Eastern European Gambling Market Overview
Eastern European countries include Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Armenia, Moldova, Russia, Tajikistan, Uzbekistan, Turkmenistan, Georgia and Ukrain.
The legal status of gambling varies widely throughout the Eastern European region. In some countries, all forms of gambling are completely prohibited; in others, all forms are regulated and used as a means to attract tourism. As in many regions, a common theme is that in countries where online gambling is prohibited, gamblers often easily visit platforms based in foreign jurisdictions - sometimes even the country next door.
In this article, we will review the Eastern European gambling market, looking at the most prominent member states as well as former members Georgia and Ukraine.
Russia is the largest state in the Commonwealth. Land-based casinos are only permitted in officially designated gambling zones, and the online gambling market is illegal. However, this doesn’t seem to discourage Russian gamblers; the online gambling in Russia is estimated to be worth around $1 billion.
Gambling was illegal during the Soviet era, but the 1990s saw an explosion of new casinos. However, ostensibly due to concerns about money laundering, gambling was made illegal once more in 2009, with casinos permitted in only a few select zones. For now, those zones are:
- Yantarnaya, in Kaliningrad Oblast;
- Siberian Coin, in Altai Krai;
- Primorye, in Primorsky Krai;
- Sochi, in Krasnodar Krai.
There are plans to open Crimea as a gambling zone in the near future. Revenues from the Crimean gambling zone are projected to reach 25 billion rubles (roughly USD $440 million). Krasnodar Krai’s Azov City was one of the originally established gambling zones, but the site was liquidated in favor of including Sochi.
It is illegal to gamble online or run an online gambling business in Russia. However, regardless of the laws, large numbers of Russian gamblers visit online casinos. To combat this and other offenses, the Russian government established Roskomnadzor, the Federal Service for Supervision of Communications, Information Technology, and Mass Media. Roskomnadzor’s main task is to eliminate or block illegal Internet sites. Roskomnadzor blocks illegal online resources and lists them in a unified register. So far, over 4000 gambling sites have been blacklisted by the agency.
Running an online casino in Russia is punishable by a fine of up to RUB 1 million and imprisonment of up to 6 years. Gambling advertising is also illegal and carries a maximum penalty of RUB 500,000. For punters, however, the stakes are much lower, as the government has little interest in punishing gamblers, and the possible fines are small.
Some online sportsbooks have been able to legally offer their services in Russia, operating through state-controlled payment system known as TSUPIS. Legal sportsbooks attract millions of visitors.
The following chart shows the Russian Federation’s total gambling tax revenues from 2013-2017. The numbers are taken from the Russian Association for the Development of the Gambling Business.
When the numbers are broken down by segment, it emerges that casino tax revenues have been increasing as tax revenues from sweepstakes have decreased and tax revenues from bookmakers have remained largely steady.
Of all the Eastern European countries, Russia has the largest potential for revenue. Due to restrictive measures on the part of the government, Russian gamblers visit offshore sites. Offshore sites often circumvent the government’s blacklist by using methods like mirror sites and VPNs. One example is Azino777, which managed to generate millions of rubles in revenue despite being officially blocked.
Since 2009, the gambling business in Ukraine has been illegal, according to the Law on Prohibition of Gambling Business. In 2011, the bill was amended to prohibit online casinos as well, regardless of the location of the site's hardware. Since 2012, the only permitted type of gambling has been state lotteries.
However, by prohibiting all forms of gambling, it could be that the government is simply denying itself a valuable stream of revenue; some experts have estimated that the yearly value of the illegal online casino market in Ukraine is roughly $1 billion. Despite the ban on online sports betting, many Ukrainians regularly visit online sports betting platforms such as William Hill, Betfair, and Pinnacle Sports.
In 2017, the Ukrainian government shut down more than one thousand illegal underground gambling establishments, seizing UAH 43 million worth of gambling equipment and UAH 4.5 million in cash. In the same year, over 300 players were issued fines. The fine for gambling is UAH 425 (12.5 Euro).
The state offers lotteries through MSL, Patriot, and the Ukrainian National Lottery. There have been some attempts and promises on the part of the government with regards to reintroducing legalized casinos and other forms of gambling, but for now Ukrainian gamblers bring their healthy appetite for bets and wagers to online platforms licensed in foreign countries.
Various bills introduced to legalize and regulate gambling have failed.
The first land-based casino in Belarus appeared in 1992, but the rapid development of the gambling business didn’t begin until 2009. Today, many gambling activities are legal, including:
- sports betting (through betting companies);
- betting terminals;
- land-based casinos;
- national lotteries;
- online casinos and bookmakers;
- slot machine halls.
