IMGL Magazine July 2023


Introduction The true legalization of gambling in Ukraine is a recent development, and despite the war with Russia, this process has not stopped. The Commission for the Regulation of Gambling and Lotteries, the operators of the newly created market, and society as a whole understand the necessity not only to withstand the conditions of martial law but also to continue and complete the gambling reform initiated before the invasion A History of Gambling Regulation in Ukraine On August 13, 2020, the Law of Ukraine “On State Regulation of Activities Regarding the Organization and Conduct of Gambling” (the Law) came into effect. This date can be considered as the birth of the Ukrainian gambling market, as gambling had been prohibited in the country for almost eight years prior to this date. Before prohibition, there had been a gambling market in Ukraine, but there was no specific regulation implemented by the government. Regulation during that time was carried out through general legislative acts that also regulated other business sectors, sometimes even using acts from the Soviet era. As a result, the regulation did not consider the specific nature of the gambling industry, the need to minimize social risks associated with its existence, and many other factors. This situation led to a significant number of violations by gambling operators, uncontrolled proliferation of gaming halls and unregulated access to vulnerable segments of the population, including minors. The absence of any culture of responsible gambling consumption in society, the unregulated nature of the industry, and other factors caused a serious social outcry, and condemnation of gambling, ultimately resulting in its complete prohibition. Throughout the period of the ban, gambling continued to exist illegally, and in line with the experience of most developed countries in the world, the need for regulation was recognised. There was a renewed attempt to legalize the gaming market

with the state’s involvement, taking into account past mistakes. Thus, a special law was passed and a dedicated regulatory body was established to create conditions for the launch of the market and to regulate it based on the fundamental standards and requirements outlined in the Law. The launch of Ukraine’s legal gambling market was received very positively by numerous foreign operators who viewed Ukraine as a country with great potential for gambling development in Eastern Europe. However, the adoption of the Law was insufficient for the full opening of the market to foreign operators, as it required legislative changes in the field of taxation, which until now has not aligned with the provisions of the Law and created a rather opaque gambling taxation system in Ukraine. Launch of the market despite the unresolved tax issues During the first few months of operation of the newly established Commission for the Regulation of Gambling and Lotteries (the Commission), the Licensing Conditions were adopted in accordance with the Law, and in February 2022, the first legal gambling operators appeared in Ukraine, both in the online and offline sectors. Certain weaknesses and ambiguities identified in the initial stages of market launch, as well as uncertainty over gambling taxation, did not hinder applications to obtain gambling licenses. In total, from 2021 to 2023, the Commission issued a total of 4,633 licenses for gambling activities. The issuance of licenses generated the equivalent of US$89.2 million for the state budget. The demand for gambling licenses was not affected by the high cost of licenses, despite Ukraine being among the most expensive compared to other jurisdictions. The high cost of licenses, as stipulated by the Law, became part of a consensus that made it possible to launch the market without the automated state system for monitoring gambling revenue (SSOM), which, according to the Law, is supposed to fully control the Gross Gambling Revenue (GGR) of every operator. The Law requires each operator to connect its online system to the SSOM to enable the Commission to monitor all betting



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