Towers with coins and justice hammer

Ukraine Passes New Legislation to Legalize Gambling

The Supreme Council of Ukraine, the Verkhovna Rada, recently passed new legislation for the regulation of both land-based and online gambling.

The amended bill, entitled 2285-D, was passed with a majority 248 to 95 votes after the second reading. Initially, the bill failed to pass last December but eventually succeeded after changes were made earlier this year.

Introduced by Ukranian lawmaker Oleg Marusyak in October last year, the bill is one of three related to gambling in the country. Another bill presented earlier in conjunction with Marian Zablotskyi, defines regulations for a 25% tax on all types of gambling in the embattled European nation. However, this is amongst several tax bills that still require consideration.

Other alternative versions of the tax bill have also been put forward by various lawmakers, including one from Dmytro Natalukha proposing a 7.5% GGR tax rate on bookmaking, 12.5% for online gambling and 22% for lotteries.

Prior controversy

In December last year, Ukranian President Volodymyr Zelensky ordered a closure of all gambling halls in the country following failure to adopt new legislation. As a result of the ban, a multi-million dollar underground gambling industry arose amongst operators, many holding lottery licenses only.

The ban resulted in the immediate closure of 152 illegal gambling operations and the confiscation of $2 million worth of slot machines and other equipment. The move prompted increased urgency to develop proper regulation for the industry, with as much as $375,000 in tax revenue being lost to the ban.

First draft

Following the ban, the country passed its first draft law related to gambling regulation on January 16th, 2020. The draft defined laws pertaining to employment, positioning, income, and tax in the gambling industry. It also called for the creation of a Gambling Commission to regulate the industry and ensure fair treatment amongst operators.

It outlined certain stipulations in regard to what is required of companies seeking a gambling license, including approximately €1 million in minimum share capital and a bank guarantee to the tune of €1.1 million. In relation to employment, the draft bill proposed a minimum of 50 Ukrainian citizens to be employed at every land-based casino and for the casino to cover a minimum area of 500 square meters.

Path to legalization

The new bill comes with certain limitations such as the restriction of land-based casinos to hotels only. However, bookmaking and online casinos like those found over at Casinos X would be legal to use for all citizens over the age of 21.

The number of slot machines permitted under the new bill has been capped at 250 per license with a limit of 40,000 machines in total across the nation. Since the vote was passed, over 3,000 amendments have been presented to the Verkhovna Rada for consideration. Many of these were passed prior to the vote although details on most have not yet been published.

The online gambling license fee on the latest version of the bill has been set at €1 million, to be paid every 5 years on license renewal. For bookmakers, this fee is €2.3 million and for hotel-based casinos in the capital Kiev, there is a flat fee of €3.9 million (€2.3 million in other cities).

Restrictions

The bill sets out a range of limitations and details specific such as license fees, renewal frequency, and ownership laws. In particular, it notes that all operations must be owned by locally based citizens and not residents of an “occupying” or “aggressor” state to the Ukraine.

Further decisions must be made regarding how many bookmaking shops each licensee can open and the number of licenses issued throughout Kiev and the rest of the Ukraine. There has been a number of bills put forward in relation to these decisions.

The new bill has also made it legal for casinos to now advertise their services online or using third-party marketing and affiliation sites. An earlier proposition included a clause that enabled a Tender Commission to election members of the Gambling Commission but this was contested as unconstitutional.

Remaining considerations

The Verkhovna Rada will now begin deliberating which new laws will be passed to regulate how the industry will be taxed in Ukraine. Several bills have already been put forward by various lawmakers from different political parties.

The most recent of these, Bill 2713-D, sets only a 5% GGR tax on bookmaking, 10% on online gambling and lotteries, and 12.5% for slot machines. It is believed to be the most likely contender to pass but faces competition from bills with widely varying tax levels.

The bill ends an 11-year ban on gambling in the Ukraine and is widely seen as a step in the right direction. The country has long struggled to control an illegal gambling industry which has introduced criminal elements to its cities.

 

Staff Writer at CPO Magazine