Ukraine hopes to win big after liberalizing gambling market
Football fans gathered in a game room in the Ukrainian city of Dnipropetrovsk to watch the 2009 Champions League semi-final between Barcelona and Chelsea.
But their evening turned to tragedy when a fire broke out in one of the dozens of slot machines installed in the arcade room.
The lack of emergency exits meant people struggled to escape the flames. Nine people were killed and 11 others injured.
This sparked a fundamental change: MPs banned casinos, slots, bookmaker shops and internet gambling.
Yet fast forward 12 years and the industry is back. In the year following the liberalization of the sector, the government issued 40 licenses.
In the capital Kiev, advertisements related to betting are plastered on billboards, public transport and television screens.
The government hopes to increase its coffers: President Volodymyr Zelenskyy has said he could bring in 160 million euros per year.
“It’s a success for Ukraine”
Anton Kuchukidze, president of the Ukrainian Gambling Council, said the country has the potential to become the largest gambling market in Eastern Europe.
“The potential here is very high,” Kuchukidze told Euronews. “It’s a success for Ukraine.
Not everyone is convinced on this last point, but the new law is an improvement on the situation which preceded the fire of 2009.
“It was awful before 2009,” Kuchukidze said. “There was no social protection. Children and gambling addicts had access to casinos, although they were under government control. Slot machines were everywhere and the market was de facto not under government control.
“You could say it was good that the sector was closed in 2009, but what followed was even worse. The market moved in the shadows and operated illegally, while the government received no income. “
He said illegal gambling halls had sprung up, disguised as lottery shops, which had not been affected by the ban.
The new rules, introduced last year, restrict who is allowed to open online and offline casinos. Only certain hotels of a certain standard can open a casino and rules are also in place to prevent access to gambling addicts. The fines for breaking the rules are significant and Kuchukidze is convinced that this will keep people in check. .
Sergey Potapov, CEO of online casino Cosmolot, said he is working with user data to identify early signs of gambling addiction.
“Hopefully this will allow us to predict who is likely to get addicted and stop it first,” he said.
Illegal gambling halls
Yet despite claims that the liberalization of gambling in Ukraine has been successful, the industry still has problems to resolve.
Potapov, for example, complains that taxes are too high and that this prevents new companies from entering the market.
He said online casinos have to pay an annual fee of € 170,000 regardless of their income. Players will also have to pay a 19.5% tax on their winnings.
A new law is under discussion which would replace the annual license fee with a 10% gross gaming income tax rate.
“We are ready to pay taxes and do it,” said Potapov, “But the tax system will have to change to be competitive and compete with Russia, Belarus or other countries. I think many companies are waiting to “enter the market until the new law is in place. It is not sustainable as it is now, and everyone understands that.”
Other critics say the new legislation is not being implemented properly, pointing to the illegal gambling halls still operating in Ukraine.
In addition, Ukrainian police also recently arrested a member of the Ukrainian Gambling and Lottery Regulatory Commission on suspicion of accepting a $ 90,000 bribe to grant a gambling license.
Kuchukidze said he was working with police to shut down illegal gambling halls and a new tax framework is on the way to help the sector.
“More than ten foreign companies showed interest in the Ukrainian gambling market when the tax bill was passed at first reading,” he said. “And I think when it’s passed we’ll see more investors in Ukraine, and that’s natural because Ukraine is the biggest gambling market in Europe and we’ll see that later.”