Is Ukraine Nurturing a Booming Illegal Gambling Market by Delaying Re-Regulation Process?

Ukrainian lawmakers recently listed poker in the country’s Register of Recognized Sports after the game was considered a form of gambling and was therefore illegal for nearly a decade. This latest move raises two important questions – is the Ukrainian government gearing up for the introduction of a new poker-focused regulatory framework and will lawmakers eventually introduce a sweeping gambling reform that will replace the current ban on practically all forms of gambling with a regime that better reflects the demands of the contemporary gambling customer?

Ukraine’s market liberalization effort originally kicked off in 2015 but saw little success. The country’s government introduced back then a draft legislation that would have legalized the construction of land-based casinos in the country, sports betting, online gambling and would have upgraded the existing national lottery.

According to estimates from that period of attempts for a change in the Ukrainian land-based and online gambling landscape to be implemented, a re-regulated and liberalized gambling market could have produced revenue of more than $1.5 billion per year, of which the government would have scooped more than $300 million in tax revenue.

However, the draft legislation was met with heavy protests from the industry due to the proposed license fees and tax rate, which gambling companies deemed too heavy.

Last year, the Ukrainian government penned a letter to the International Monetary Fund, promising that it would implement the necessary changes to the country’s economy in a manner that would make it eligible for a $17-billion financial assistance and that it would look to re-regulate its gambling market so as to secure additional revenue sources.

As per the letter, Ukrainian lawmakers were expected to introduce a new draft legislation by 2018. However, given the fact that the final quarter of the year is approaching and there has been no information on the government’s progress on a draft legislation, it really looks as if there will be more delays of the process.

Poker’s New Status

Last month, Ukraine quietly recognized poker as sport, adding the game to the Register of Recognized Sports. Poker had been considered a sport up until 2010, when it was taken off the afore-mentioned register by the then Justice Minister.

The game was thus defined as a form of gambling, together with slots and popular table games such as blackjack and roulette. Under Ukraine’s On Prohibition of Gambling Business Act from 2009 all such games were and still are considered illegal in the country.

Local poker clubs tried to combat the new status quo and took the matter to court. A three-year battle then followed and concluded with a 2013 ruling by the Ukrainian Supreme Court that stated that tournament poker could still be played. However, cash games were still deemed illegal.

Online poker operators, fearing legal action, quickly relocated their servers. The new legal status of poker in the country is hoped to trigger a change in the regulations regarding the provision of online poker services to Ukrainian players. In fact, many interpreted the quiet addition of the game to the Register of Recognized Sports as a signal that a positive change might be on the horizon.

Thriving Unregulated Market

Despite the existing ban on almost all forms of gambling in the country, it should be pointed out that Ukraine’s unregulated/black market is thriving and this has been the case for quite some time. Online gambling has been particularly popular in the country over the past several years as services of this kind can be easily accessed by customers and can be easily promoted to customers.

According to unofficial statistics, Ukraine’s online gambling market could be worth around €300 million in terms of revenue generated. It is believed that sports betting is the most popular type of online gambling service in the country and that the local online betting could be worth more than €200 million, leaving the rest to online casino games and similar other products.

According to data from the Internet Association of Ukraine, the websites of different betting operators are often among the most visited ones in the country. And data provided by different bookmakers suggests that small bettors, or ones who wager smaller amounts of money but do that regularly, comprise the greater portion of Ukraine’s market.

All of the above points to the fact that Ukraine nurtures a booming unregulated market and is losing millions due to the lack of a proper regulatory framework. It is yet to be seen whether the country will be able to keep its promise to the IMF and introduce a viable gambling legislation this year. However, chances are that any changes in the current status quo will be implemented as early as 2019.

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