Bracing for Change in Russia

25 August 2006

Russia's State Duma, the lower house of its parliament, has reportedly scheduled a second round of debates on a bill that would strictly regulate gambling businesses in the country.

Approved after its first reading in March, the original bill, titled "On State Regulation of the Activity on Organizing and Conducting of Gambling and Betting," designates casinos, slot machines and bookmaking as authorized gambling activities, but placed a quota on the number of gambling houses in Russia, significantly lowering the number of gambling facilities from 60 casinos and 3,000 slot machine halls to just 50 all-encompassing gambling houses.

Alexey Savatyugin, who heads the Russian Finance Ministry's department for financial policy, stirred the pot by suggesting in April that the quotas be eliminated from the gambling bill, which some thought may cause it to stall indefinitely in Parliament.

But it appears the government may have taken Savatyugin's suggestions to heart. According to local media reports, Entrepreneurship and Tourism Committee Chairman Valery Draganov said work is underway on making drastic amendments to the bill, including setting quotas.

The newest version of the bill still provides for eliminating small gambling businesses and allows only casinos, slot machines and bookmaking as authorized gambling activities, but now every region would have a set quota of gambling businesses according to its population.

The new quota would be set at one gambling institution per 200,000 people in non-industrialized regions. In industrialized cities, such as Moscow, St. Petersburg, and in resort cities, however, the proportion would be one gambling business per 100,000 people.

All businesses will be required to have a license, net assets at least equal to 600 million RUB (US $22.4 million) and have machines averaging at least 80 percent of gains. Gambling businesses will not be allowed to engage in any other activity.

The second reading is scheduled for Sept. 22.

Meanwhile, Russia's Parliament just reported that gambling in Russia has grown to a more than $6 billion a year industry, mostly bankrolled by a few high rollers.

Alexander Lebedev, a deputy of the Russian Parliament, said most of the money is wagered in Moscow casinos and slot machine halls. But, according to a recent survey of people over the age of 18, only 19 percent of the adult Russian population approves of casino slots, while many favored an outright national ban on gambling.

Russia is a growing gambling market and, therefore, an attractive market for Internet gambling. Thus far, the law has not included Internet gambling, but there are lobbying efforts to get that changed.

"At present there are no points at all about Internet gaming in the documents that I have seen," a source very close to the process told IGN. "So it looks like I-gaming got lost between the drafts and the first reading. The process between readings allows for additions and subtractions from the law."

Specific contents of the law will not be revealed until the third reading of the law, which has not yet been scheduled. If the law is if approved, it will go into effect Jan. 1, 2009. Until that time, all established authorized casino and gambling sites will continue to operate provided their net activity reaches 584 million RUB (US $21.8 million). All gambling businesses currently based in inappropriate locations, such as shops and homes, will be shut down.

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.