Regulated Ukrainian market moves one step closer as bill passes first reading

An amended bill regulating online sports betting and online casino in Ukraine has passed at its first parliamentary reading in the Verkhovna Rada.

Bill 2285-D, which is the 10^th draft of the initial law, imposes a licence fee for online and offline sports betting of €21.6m (£18.4m).

An online casino licence will cost €11.5m for a five-year permit, while licences for online poker will cost €450,000 and will also run for a five-year period.

Online sports betting and casino operator Parimatch said it welcomed the passage of Bill 2285-D, stating it was the first step in creating a “fair and transparent” gambling market.

“In order for the gambling to be fit for legalisation and become an important contributor to the state and society, it is critical that laws are developed in line with best practice international standards,” Parimatch added.

The betting firm called on Ukrainian politicians to agree taxation rates for operators as quickly as possible, claiming operators will “not be able to invest in the Ukrainian economy without an understanding of the taxation concept and a transparent model of return on investment.”

Taxation rates and the creation of a regulatory entity to oversee the Ukrainian gambling market have yet to be confirmed. However, EGR understands that a tax rate of 10% of gross gambling revenue is being mooted as a potential option.

The cost of an online casino licence was previously set at €13.9m and included an annual €495,000 regulatory fee to cover the costs of monitoring and supervision, however EGR understands that this fee was dropped from the final bill, resulting in a reduced cost.

Previous draft laws had one single licence for online casino, sports betting and poker, however these so-called ‘monstrous’ licences were scrapped due to the differences between running casino and sports betting businesses. Additionally, previous drafts included a localisation requirement for operators’ servers to be located within Ukraine, however this has also been dropped.

Under the newly approved bill, operators must be incorporated in Ukraine and must have a registered office there to qualify to apply for an online licence. All online sites for casino, sports betting or poker must operate with a .UA domain name.

Ukrainian-licensed operators will be able to accept both Ukrainian and non-Ukrainian players under the bill. The gambling software and hardware must be tested and certified by an entity authorised by the Ukrainian regulator for certification and testing.

Speaking about the developments in parliament, Ilya Machavariani, associate at European law firm Dentons, said the adoption of the draft law was “rushed” as a result of the parliamentary deadlock.

“The reasons for that may vary, but let’s hope that this rush will not affect the overall quality of the regulations because the future of the Ukrainian market depends on that.

“On the bright side, it is really good news that the draft law that was adopted today is one of the best amongst the alternatives that were available,” Machavariani added.

Ukraine has aggressively pushed for the legalisation and regulation of online gambling since October 2019, initially targeting a January 2020 date for the first licensing of operators.

However, subsequent debates in the Verkhovna Rada have caused initial draft laws to be amended on nine separate occasions, leading to criticism from newly elected Ukrainian President Volodymyr Zelensky.

Zelensky has ordered the closure of over 150 illegal gambling facilities across Ukraine and the seizure of gambling equipment worth UAH46m (£1.5m).

The bill will now be passed for its second parliamentary reading and potentially more amendments, with this process due to occur over the next few weeks.

“We need to wait until the draft law will be put in force, but it is highly unlikely that the outline of the regulation will substantially change,” Machavariani added.