Ukrainian gambling market development: expert opinion
The whole world is watching as Ukraine legalizes the gambling industry and rolls out new regulations, and the gambling sector is preparing for the upcoming changes. To satisfy a growing interest in the Ukrainian gambling market and explain what should be expected from the new legislature and licensing process, our Head of Sales, Vadim Potapenko, gave an interview to LoginCasino.
What gambling projects should be considered the most promising? In your opinion, which sector stands to benefit the most from legalization?
Vadim Potapenko: When it comes to the different sectors of the gambling industry, the conditions regarding organizational costs and project management for land-based casinos are for the most part clear and transparent. However, when it comes to opportunities, I suggest focusing on Georgia, which is an interesting case. Today, if you have the budget and experience, it is possible to start a land-based casino and an online project of the same brand in the country. This is of great advantage to operators, as it allows them to work with their offline audience while actively promoting their business and increasing brand awareness online. In addition, a business’s online presence can be integrated with live events in casinos. For example, everyone knows how the WSOP (World Series of Poker) works: users play online, then everybody gets together in a real casino. This is an exciting experience for players and a great opportunity for operators to raise their profile.
The Verkhovna Rada claimed it was going to take into account both the progressive attitude and regulatory models of European countries when it passed the bill. In which direction should the state authority move? Are there any foreign regulatory models that could serve as an example of ideal conditions for both the state and the industry in Ukraine?
VP: There is no perfect scenario — each country’s regulation has its own pros and cons. Obviously, operators will always have a negative attitude towards taxes — they view them as a burdensome expense on top of what they already pay to payment system providers, game developers, and affiliates. That is why the simpler the tax scheme is, the easier it is for the operator.
Ukraine is on the right track, for a few different reasons. There are licenses available for both online and land-based projects. Furthermore, the licenses are affordable: many will say they are the high side, but I believe that start-ups with the experience and the budget will pop up. This will reduce risks for the players — if a casino has money, it can guarantee that winnings will be paid out. Any new businesses that appear on the Ukrainian market will be well managed projects with sophisticated brands.
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Is it true that license fees are unreasonably high? Would a new gambling business project be able to get licensed and, among other obligatory expenses, generate stable revenue in the initial phases of its operation?
VP: As I mentioned earlier, a local license and local operation normally demand a major investment. It may not be the easiest path to take, but it is possible. Young companies should cooperate with several investors and develop a clear business plan. I’ve seen cases where projects with a small budget (for a casino) developed into big companies. However, this success was a result of experience in operation or affiliate business. Efficiency and quick reactions to market changes or developing competitors are also critical.
What advantages do operators with experience in the European and Asian markets have when entering Ukraine?
VP: I believe each country has its own unique characteristics; what works in one country might backfire in another. In the past, several big companies from the UK tried to enter the Russian market, but by now you won’t find them among the market leaders. I would say that the most important thing to keep in mind when expanding into any new market is quick payouts to players. A substantial portfolio of providers and gaming content, as well as bonuses, loyalty programs, and other player acquisition and retention tools are also important. The only advantage operators that come from other markets have is experience in the gambling business; they already know what situations might happen, how to react to them, and how to avoid them. Operators from other markets might not be aware of acquisition strategies that would work for Ukraine, but if they’ve already successfully developed their projects in Europe and Asia, they can definitely find a way to do so in Ukraine, too.
What payback period do you predict when taking into account the current licensing conditions? What should a sportsbook provider or a traditional land-based casino expect?
VP: It is always difficult to project a payback period — there are many factors affecting investment returns. Let’s be fair: if a casino with a Curacao license turns a profit after a year in operation, this is a great performance, because most big clients expect their investment returns in a year and a half or two years. “You never know until you try” could be a good answer to this question — it is always possible that a new project will melt players’ hearts in the first month!
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What do you expect from the central monitoring system? When do you think it could be launched? Does the technical infrastructure necessary to implement it in the way described by the law exist?
VP: As far as I know, the system will be launched in 2022, but it is quite possible the process will speed up once the first licensed operators appear and a clear image of the gambling market forms. You might compare it to Sweden, where at one point authorities made certain projections, but at the end of the day, the gambling industry generated larger sums than they expected — even considering all the limitations that were in place back then. This case demonstrates that everything is possible.
What conflicts or shortcomings in the regulations should potential operators be ready for?
VP: Of course, when implementing new rules, operators might face some difficulties at first, since the process will still be developing and improving. For example, operators might hit some bumps in the road on their way to obtaining a license. Also, land-based business owners might find some of the licensing classifications confusing — what is considered a countryside complex, how to distinguish between big cities and small cities (there are different requirements for them), etc. Advertisement and promotion might also be difficult to navigate because these areas will be subject to many different rules and exceptions.