Belarus imposes a number of regulations on the gambling business, namely:
- Every gambling establishment must be licensed by the MNS (Tax and Duties Ministry). To get it, an operator must pay a state fee of 500 basic units. In 2019, 1 basic unit is 25.5 Belarusian rubles;
- All technical gambling equipment must be certified by the Ministry of Taxes and Assessments;
- Only juridical persons, legally registered in the country, have the right to open gambling houses;
- Licenses are issued for a period of ten years.
The biggest gambling cities in the Republic of Belarus are Minsk, Gomel, Brest, Grodno, and Vitebsk. In December 2018, there were 13 legal land-based casinos in the capital of the state. According to the MNS, in 2018, 106 legally registered operators received a gaming license in the Republic of Belarus, and 86 of them started a business.
There are over thirty casinos across Belarus, as well as numerous slot machine halls and sports betting outlets. Five of the most popular casinos in Minsk are the Belaya Vezha, the Shangri La, the Opera, the Victoria Cherry, and the Royal Casino.
In 2017, the Belarusian government received BYN 33.3 million (14 million Euro) in taxes from casino revenues. The tax system involves both fixed taxes, which are dependent on the number of slots, table games, and other equipment, and a 4 percent tax on winnings. Casinos pay between €2500 and €4000 per gaming table and €80-€100 on slot machines.
In 2018, the government announced a plan to legalize and regulate online gambling, starting from April 2019, amid projections that doing so could bring in up to $6 million in tax revenue. Regulations stipulate that online casinos must have an account with $1 million at all times in order to pay out winnings without delay. Whether Belarusians will abandon popular offshore sites in favor of government-licensed ones remains to be seen.
To open an online casino in Belarus, operators must:
- get a special permit (license);
- have a security deposit, from which the wins and mandatory payments can be made in case of financial insolvency of the operator;
- identify each visitor of the online platform;
- provide the tax authorities with remote access to the site server and connect the resource to a special cashier system that will control the turnover of funds.
The country’s gambling sector seeks to take advantage neighbouring Russia’s gambling restrictions. It is estimated that 50-70 percent of state gambling revenue is from visiting Russian tourists.
The gambling industry began to develop after the dissolution of the Soviet Union, with several gambling-related laws being passed in the late 1990’s. On 25 March 2005, the law "On the Organization of Lotteries, Gambling and Profitable Games" was adopted, which regulates the activities of land-based casinos, lotteries, slot machine halls, and other types of gambling. A 2017 amendment raised the age limit for Georgians to 21 but set the limit for foreigners at 18.
Most casinos are located in Tbilisi, with the second most being located in Batumi. Unlike some other countries where the industry is concentrated in just a few hands, there is a high number of different operators.
In 2017, the gambling industry contributed 8.4 percent of Georgia’s total business sector revenue, and in 2018 supplied ₾136.5 million (roughly $46 million) to the state budget. This was the culmination of 5 years of solid year over year growth; in 2014, gambling revenues were just ₾64.9 million. In 2018, the gambling industry contributed ₾75 million in slot machine fees, ₾5 million in lottery fees, ₾13.2 million in electronic gaming fees, and ₾41.3 million in casino table fees.
The majority of Georgians don’t gamble, and many hold a negative opinion of gambling; a sizable portion even believe it should be banned. However, due to its strong link to the tourism industry, this is incredibly unlikely. Georgia is surrounded by countries where gambling is illegal or very heavily restricted, and residents of those countries contribute the most heavily to Georgia’s gambling revenue. For example, in the resort city of Batumi, nearly 70 percent of casino visitors in 2017 were non-residents, and casinos provided ₾30.6 million to the city’s municipal budget.
Batumi is the administrative capital of the Adjara region, where 12 casinos are located. Fees for establishing a casino, which can reach ₾5 million in other parts of the country, are a mere ₾250,000; in some other regions, the fee is entirely waved.
Casino operators must also pay quarterly fees on their equipment:
|Lottery Bonuses||10 percent of total fund|
|Lottery||20 percent of ticket sales|
|Machines outside a casino||₾1000-₾15,000|
In Georgia, only operators who already own land-based enterprises have the right to establish online gambling sites. There are no separate permits for online gambling platforms. Among the permitted online gambling entertainment are casino, video slots, sports betting, and lotteries.
Also, Georgian legislation prohibits the activities of companies that are registered offshore. Internet resources are required to make quarterly contributions, the amount of which is determined by the local administrations based on the site’s revenue. While the number of licenses issued has been decreasing, gambling revenue is continuing an upward trend.
