Ukraine Gambling Regulation

Gambling Regulation Located in Eastern Europe, Ukraine is a unitary republic with an estimated population of 43.9 million people as of 2021. It ranks as the second biggest country in Europe in terms of geographical area and covers over 603,000 square kilometers, the Crimea peninsula included. The country has many of the traits of a major economy, including plenty of fertile farmlands, an adequate education system, a well-educated workforce, and a developed industrial sector.

Despite this, Ukraine remains a developing country with a stagnant economy, plagued by high rates of poverty and rampant corruption. It topped the list of the poorest European countries in 2020, with a gross domestic product per capita of US$3,727. Ukraine has had a turbulent relationship with gambling over the last decade, largely due to the tragic events that occurred in a Dnipro gaming hall, when a fire killed nine and severely injured eleven people.

The accident caused the Ukrainian Parliament to prohibit both gambling businesses and gambling participation in 2009. The ban remained in place until July 2020 when current president Volodymyr Zelenskyy approved new legislation that decriminalized gambling and opened the industry to private operators. Ukrainian gambling laws are relatively flexible and cover a broad range of landbased and remote activities.

The Ukrainian Commission for the Regulation of Gambling and Lotteries has the mandate to oversee both terrestrial and online gambling in the country. The local regulatory framework and the requirements on licensees in Ukraine are quite stringent. Each license application undergoes a thorough review by the regulatory authority, which can easily refuse permits to applicants who have not met all licensing conditions.

Gambling activities in the country were illegal from 2009 to 2020 under the provisions of the Law On Prohibition of Gambling Businesses in Ukraine. The legislation passed after a fire started in the Metro Jack Pot slot-machine parlor, located in the city of Dnipro (formerly Dnipropetrovsk). The fire commenced in one of the slot machines on the premises and quickly spread. The slot parlor itself was inside a five-floor apartment complex. Nine people died in the accident (including two staff members) and eleven more suffered severe damages.

The 2009-2020 Gambling Ban in Ukraine

Law № 768-IX of 2020

The 2009-2020 Gambling Ban in Ukraine

Inspections showed the slot parlors violated local fire restrictions and regulations. Too many slot machines operated in a very limited space and the parlor lacked any escape routes whatsoever. Shortly after the accident, Dnipro authorities ordered the closure of all slot parlors, poker clubs, casino venues, and nightclubs across the city while safety inspections were taking place.

While the accident largely resulted from negligence and corruption, it caused a massive wave of outrage throughout the country. Society’s indignation against gambling grew to such an immense extent that the government ended up banning gambling facilities across Ukraine because of the events in Dnipro. The Law on Prohibition of Gambling Business in Ukraine was approved by then-president Viktor Yushchenko on June 23, 2009.

Interestingly enough, it also covered online gambling operations despite the fact they had nothing to do with the tragedy. The Dnipro accident resulted from noncompliance with the safety requirements, lack of maintenance, negligence, and corruption. However, the government needed a whipping boy and found it in the face of the gambling industry.

Not only did the restrictions fail to solve the problems at hand but similar accidents occurred in the following years for the same reasons. Ukraine was previously home to a thriving gambling sector and some people spoke against the ban, arguing this industry provided jobs for thousands of Ukrainians. The government turned a deaf ear to the opposition and the gambling ban officially came into effect on June 25, 2009.

Lotteries were the only form of gambling exempt from the ban, but this was because they were a monopoly of the state. In January 2010, the government officially removed gambling from the list of enterprises that can be licensed in Ukraine. Many online gambling providers moved their servers outside the country and continued to service Ukrainians without authorization from abroad between 2010 and 2020.

Things started to become problematic over time as such illegal operations caused a significant outflow of taxable revenue from Ukraine. Needless to say, the above-mentioned offshore operators paid no taxes on the profits they raked in from local players. This was one of the primary reasons why the government decided to legalize gambling in 2020.

Law № 768-IX of 2020

Gambling in Ukraine became legal again with the passage of Law № 768-IX on July 14, 2020. The legislation’s full name is Law of Ukraine on State Regulation of Activities Related to the Organization and Conduct of Gambling. It describes gambling as any game where players must stake money to participate for the chance to win a prize. The prizes’ probability and size should depend wholly or partially on chance, knowledge, and skill.

