Legalization of Gambling Business in Ukraine: Opinions of CPA Experts. Part 1

Legalization of Gambling Business in Ukraine: Opinions of CPA Experts. Part 1

On June 20, at the forum Dialogue between government and business, the President of Ukraine Volodymyr Zelensky said that in the next five years his priority would be the liberalization of the Ukrainian economy and protection of competition. Moreover, legalization of gambling.

As the issue was being discussed for the last 10 years, the society did not expect rapid developments. However, the President returned to the issue in early August. At the business forum in Istanbul, he said that he was planning to legalize casinos at five-star hotels in order to incentivize the development of tourism at the Black Sea.

The first real move beyond the common discussions was the speech of Volodymyr Zelensky at the meeting with members of the Cabinet of Ministers, Verkhovna Rada, and law enforcement agencies on September 2.

It is then that the terms of preparation, introduction, and adoption of the law were specified, and people in charge were assigned. By order of the President, the draft law has to be prepared and introduced to the parliament by October 1 and adopted by December 1, 2019.

What changes to expect and how will they influence the Ukrainian market? We discussed it with experts that will speak at Kyiv iGaming Affiliate Conference 2019.

Expert respondents:

Nicc Lewis – founder and CEO of the full-cycle marketing agency Expozive. He has 10 years of experience in digital marketing (В2В and В2С).

Roman Bout – founder of Quints that produces software for affiliate marketing and analysis of efficiency of advertising campaigns. Specialist with 10 years of experience in online gambling.

Currently, the illegal gambling business is flourishing in Ukraine. Can legalization encourage transparent gambling operations in Ukraine? Why?

Nicc Lewis (Expozive), “Generally, the answer is yes. The most important factor is the execution and practical enforcement of the legislation. AAMS set the bar very early on with enforced blacklisting of domains. The other side of the coin is the cost versus reward implications of having a license. If the fees, costs, and administration of the license are fair to operators and the reward of being able to passport the license beyond the Ukraine borders is possible, the major operators will be more inclined to be more careful with regards to their business in Ukraine.”

Roman Bout (Quints), “I believe that legalization will not allow bringing all businesses out of the shadow. Legal operations imply high taxes. Many companies are very likely to prefer working in the old way, as it may be more profitable from the financial standpoint. A number of companies that accept online players from Ukraine, physically and legally operate far beyond the country, so they will not be interested in working legally. As we know from the experience of the Russian Federation, such restrictive measures as website blocks are not very efficient – they create additional difficulties but cannot fully restrict player access to illegal online casinos.

 

At the same time, big businesses that are physically located in Ukraine will more probably opt to work officially to feel more calmly. If companies have more opportunities for official advertising due to legalization, it will be an additional reason to go out of the shadow.”

In your opinion, what is more economically viable and safe for the Ukrainian market: to create a separate gambling zone or to promote venues across the country (with restrictions to locations near educational institutions, family leisure places, etc.)?

Nicc Lewis (Expozive), “Simple business math means the more reach and locations, the larger the market pool, the larger the revenues. If you include online gambling then location becomes irrelevant. The UK is a good example where there are few limitations. So how is responsibility governed? The restrictions are on advertising both in terms of the messaging and the locations or times of airing.”

Roman Bout (Quints), “It is a difficult question that can be answered by people with more experience in the land-based business. I am more about the online sector. It seems to me that the realization of responsible gambling is more important here than the location of facilities solely in gambling zones or throughout the country.

 

In my opinion, a bad solution is to locate small gambling houses at every corner especially in dormitory suburbs. They are primarily intended for not well-off social groups. Such people often do not realize what gambling is and believe that they can easily win big and change life for better. Unfortunately, it does not work so.

 

Any gambling activities are primarily entertainment, which is paid for by players, so from the pragmatic point of view, it is a bad idea to think that gambling will bring a profit to players. However, the research shows that around 76% of citizens of post-Soviet countries consider gambling as a way of earning money. And this is terrible, as people are not aware of what they are doing, in fact.”

One of the agendas in European countries (for example, in Switzerland) is the anti-problem gambling policy. Does Ukraine raise this issue? Do you think Ukrainian gambling venues should develop mechanisms against gambling addiction?

Nicc Lewis (Expozive), “The answer is of course! More so, it is in the interest of the operators and license holders to have strong gambling addiction mechanisms. By protecting their client base, they are also protecting their brand reputation, the industry reputation, the future of the business and mitigating against potential losses from chargebacks or lawsuits. In fact, I would say it makes no sense whatsoever not to have strong mechanisms against gambling addiction.”

Roman Bout (Quints), “Development of mechanisms against gambling addiction is a very important part of the state policy. It is a normal practice in the whole developed world, so I hope that this aspect will be also thoroughly elaborated in Ukraine.

 

Gambling facilities do not need to develop mechanisms, as the government develops norms, and companies just have to comply with them.

 

Restrictive measures positively influence the fact that addicted players cannot lose all their money, as a deposit limit is set up and when players reach it, they are restricted from the game for a certain time. Such mechanics allows reducing the number of stories about the shattered fate of losing a flat, car, and wife at the peak of thrill.

 

In Europe, every themed conference discusses the issues of responsible gambling. European brands say that according to their statistics, a gambler that sets monthly deposit limits brings less profit in the short run but more in the long run. And business is about long-term gain.

 

Imagine the situation. Let’s take a middle class representative that likes playing casino games. He can lose a certain amount, let’s say 1,000 euros, monthly and can keep doing that all life. Or he can lose all his savings in one month, for example, 10,000 euros, get depressed, start drinking, have an anti-social lifestyle, lose the job, family, and ultimately he stops bringing 1,000 euros every month.

 

Here the question comes – what is more important to get money here and now or to get more profit within several years. When a business operates in the shadow, it is more important for it to get short-term gain. And when a business operates legally and has prospects for 5-10 or more years, the focus shifts from the short-term to the long-term gain.”

Do you agree with the expert opinion? You can discuss the legalization of the gambling business in Ukraine with them and ask other timely questions at the event.

On September 26, at Kyiv iGaming Affiliate Conference 2019, Nicc Lewis will take part in the panel discussion “Casino, betting, esports: finding the right balance”, and Roman Bout will make a presentation “How to prepare CPA properly”.


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