A newfound sense of freedom after the break-up of the Soviet Union and the country's improved income due to its oil revenue led to an explosion of activity in Kazakhstan’s gambling sector throughout the 1990's and early 2000's. This came to an end in 2007 when casinos were forced to move to two resort areas, Borovoe and Kapchagai, with the dual intent of limiting gambling's effect on social wellbeing and increasing tourism.
On 9 January 2019, a bill was introduced to parliament concerning the creation of three more gambling zones. The initiators were the representatives of the Ministry of Culture and Sports. Their proposal is to allow the opening of gambling establishments in the Mangystau region, Akbulak, and Khorgos. At the time of writing this article, the bill is under consideration.
Sports betting remains freely available throughout the country, providing around $5 million in tax revenue each year. While online gambling is technically illegal, gamblers regularly enjoy iGaming on platforms registered in foreign jurisdictions, and the government doesn't exert any real effort to curb the activity. The government retains the ability to block foreign sites, but this power is mainly used for political purposes.
Features of the Kazakh gambling market
- According to the law, owners of land-based casinos, betting shops, and bookmakers have the right to open businesses only in non-residential premises, limiting operators’ location options.
- For online sports betting, the operator’s hardware must be located in Kazakhstan. Otherwise, the operator will not get the license.
- Foreign investors own a large number of local gambling houses.
Bookmaking licenses cost around 1.1 million Tenge, or $7336, a year, and bookmakers pay a flat fee of 130,000 Tenge, or $860, per month for each betting terminal they operate. Estimated tax revenues from bookmaking in 2012 were from 600 and 800 million Tenge, or $4-5.3 million.
According to figures provided by the Kazakhstan Ministry of Finance to the Organization for Economic Co-operation and Development, gambling revenues have steadily increased since the new regulation scheme was introduced.
Online gambling is unregulated in Kazakhstan, but the government does very little to enforce the prohibition when it comes to gamblers. Kazakh gamblers frequently visit sites which are available in Russian, Kazakh, and English, and that accept deposits in Tenge.
Gambling in Armenia is legal and regulated. Gambling advertising is limited to gambling premises and a few other locations. Casinos in Armenia are only allowed in the specialized zones of Jermuk, Meghri, Sevan, and Tsaghkadzor. Local licenses are necessary to operate online gambling platforms. Recent changes to gambling regulations include having wagers over $2000 reported by operators and registered in a database.
Turkmenistan is something of a rarity in its region, with legalized gambling and something of a lack of enforcement when it comes to licensing and registration. Online gambling is legal, although there are no platforms based in the country. Very few platforms offer services in the local language and currency, so gamblers often choose those with a Russian language option and make deposits in dollars, euros, or rubles. Gambling, especially sports betting, is very popular, and the government has made no indications of increasing regulation.
The gambling market in Russia is developing fast, and the demand for gambling among citizens is increasing. As for Belarus, another state where gambling is legal, the situation is different. In the period from 2015 to 2017, 8 casinos and 81 slot machine halls were closed in the country. The number of licensees decreased from 135 to 108. The most likely reason for this is the regular increase in tax rates.
Based on the forecasts of financial analysts, the law on online gambling legalization in Belarus, which will come into force on 1 April 2019, will increase the number of online casinos, betting shops and other gambling establishments. It is hoped that this will improve the flow of funds to the State Treasury.
Azerbaijan, Tajikistan, Kyrgyzstan, and Uzbekistan all prohibit gambling. All four, except Kyrgyzstan, have established criminal liability for organizing gambling activities. However, despite the ban, illegal casinos, bookmakers, and betting terminals still operate in the countries. As always, stopping citizens from visiting offshore gambling sites is all but impossible.
Ukrainian authorities understand that legalizing and regulating gambling is the only way to end the underground gambling market and take advantage of its potential tax revenues. In 2018, the Ukrainian government announced their intent to legalize gambling, but as of yet that hasn’t happened. The possibility that it could in the future remains.
The Eastern European gambling market is a complex an ambiguous market. There is a broad, negative perception on the part of governments and populations in the Eastern European gambling market that gambling is detrimental for society and associated with criminality. A common reason governments give for the prohibition of gambling is its potential for money laundering.
However, all forms of gambling, from sports betting to online casino games, enjoy a tremendous amount of popularity throughout the Eastern European market. Russia and Ukraine in particular generate huge amounts of revenue despite their governments’ efforts to stem the tide of offshore operators tapping into the underserved markets.
While there’s no sure way to predict the future of the Eastern European gambling market, it’s apparent that despite the restrictive measures taken by Eastern European governments, the popularity of gambling isn’t going anywhere, and the Eastern European market has opportunities for platform operators to enter the market.
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