23 May, 2022
On February 24, Russian armed forces invaded the territory of Ukraine, where active hostilities are still ongoing. During all this time, the economic and all business sectors of Ukraine have been seriously affected, and the gambling industry is no exception.
Head of the Commission for the Regulation of Gambling and Lotteries of Ukraine ( KRAIL ) Ivan Rudy spoke to SBC CIS about the current situation in this Eastern European country and how gambling companies continue to operate in the face of war.
Despite the still difficult situation in Ukraine, there are increasing calls for reopening and supporting the country's economy. In particular, CRAIL called on Ukrainian businesses to return to work. How do you assess the current situation and in what form do you think the resumption of work is most appropriate?
The negative consequences of the terrorist actions of the aggressor country - Russia - are reflected in all sectors of the Ukrainian economy. It is clear that this has not bypassed the sphere of gambling either. From the beginning of the introduction of the legal regime of martial law on the territory of Ukraine, CRAI began to receive applications and requests from licensees to carry out activities under this regime: on the termination and suspension of activities due to the impossibility of carrying out activities under martial law; on the release of licensees from liability for non-payment or delay in the implementation of the license fee in connection with the occurrence of force majeure circumstances as a result of the military aggression of the Russian Federation; on the deferment of payment for the license after the termination or cancellation of martial law;
All these appeals from gambling market participants allowed CRAIL to quickly identify problematic issues. The Commission specialists have worked out the problematic aspects of the activities of the gambling market participants, and CRAIl, within its own powers, has taken the necessary measures aimed at resolving these issues and supporting the organizers of gambling in the current conditions. The Commission is sympathetic to the decisions of the organizers of gambling and - within its competence - promptly considers such applications. At the same time, the gambling market continues to demonstrate the understanding that without economic activity - even under martial law - the full functioning of the state is impossible. That is why the organizers of gambling make every effort to carry out activities on the Internet: in particular, betting activities, online poker and so on. Since the beginning of the war, all licenses issued by CRAIL for the right to carry out activities by the organizers of gambling related specifically to the online segment.
CRAIL began to resume its work in March, and since April the regulator has been fully operational. The Commission is actively involved in work with legal acts aimed at deregulating economic activity and improving the procedures for its licensing under martial law, as well as during the recovery period after the end of the war. In particular, CRAIL cooperates on a permanent basis with the State Regulatory Service of Ukraine on the issues of licensing and permitting system in the field of economic activity and deregulation of economic activity, making its own proposals: on the onset of force majeure as a result of the introduction of martial law, deferral of license fees, suspension of licenses due to the inability to carry out activities and much more.
Since April the situation began to change. Representatives of the gambling market are gradually returning to work in places where there is no threat of Russian military aggression. Some gambling establishments previously closed due to the war are reopening with updated schedules to accommodate curfew restrictions, for example. At the same time, CRAIL continues to provide administrative services in the field through the issuance of appropriate licenses and permits, and provides the necessary information support to market participants.
If we talk specifically about the gambling and betting sector... Of course, now is an extremely difficult time. But what is the real picture of operating in a country where the war is not yet over? Or, perhaps, how do you see the picture of work in the post-war period?
We have already adapted to work in the situation that has arisen in our country, and we will only continue to gain momentum. The return to the uninterrupted functioning of the gambling market in the territories under the temporary occupation of the aggressor state and in the zone of hostilities will be associated with the need to ensure the legal, economic, social and organizational conditions for the functioning of gambling: this, in particular, is the restoration of premises and return of the staff of gambling establishments to their places of permanent residence. Thus, economic activity in the field of gambling and lotteries can become one of the sources of filling the State budget and supporting the development of the Ukrainian economy after the war.
Are there any data on actual business and economic losses in the industry for the last two months?
As of today, we can state that under the conditions of the war, the gambling and lottery sector not only lost a significant share of its potential, but also underwent significant structural changes due to the decline in business activity and the impossibility of carrying out their activities by business entities located in war zones. An analysis of the consequences of such changes and an assessment of direct losses will become fully possible only after the end of the war.
However, a significant number of gambling organizers have managed to adapt to today's challenges and continue to properly fulfill their obligations to the players: many, as already noted, have resumed activities on an updated schedule that takes into account martial law restrictions such as curfews. CRAIL, in turn, continues to issue licenses and promote the restoration of the business, which ensures the filling of the State budget and supports the development of the Ukrainian economy.
The main trends that emerged in the gambling business as a result of the Russian attack on Ukraine can be most clearly evidenced by statistical data on the activities of land-based gambling establishments before and after the start of the war.
