Playing the long game: how Parimatch has been working towards Ukrainian regulation

Following the rollercoaster ride that is gambling regulation is never easy, with so many twists and turns it could make even the hardiest of gambling operator want to reach for the exit lever. However, with so many operators with operations stretched across countless jurisdictions, the challenge to build first-mover advantage is never as hard.

Parimatch is an operator with grand ambitions, aiming to become a big player in not only European sports betting circles, but to be mentioned in the same breath as the bet365s and GVCs of this world. With a cautious and steady approach to growth, it has been expanding its operations through multi-million-euro sponsorship deals and market expansions but behind the scenes the firm has been working tirelessly to bring the traditionally grey markets of central and eastern Europe into the regulated world.

Through careful lobbying and advocacy, Parimatch has pushed for legalisation and regulatory efforts in the Ukrainian market as a way of opening the door to the more restrictive markets of Central Europe. Parimatch’s head of legal, Ievgeniia Derbal, chats to EGR Compliance about the group’s lobbying efforts in this challenging region.

EGR Compliance: How long has Parimatch been lobbying for Ukrainian regulation?

Ievgeniia Derbal (ID): The efforts of the president and the government of Ukraine to legalise gambling in Ukraine started more than a year ago. Parimatch, as an international betting holding operating in many countries with local licences, has of course been closely watching the progress and development of the process. Needless to say, Parimatch, which started its operations in Ukraine, is definitely interested in this market, particularly given its population of 40 million.

EGR Compliance: What methods has the business used to actively champion regulation in Ukraine?

ID: Parimatch is always open for any discussions whenever our position and expertise can be helpful. Whenever we have been invited to any working groups or any discussions with policymakers, we have welcomed the chance to share our experience. We operate in many countries and understand the particularities of the regulation of betting activity. Consequently, we feel that our shared opinions can help benefit legislation in Ukraine.

EGR Compliance: Is the Ukrainian government creating future issues for itself by not setting up the gambling regulator before legislation is given the go-ahead?

ID: According to the draft law, the authorised body will be established within two months after the law comes into force. Before voting on the final bill in parliament, it is impossible to set up a body, since the main requirements and structure of it should be introduced by the law. Otherwise, parliament should have two separate bills: one for establishing the authorised body, and one for legalising the industry, which will make the process even more complicated. We have seen similar problems with the Tax Code of Ukraine, which needs changing through a separate bill which has not even passed the first hearing so far.

EGR Compliance: What are the fundamental lessons that prospective Ukrainian regulators can take from regulated markets across the world?

ID: We have looked closely at European countries’ regulatory monitoring systems. The UK does not have the regulatory monitoring system. Instead, the UK uses self-reporting systems through mandatory regular return submissions, audit and live “return-to-player” (RTP) performance monitoring of games of chance. Again, it is each operator’s self-monitoring obligation.

France, Italy, Poland and Romania do not have regulatory monitoring systems. All these countries have self-reporting and self-regulated regulations. The experience of the developed European countries with many years of experience in how to regulate the gambling industry shows us the government and the operators have to focus more on the social aspects of the game like responsible gaming and ludomania to encourage a healthy and responsible industry rather than just focus than on the economic contribution.

EGR Compliance: What would be a fair and attractive tax rate to charge prospective egaming and sports betting operators?

ID: Currently, the Tax Code of Ukraine provides for the burdensome taxation system of betting being 18% tax on GGR, a 18% personal tax on winnings and 18% corporate profit tax. Following the experience of many European countries, the tax on winnings should be abolished, especially now when the industry is just developing and we are focusing on the players’ betting on local websites rather than using services of international websites which do not currently allow the payment of taxation from player winnings.

The tax on GGR should also be abolished for the first few years since the governmental control on the accuracy of its payment cannot be done without the regulatory electronic monitoring system. This should be established within two years. It will be fair to impose the tax afterwards, in the range of 5-10% depending on the type of gambling activity.

EGR Compliance: There were 3,000 amendments to the draft bill. Based on this staggering amount of changes, do you think the government will pursue frequent changes to regulations when the bill goes through?

ID: The experience of the Ukrainian parliament in adopting the new laws shows that quite often the changes to the new law are drafted even before the final voting takes place. For example, the parliament has adopted the law ‘On Amendments to the Tax Code of Ukraine on Improving Tax Administration, Removing Technical and Logical Mismatches in the Tax Legislation’. Yet almost the next day the changes to the new law started to be prepared.

EGR Compliance: What is the ideal scenario for Parimatch in respect of Ukrainian regulation?

ID: Parimatch is always following the regulation in every jurisdiction the company operates in. For our company and for other foreign investors, we just ask for clear, transparent, fair and stable rules of engagement in the industry.

EGR Compliance: Should the Ukrainian gambling regulator be independent of government?

ID: The regulator is designated to regulate and control the new industry performing the powers of the executive branch of law according to the constitutional hierarchy of state authority. It needs to be accountable. If it does not report to the government, who should it report to? Directly to the nation through the parliament?

EGR Compliance: The Ukrainian government is reportedly set to introduce an online real-time monitoring system to provide information on player bets, deposits and winnings, similar to those currently being used in Belarus and Russia. What are the benefits or drawbacks of this system?

ID: Yes, the draft law provides the online system of monitoring, the aim of which is to receive and transfer in real time the information on the deposits and bets of the players as well as paid winnings. The analogue version of such a system exists in other countries in the region, for example the Russian Federation and Belarus. The example of these countries shows that the existence of such a system requires long-term preparation and expertise.

The Ukrainian government will have to spend lots of resources to establish a special division within the tax service to develop and manage the system, as well as recruit new staff that will need to be trained. Alternatively, the system could be operated by a private company at an expensive cost to the taxpayer. In this case, confidential information might fall into the wrong hands.