ban – is €1 billion. This data was officially reported by the Anti-Monopoly Committee of Ukraine, which analyzed the shadow and legal activities related to lotteries and sports betting.

However, independent experts challenge this information mentioning quite other figures. For example, Casino News Daily names the sum of €300 million. The ambiguity of assessment relates to the fact that the online gambling segment, which is difficult to control, has been actively developing lately.

It is not very profitable to work legally in Ukraine now due to extremely uncomfortable conditions for running a business. As a result, a growing number of companies is going to the “grey zone” and the state loses millions of potential budget replenishments. For example, lottery tax revenue reached ₴320 million in 2014 and dropped to ₴64 million in 2016.

Sports betting is the most popular gambling activity in Ukraine. According to the Ukrainian Internet Association, websites of different betting operators are some of the most frequently visited. At the same time, players that regularly bet small amounts make the biggest part of the Ukrainian online and offline market.

Prospects of the gambling market after legalization

Attempts to liberalize the gambling market in Ukraine have been taken since 2015 when the government prepared a draft law that could legalize the construction of land-based casinos, sports betting, online gambling, and advance the regulation of the national lottery. However, this attempt was not successful similarly to projects of 2018.

Now by order of the President of Ukraine, the Cabinet of Ministers has to draft the law about gambling business legalization until December 1. It is expected that the gambling market will be consequently divided into mass market and casino. The first steps of the government may probably be the regulation of the license acquisition process and legislative attempts to control the turnover.

Insiders state that even now some big companies from the CIS and Western Europe show interest in the gambling field of Ukraine. It means that the legalization of gambling may attract large investments from abroad, but this depends on the official business regulations.

Legally approved activities of gambling companies including casinos and betting houses can also contribute to:

• the increase of tourist traffic;
• the growth of the advertising market;
• the development of the sports sector;
• renewal of horse races.

Experts name several conditions, thanks to the fulfillment of which the Ukrainian gambling market would work rather efficiently. Here are some of them: intelligent fiscal regulation, clear and transparent conditions for license acquisition, integration of the European business standards. The representative of ТМ Parimatch Vadim Misyura believes that if the law is drafted in a proper way, the Ukrainian gambling market has the potential to grow by several times in the next decade.

How the European gambling market develops

The European gambling market is quickly growing thanks to the liberal legislative system and clear tax regulations. According to Global Betting and Gaming Consultants (GBGC), the total volume of the European gambling industry was worth around $525 billion in 2016. The most developed is the gambling industry of the UK, which adds over £2.3 billion to the country’s economy. Such countries as Italy, Germany, Sweden, and the Netherlands do not lag behind.

The development of the gambling industry in Europe is encouraged by high standards of regulation.

• certification of lottery and gambling hardware;
• use of the electronic betting system for the control of every deposit and withdrawal transaction;
• implementation of responsible gambling;
• membership of lottery operators in the European and global lottery associations.

The international practice shows that the ban of the gambling business does not help to eradicate it. Instead, it moves the business into the shadow and the state loses potential benefits of its operation. A properly developed legal framework helps to control the gambling field, regulate its activities, and clearly understand market volumes.

Conclusions

Development of an adequate draft law and its subsequent adoption by the Ukrainian authorities will facilitate the increase in tax revenue. Besides, the regulation of the gambling field will attract foreign investors and will influence the growth of tourism. However, the most important thing here is the focus on the international experience, implementation of the European standards, and development of clear regulations for all players without any exceptions.