Namely, in Ukraine before the start of military aggression:
— 19 organizers carried out gambling activities in slot machine halls and casino gambling establishments;
- 61 gambling establishments functioned - eight casinos and 53 slot machine halls;
— the geography of the functioning of gambling establishments covered 17 regions of Ukraine - Vinnitsa, Volyn, Dnipropetrovsk, Zhytomyr, Zaporozhye, Kyiv, Kirovohrad, Lvov, Nikolaev, Odessa, Poltava, Rivne, Sumy, Kharkiv, Khmelnytsky, Chernivtsi regions and the city of Kyiv.
And since the beginning of military aggression in Ukraine:
— 13 organizers of gambling reported a temporary halt in the activities of gambling establishments;
- the total number of gambling establishments, the temporary closure of which was reported by the organizers of gambling, amounted to 41 units. However, despite all the difficulties and assessing the possible risks of the functioning of the establishments, two organizers of gambling - in late April - early May - announced the resumption of the activities of three gambling establishments;
- the geography of gambling establishments has also changed: according to information provided by the organizers of gambling, in five regions of Ukraine, the activities of all gambling establishments have been suspended today - these are Zhytomyr, Zaporozhye, Kyiv, Khmelnytsky and Chernivtsi regions of the country.
The state budget continues to be replenished with payments from organizers of gambling for licenses of the second year of activity. As a result, as of the end of April, the total amount of funds received by the country's budget through licenses amounted to 670.7 million hryvnias (about 22 million US dollars); of which 195.2 million were paid in April.
What we are now seeing in terms of the dynamics of state budget revenues from gambling in Ukraine under martial law indicates the possibility of prompt restoration of constant indicators of the development of the sphere after defeating the enemy.
During all this time, many foreign companies and organizations have expressed their support for the people of Ukraine, and the country has also received huge amounts of humanitarian aid. Tell me, are there any business negotiations with foreign partners at the moment?
In order to counteract the armed aggression against Ukraine and overcome its negative consequences, CRAIL is taking measures to ensure an active consolidated international policy of isolating Russia.
First of all, CRAIL sent an appeal to international companies operating in the field of gambling and lotteries, as well as companies providing services to gambling operators, with a request to terminate existing partnerships and business relations in the Russian Federation. The Commission sent the same appeals to international organizations, exhibitions and forums - in particular, about the exclusion of any representatives of Russian companies, speakers and operators from the working groups. In addition, we are engaging the international gambling and lottery community in the cause of the full restoration of peace in Ukraine.
Within the framework of international cooperation, in April this year, CRAIL joined the European Gaming Regulators Forum GREF (Gaming Regulators European Forum), an organization of European regulatory bodies, which is the central forum where regulators determine the coordinating policy in the field. Thus, from May 31 to June 2, 2022, it is planned to hold an annual conference organized by GREF. And since CRAIL is a member of this structure, a delegation from Ukraine plans to join the conference and discuss the latest trends in the development of the sphere, as well as make efforts to attract new partners.
At the same time, CRAIL consistently supports the introduction of international sanctions against the aggressor state and its business entities. The Commission has already called on European gambling regulators to:
- Appeal to the governments of NATO member states and Ukraine's allies with a call to take all possible measures to ensure the closure of the Ukrainian skies in order to protect the civilian population, infrastructure and cultural heritage of Ukraine;
— refrain from cooperating with representatives of the Russian government, Russian companies and other organizations;
- publicly and openly express condemnation of Russian aggression;
— provide informational and practical support to Ukraine.
Many foreign partners and responsible business representatives responded to the call of CRAIL, and they supported Ukraine not only in words, but also in actions. So, today the most severe sanctions are already in effect against Russia. There are also known initiatives to make charitable contributions from foreign companies in favor of the Armed Forces of Ukraine and so on.
Previously, Ukraine was unofficially considered as a potential iGaming hub, as one of the most promising countries in the region. And how do foreign partners look at the Ukrainian market in the current situation?
Taking into account the steady movement of Ukraine towards building an effective and competitive model for the functioning of gambling, our state retains the possibility of obtaining the status of a European iGaming hub, despite the ongoing military aggression on the part of the occupier. To do this, CRAIL provides for the establishment of interaction with representatives of the European gambling business, relevant organizations, associations and state gambling regulatory authorities of the Member States of the European Union, as well as the implementation of the best European practices in our field.
Such interaction is carried out to familiarize representatives of the European gambling business with the sphere of gambling regulation in Ukraine, licensing features and development prospects for foreign investors. I would also add that a bilateral memorandum of cooperation between CRAIL and the Gambling and Lottery Supervision Service of the Ministry of Finance of the Republic of Lithuania is already being prepared for conclusion, which will open up even more opportunities for cooperation and attracting foreign direct investment in the field of gambling and lotteries in Ukraine.