The 2020 law governs a broad spectrum of landbased and online gambling activities, including slots, roulette, card and dice games, sports betting, and horse race betting. Claw crane machines that award only material prizes such as candies or stuffed toys are outside the legislation’s scope. The same goes for lotteries whose regulation is subject to Law № 5204-VI.

The latter passed in September 2012. It aimed to set up the main principles of lottery regulation and create conditions for the further development of the lottery market in the country.

Apart from providing a legal definition of gambling, Law № 768-IX describes in detail the requirements gambling firms must comply with to legally operate in Ukraine. The first and most important condition is to receive a license from the Ukrainian regulatory body. Below we examine closely the licensing fees, requirements, and the tax rates imposed on gambling operators in Ukraine.

Licensing Requirements and Tax Rates in Ukraine

Licensing Requirements The 2020 legislation provides for seven main types of gambling licenses and three secondary ones. The primary licenses are for landbased casino gaming, landbased slot parlors, landbased sports betting, online betting, landbased hippodrome pool wagering, online casino gaming, and online poker.

Landbased holders of main licenses must also receive secondary licenses for betting shops, gaming tables, or slot machines. Software companies can apply for business-to-business software supply permits. Ukrainian law does not impose any restrictions on the maximum number of gambling licenses. Furthermore, the same company can accumulate several licenses for different gambling services.

Another condition stipulates that only legal entities from Ukraine can apply for gambling permits. However, said entities can be funded or controlled by companies from outside the country as long as they are not Russian. Firms registered in jurisdictions on the FATF (Financial Action Task Force) blacklist cannot apply at all.

Requirements Imposed on Landbased Gambling Licensees

Requirements Imposed on Landbased Gambling Licensees Applicants for landbased licenses must also obtain permission that confirms the premises they intend to use for operation fulfill all requirements set forth by Ukrainian laws. Landbased gambling premises can only be located in designated places. For instance, casinos in the capital Kyiv can only operate on the premises of five-star hotels that have at least 150 rooms.

The minimum required floor space of such casinos should be 500 sq. meters or more. The casino floor should be separated from the non-gaming areas. The gaming venues in other major cities like Dnipro or Odessa can operate in hotels with four or five stars and at least 100 rooms. Casinos can open doors in larger recreation resorts outside Ukrainian cities, but only if the resorts cover the minimum area requirements of 10,000 sq. meters and house five-star hotels.

Certain requirements are in place for the equipment used in landbased casinos. Venues in cities with a population of over half a million must have at least ten gaming tables and fifty certified slot machines. In cities with fewer inhabitants, the casino should have at least five gaming tables and twenty slots.

Landbased gambling venues must have a minimum of fifty employees aged 21 years old or higher. Management and staff members are not required to apply for special permits as is the case in countries like the UK. The rules of all available games, their winning odds, and licensing information should be available in both English and Ukrainian.

Similarly, licensed slot parlors in the capital can operate in hotels with three to five stars and at least fifty rooms. The same applies to licensed betting shops, although they can also be located in designated hippodromes. Slot parlors must occupy at least 300 sq. meters, while the minimum area of betting shops is 50 sq. meters.

License Fees and Duration

License Fees and Duration Upon application, interested Ukrainian companies must submit their documents to the local regulator for evaluation. Each applicant must confirm their source of funds. A company’s owners, significant shareholders, and key personnel members should all present certificates to prove they have no previous criminal records.

The Ukrainian regulator requires around fifteen business days to reach a decision and informs applicants within five days afterward. The approved companies must pay their licensing fees for their first year of operation within ten business days. Rejected applicants can appeal the regulator’s decision in court.

As for the license fees, they vary based on the minimum monthly wage the Ukrainian government has posted at the beginning of the respective year. The 2021 license fees imposed on online gambling operators amounted to ₴39 million for casino games, ₴30 million for online poker, and ₴180 million for betting shops. The primary permits for sports betting cover both landbased and online wagering.

Lottery licenses have a duration of ten years, while the primary permits for other gambling activities have a validity of five years. Law № 768-IX does not contain provisions concerning the renewal or extension of the gambling permits. Approved operators must apply for new licenses after their old ones expire.

