Emerging Markets | Ukraine

16 February 2009
When Ukraine was part of the Russian empire, all gambling activity was strongly prohibited; only in small, privileged clubs, for instance, could people even play cards.

In the Soviet Union, gambling activity was totally illegal except for that offered by the state lottery, SportLoto, and several lotteries that were time-sensitive and oriented toward special goals. Even for tourists, official, aboveboard gambling didn't exist.

The fall of the Soviet Union gave rise to new, independent states, new opportunities and new types of commercial activity that hadn't existed in those states before -- including gambling.

The first casino in Ukraine opened in 1991 in Kharkov. But gambling in Ukraine officially started in March 1992 when the casino, Split, took its first bet in Kyiv, the Ukrainian capital. Now, Split Casinos comprise the country's largest casino network.

The number of casinos and slot halls rose very quickly, and in late 1994, Verkhovna Rada, the Parliament of Ukraine, passed the Law of the Taxation of Companies' Earnings (hereinafter, “Law of Taxation”; i), wherein regulation for lotteries and other gambling activities in Ukraine was set forth for the first time.

By 2000, gambling activity became even more widespread, prompting Parliament to enact the Law about the Licensing of Certain Types of Activity (hereinafter, “The Law on Activity”; ii).

That law fully described the range of gambling activities allowed in Ukraine (lottery, betting, casino, online gambling, bingo and so on). Not only did it regulate existing services and operators, it also established a legal framework by which to promote new businesses and market activities.

In March 2006, a licensing-conditions amendment was implemented, establishing a new price for a five-year license: 150,000 euros. The amendment also made the process of attaining a license easier and faster.

From that moment, the regulatory framework for all possible, legal gambling activity was in place. Usually, after any government passes regulation like this, one witnesses a boom in investment. But not in this case.

The gambling market was overcrowded with small slot-machine bars, which operated old machines of questionable compliance, as well as casinos, whose patrons were criminals, predominantly. Prospective customers, therefore, were not inclined to visit them, deterred by an uncomfortable and often dangerous environment.

How did this situation arise?

There were two significant weak points in the country's economic climate for gambling.

First, gambling was illegal during the Soviet times, so most people thought the activity criminal and not trustworthy by nature.

Second, the post-U.S.S.R. effect, which runs: "There are no countries in the former Soviet Union besides Russia." This effect engendered a lack of interest in Ukraine's gambling market in the minds of potential investors; moreover, the wave of bad P.R. after the gambling ban in Russia was so strong that, even now, many Ukrainians remain convinced that gambling is banned here.

Taken together, the points created an economic climate where casual slot-machine halls became popular, but public opinion about those halls, negative. Currently, lottery gaming is more socially accepted, but most lotteries are oriented toward non-money prizes like apartments, cars and other goods.

Another gambling activity, bookmaking, is not very popular in Ukraine, though there are retail shops in every regional center. Four players dominate this market: Marathon, Offside, MaxBet and Pari-Match. Each is a branch of a Russian gaming company, but operates on a limited basis in Ukraine.

The newest type of gambling is poker, but the situation here is very confusing.

On the one hand, poker, under the Law on Activity, is considered a casino-gambling game; on the other, the country's Family, Youth and Sports Ministry in April 2005 passed a resolution under which poker is considered a sport. This resolution is temporary, though, and valid through March 2010.

Currently, Ukraine's finance ministry has on issue 191 gambling licenses, and the majority of licensees operate slot-machine halls. Thirteen companies have bookmaking licenses, but only the four listed above operative actively.


(i) Click here to read, in Ukranian, the full text of Law of Taxation

(ii) Click here to read, in Ukranian, the full text of Law on Activity.

Mr. Goleatin is the business development director of Gambling UA Ltd., a consultancy which offers advisory services for clients targeting Russian-language markets.