CIS in review 2020: Ukraine

The obvious main Ukrainian event of 2020 is the adoption of the law of Ukraine “on the state regulation of gambling” (the “Gambling Law”) on 14 July 2020, which lifted an overarching gambling ban previously instituted way back in 2009.

Along with the adoption of the Gambling Law, Ukrainian authorities also incorporated a regulatory body for the gambling industry (Ukrainian Gambling and Lotteries Commission (the “UGLC”) and adopted certain secondary legislative documents out of the long list of documents that are to be adopted in accordance with the Gambling Law.

In this article we’re giving a brief overview of the key aspects of the following:

• key changes that were introduced in 2020;
• forthcoming changes in the Ukrainian gambling market in 2021;
• 4H’s point of view on the upcoming changes.

Key changes that were introduced in 2020

Adoption of the Gambling Law

Following passage of the Gambling Law it has become possible to obtain the following types of licences:

• sports betting licences (this licence covers both land-based and online offerings, it also includes off-the-racecourse totalisator offerings);
• online casino licences;
• online poker licences;
• land-based casino licences (this licence also allows the organisation of poker games in the casino);
• land-based slot-machine hall licences;
• racecourse totalisator licences; and
• investment licences (this licence is different from the others, it is issued in relation to large-scale investment projects in the field of gambling that are approved by the Cabinet of Ministers of Ukraine);
• B2B licences (as of now Gambling Law and licensing terms are silent on the requirements which the applicant has to meet to obtain such licence).

Creation of the UGLC

The next important milestone was the creation of the regulatory body — the Commission for Regulation of Gambling and Lotteries (UGLC) on 23 October 2020.

It should be separately noted that members of the UGLC were appointed on a temporary basis in accordance with the special procedure that is in place in Ukraine for the emergency period because of Covid-19. As soon as the Ukrainian authorities declare the end of this emergency period, the UGLC’s members will be appointed anew; existing interim members would be able to participate in the selection process on par with other candidates.

Adoption of the licensing terms

Starting from the first days of work, members of the UGLC commenced the process of preparation of the licensing terms, the objective of which is to outline the peculiarities of the licensing process and start the process.

Finally, on the last days of December 2020 the Cabinet of Ministers of Ukraine adopted the licensing terms for most of the available licences — as of the date of this piece there are no adopted licensing terms for the B2B licence.

Adoption of the licensing terms formally marks the moment when the application “window” is opened. In other words, starting from its adoption and onwards, it is possible to file the application to the UGLC and obtain the licence provided that the applicant meets all requirements established by the Gambling Law and licensing terms (please note that the latter document largely mirrors the Gambling Law itself in terms of the requirements applicable to the applicants and operators).

Forthcoming changes in the Ukrainian gambling market in 2021

Before the Ukrainian legalisation process could be named as completed, the UGLC and Ukrainian authorities still need to tick some more boxes in 2021 in accordance with the Gambling Law. These actions include inter alia:

• adoption of the set of technical documentation related to the process of gambling equipment certification (for instance, such technical documents include technical requirements to the gambling equipment, requirements to the Ukrainian gambling certifying bodies etc.);
• adoption of the taxation framework of the Ukrainian gambling market (this issue was intended to be resolved a long time ago, but there was no sufficient progress on this front during 2020); and
• creation of the system of online monitoring.

Moreover, we are obviously anticipating the adoption of the B2B licensing terms in the nearest future.

Assessment of the upcoming changes

Despite all controversy and chaos surrounding Ukrainian legalisation, the process is steadily moving forward: the regulatory body is in place and tirelessly working, licensing terms are adopted, and it seems that it is only a matter of time until first licences will be issued.

Although sometimes it seems that behind this big and undoubtedly crucial landmark — the first issued licence in Ukraine, other issues and aspects that can directly affect the performance of the future market are a bit overlooked. For instance, the certification issue or issue connected with location of servers (as of now the servers could be located only within the territory of Ukraine) are still unresolved despite its obvious significance for any international gambling operator considering the Ukrainian market as its next jurisdiction.

All in all, the first months of 2021 will provide more clarity on the perspectives of the Ukrainian market and we hope that the number of unresolved issues would start to actively decrease in the nearest future.

Ilya Machavariani is a gambling and gaming lawyer for Europe, Russia and the CIS and the senior partner at 4H Agency. He has extensive experience advising on gambling issues and advises clients on operating in the Russian Federation and the CIS, on the full range of regulations relating to the activities of gambling operators, as well as drafting the necessary contracts and internal documents. He also handles licensing processes for gambling operators that are entering new markets throughout the world.

Ivan Kurochkin, a partner at 4H Agency, has broad experience on gambling issues, especially in regulatory matters. His work involves advising clients doing business in the Russian Federation on various activities of gambling operators (including bookmakers), focusing on issues related to compliance with gaming licence requirements, applicable AML requirements and issues relating to advertising of gambling operators.