The current legislation also disallows license suspension. However, the Ukrainian regulatory body has the right to invalidate permits on several grounds. For example, this could happen in cases of delayed licensing fee payments or if an operator has submitted false information in their license application documents. Companies with invalidated permits have the option to appeal the regulator’s decision in court.

Gambling Taxes in Ukraine

Taxes Gambling taxation in the country falls under the scope of the Ukrainian Tax Code. Under its provisions, gambling companies are subject to tax rates of 18% imposed on their gross gaming revenue plus corporate income taxes (again 18%). Slot games are taxed at a rate of 10% on their gross revenue. Additionally, the gaming companies’ employees have 1.5% withheld from their salaries in the form of a temporary military tax.

As for lottery operators, they are taxed at higher rates of 30% on their gross revenue in addition to the 18% corporate income tax. Players’ profits resulting from gambling and lottery participation are free from value-added taxes (VAT). However, the Ukrainian Tax Code requires gambling operators to deduct 18% of their customers’ winnings as personal income tax, along with 1.5% in the form of military taxes.

Under Law № 768-IX, authorized gambling operators must honor their social responsibility obligations, starting with the compulsory verification of each customer’s age and identity. The operators’ employees must periodically undergo special training on responsible gambling and addiction prevention. All gaming venues, mobile apps, and gaming sites must prominently display information regarding the games’ rules and responsible gaming.

Legal Gambling Age and Identity Verification

The Register of Excluded Persons

Restrictions on Betting Shops

Legal Gambling Age and Identity Verification

Operators must observe for compliance with the minimum legal age, which is 18 years old for lottery participation and 21 years for other gambling products. The same age restrictions are in place for staff members and visitors in the case of landbased casinos. Online gambling sites must identify each customer with the help of electronic signatures, BankID, MobileID, or other similar methods. If based inside the country, they can only accept bets from Ukrainian nationals.

The Register of Excluded Persons

In 2021, the Ukrainian regulatory body launched a non-public register of individuals who are restricted from gambling participation. Nationals can request voluntary exclusion from gambling for a period between 6 and 36 months. The close relatives of gambling addicts can also file exclusion applications with the regulator. Ukrainian players have the option to set up individual limits on the sums they want to spend on gambling.

Restrictions on Betting Shops

As we previously wrote, gaming venues and slot parlors can only be located within hotels that have four or five stars. Similar restrictions are in place for betting shops. In the Ukrainian capital, they can be located only in hotels with at least fifty rooms and three to five stars.

Outside Kyiv, they can operate on designated racecourses or inside hotels with three to five stars and 25 rooms or more. The law disallows operating a betting shop in proximity to schools (less than 500 meters) and other educational buildings. As the Dnipro accident from 2009 basically occurred in an apartment complex, running sports betting operations from within residential buildings is now against the law.

Article 22-1 of Law № 270/96-VR imposes various restrictions on marketing activities related to lotteries, betting, and gambling, in general. The article strictly prohibits gambling advertisements on radio and television between 6 am and 11 pm. The ban applies to all kinds of signal transmission, including cable, satellite, and online television/radio.

No Gambling Ads in Public Transport

Marketing Information Should Be Reliable

Bonuses Cannot Be Granted for Losing Money

No Gambling Ads in Public Transport

The marketing of betting products and services is illegal in all forms of printed media except for specialized magazines and publications. Gambling ads must not appear in public transport, including on buses and subway trains, as well as on items that target nationals under the age of 21.

All gambling advertisements must promote responsible gaming and contain warnings about the risks of gambling addiction. Said warnings should take up at least 15% of the advertising space, with a black text against a white background. It is logical only licensed companies can market their services to Ukrainian nationals.

Marketing Information Should Be Reliable

Each ad or commercial should contain information about the respective brand’s license, along with its number and issuing date. The promotional materials should never target vulnerable individuals, including underage persons, low-income households, or people who suffer from mental illnesses or disabilities. The information in the ads should never be false or misleading.

