According to the recent gambling news, the topic of legalization of the gambling business in Ukraine has recently been in the spotlight. Sergey Mishchenko, an online gambling consultant, has provided a lot of interesting information concerning the main challenges the market has been facing over the recent years, the future of the gambling industry in Ukraine and possible changes.
Does the gambling business in Ukraine has a future?
Of course, it does. This is a capacious, modern, competitive market with a large, formed audience. Its current infrastructure is no different from developed markets, such as the UK, Germany, Italy, France. Ukrainians play at both online and land-based gambling establishments, prefer the same products: bets on sports events, casinos, poker, lotteries. As for the online sector, mobile devices prevail here, and online payment systems have been developed. In Ukraine, there are no problems with the penetration of the Internet, the immaturity of the audience, the culture of the game, and the development of the products. There is only one problem: the Ukrainian gambling market is not properly regulated. But this, I hope, will be fixed soon.
May, you please, provide a deeper insight into the current state of the gambling industry in Ukraine?
Since 2009, any type of gambling activity, except for state lotteries, has been banned and illegal in Ukraine. For 11 years, the market has existed and developed thanks to loopholes in the legislation governing the activities of state lotteries and has been closely associated with corruption and lobbying for the interests of certain groups. This, however, did not prevent several large, even by world standards, players such as PariMatch and Favorit sport from gaining a foothold in the market. At the same time, the disadvantages of the lack of regulations are obvious: players are not protected, the state does not receive taxes, the industry is not attractive for foreign investments.
Over all these eleven years, initiatives to legalize the gambling business arose in Ukraine, but the most realistic chance to implement this appeared only in 2020. The bill “On state regulation of the organization and conduct of gambling” (No. 2285-d) has already reached secondary reading in Ukrainian Parliament Verkhovna Rada. This is not the first and, I think, the latest version of the bill, some of its provisions are evaluated differently by market players and lobbyists, so it will take some more time for its adoption. The implementation and monitoring of the implementation of the provisions of the law in practice will also take considerable time.
How will the market change after its legalization?
First of all, players will receive due protection of their rights and interests. Unscrupulous operators will no longer be able to refuse players to pay their winnings, will not provide an opportunity to play to underage players, people suffering from addiction. At online casinos and land-based gambling establishments, pirated games with an adjustable and/or low probability of winning will disappear. Compliance procedures for Responsible Gambling, Know your Customer (KYC), Anti-money Laundering (AML), Combating the Financing of Terrorism (CFT) will start to work. All this, from my point of view, will increase the level of confidence of players and, in the future, will lead to the growth of the playing audience.
Licensed players will get more opportunities to promote their products, advertising, and access to new marketing channels. In their budgets, objects of expenditure related to illegal activities will replace objects of expenditure connected with tax deductions. The financial flows of players and operators will move from “black” to “white” channels. This, in turn, will lead to an increase in the number of advertising markets and payment systems.
The state will replenish the budget through the sale of licenses and taxes from the activities of licensed operators, and the latter will create new jobs in Ukraine.
The gambling market of Ukraine after legalization will certainly attract investments. I estimate the volume of the online segment alone at $ 3-3.5 billion per year. It is very attractive for investors, both domestic and foreign. If investors are convinced that their investments are protected and the market is transparent, they will definitely enter it: large – most likely through M&A, small – launching new products. Therefore, I consider the purchase of PariMatch and/or Favorit sport by major global brands a matter of time.
Finally, the official status and appropriate protection will be received by employees of companies that are legally engaged in the gambling industry. It will also bring some benefits for those who work in Ukrainian RnD centers of foreign companies related to the gambling industry. And there is a large number of such people. The Ukrainian offices of NetEnt, Playtech, EGT, Pragmatic Play, BetConstruct, EveryMatrix, SBTech have tens of thousands of employees.
In your opinion, how soon will all the above-mentioned changes take place?
All these changes will not happen instantly and fully. At first, the volume of the market will decrease significantly because there will be considerably less licensed land-based gambling establishments than before legalization. Further, it will take at least 2 years to bring the market into compliance with the regulation – this is my optimistic forecast. This period will depend on how effectively the market players comply with the new rules. If the control is not effective, some operators will continue to work illegally, as a result, positive changes caused by the introduction of regulation will not occur.
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