Bonuses Cannot Be Granted for Losing Money

When it comes to promotional incentives, Ukrainian law prohibits licensed operators from offering bonuses if the condition for receiving them is losing a specific amount of money. In essence, this means nationals cannot take advantage of cashback offers where they receive a given percentage of their losses back. As for landbased casinos, they cannot offer their patrons alcoholic drinks, cigarettes, and other tobacco products.

Participants in the Ukrainian gambling market must operate in compliance with Law № 361-IX of December 2019, also known as the Law on Anti-Money Laundering. The legislation calls for the financial monitoring of all licensed gambling businesses. It requires them to perform customer due diligence checks for all transactions exceeding ₴55,000 (approx. $2,040). The operators can postpone or refuse the payments of winnings on grounds of the anti-money laundering (AML) requirements.

All Stakes Should Be in UAH

No Gambling on Credit

All Stakes Should Be in UAH

The Ukrainian State Financial Monitoring Service (SFMS) watches for AML compliance on behalf of the gambling operators. Licensed gambling firms can only accept bets in the local currency, the Ukrainian hryvnia (UAH). All financial transactions in brick-and-mortar gaming venues must occur through the cashier cage. Ukraine’s legislation prohibits currency exchange offices or pawnshops within landbased gambling establishments.

The operators must pay winnings of up to ₴50,000 (approx. $1,850) at the cashier. Profits exceeding this ceiling are paid to players in cashless form. Financial institutions and payment processor companies operating in the country should strive to block gambling-related transactions to unauthorized operators.

No Gambling on Credit

Casinos, betting shops, and slot parlors cannot loan money to their customers because gambling on credit violates Law № 768-IX. The Ukrainian legislation also prohibits using decentralized currencies like Bitcoin for betting purposes. In September 2021, local lawmakers submitted a draft of a new law on virtual assets, but President Volodymyr Zelenskyy returned it to the Ukrainian Parliament (the Verkhovna Rada) with proposals for amendments.

Nonetheless, some of the bill’s provisions unambiguously state that cryptocurrencies are not accepted as legal tender in the country. Ukrainian gamblers cannot run up debts since betting on credit is against the law. It follows gambling debts are unenforceable in Ukraine.

Sanctions for Violations of Ukraine’s Gambling Law

Organizing and running unauthorized gambling is liable for punishment under Ukraine’s Criminal Code. Those guilty of this violation will suffer fines ranging from ₴170,000 to ₴850,000 (approx. $6,300 to $31,600). Authorized operators risk sanctions for violations like using non-certified gaming equipment such as roulette tables and slot machines.

Those caught red-handed in tampering with the gaming equipment incur fines amounting to 1,000 minimum monthly wages, or approximately ₴6 million (around $223,000). The sanctions for underage gambling are equally severe. Operators who admit minors inside their premises or allow them to gamble are subject to a ₴3 million fine. The implication of underage individuals into gambling is punishable with three to seven years in prison.

People who produce and distribute unauthorized gambling marketing materials are liable for fines of up to ₴1.8 million. Ukrainian nationals involved in non-licensed gambling activities might incur administrative fines of ₴25 to ₴425. They will also have their stakes forfeited. With that said, players rarely face prosecution as the local authorities mainly focus on sanctioning violating operators.

Speaking of which, the country’s regulatory authority typically requests offshore online operators and hosting providers to restrict Ukrainian residents from accessing their websites. Payment companies, banks, and other financial institutions within Ukraine cannot facilitate transactions to gambling sites without local licenses. Local players can find a list of licensed online gambling providers on the Ukraine Gambling Commission’s website.

Conclusion

Conclusion The 2020 legislation adopted by the Ukrainian government paved the way for the development of a properly regulated gambling industry in the country. With adequate regulations in place, local gamblers can enjoy higher levels of player protection, fairness, and security. Although some people opposed the legalization at first, many embraced it due to the numerous economic opportunities it offers.

The most important quantitative merits of legal gambling in Ukraine are the workplaces it creates and the additional tax revenue the state collects. Ukraine may attract more interest on behalf of gambling companies if the newly proposed Bill № 2713-D becomes a law. It aims to standardize the gambling taxes across all verticals and reduce them from the current rates of 18% to 10% based on GGR. So far, the Verkhovna Rada has approved the bill on first reading only.