The Insider’s View: Uzbekistan - expectation versus reality
In the first edition of the insider’s view, 4H Agency's Ilya Machavariani and Ivan Kurochkin look at the state of play in Uzbekistan’s fledgling sports betting market and what to expect in 2021
Since 2007, sports betting, totalisator, and all types of gambling activities, except lotteries, have been banned in Uzbekistan. This is directly related to the local mentality, as Islam is the dominant religion in the country and prohibits any gambling entertainment. After taking office in 2018, the President of Uzbekistan Shavkat Mirziyoyev declared the country’s course towards a secular state. Much has already been done for this to an impressive degree (e.g. The Economist recognised Uzbekistan as the Country of the Year in 2019) as the president called on responsible persons to revive the country’s economy, including through foreign investment. This has also made it possible for the talks of allowing sports betting in the country of 33 million people to spring back to the surface.
Thus, in late 2019 the president of Uzbekistan issued a decree that set out, among the rest, the launch of the sports betting market in 2021. The goal is to support the further development of the local sports in the country, especially football, increase its investment attractiveness and secure additional funding.
The initiative was to be realised through several steps:
- Amending the existing Criminal Code and the Code of Administrative Responsibility to introduce measures for violation of the market rules.
- Drafting and adopting the rules for running the sports betting operations.
- Amending the legislation to introduce the mechanisms of the state regulation of the industry as well as the mechanism to direct a portion of bookmakers’ income towards the development of the local sports.
From what is already known, the government appointed the Agency for Capital Market Development as a responsible body that would issue licences to sports betting operators. And in addition, the country would also have a system to monitor sports betting operations and control all incoming and outgoing payments of customers online, similar to what has been implemented in Belarus with their Special Computer Cash Register System.
Pushing ahead
In early 2020 the government of Uzbekistan embarked on a journey to legalise and regulate sports betting driven by the political will of the top officials in the country. However, due to the pandemic, the regulatory framework necessary for the market to become operational has not been fully formed. The work resumed in the second part of 2020 and hasn’t stopped ever since. With the current pace of progress, it seems reasonable to expect regulations to arrive closer to the second half of 2021.
So far one thing is certain — the government understands the vast economic benefits of regulating the sports betting market. In February 2020, Deputy Prime Minister Aziz Abduhakimov and Uzbekistan Football Association lawyer Dilshod Narkobilov, told the media that Uzbekistan fails to collect approx. $50m a year in taxes due to the local population’s wagering at foreign websites or when they travel abroad to gamble. This drives funds away from the state budget and leaves the national sports federations underfunded. It is estimated that in 2020 the illegal online betting market in Uzbekistan generated about $80m in GGR. Once legalised, the GGR may grow five-fold over the next three years.
Major sports betting companies in CIS see the market in Uzbekistan as very promising. First and foremost, due to the large, active and mostly young population of 30+ million people. But the active penetration of the sports betting market is unlikely to occur in 2021. Although there are companies that already expressed their readiness to enter Uzbekistan, their number will get considerably higher once the regulations are introduced and companies see a much clearer path to move in.
It is also unclear what taxes and to what extent will be levied on sports betting operators. For now, we can only be patient and wait for more news to come. All the hurdles aside, it is evident that the government of Uzbekistan is eager to solve problems to continue its track of improvement and modernisation of the country. It is a well-established practice for bookmakers to officially sponsor teams and athletes in the countries where they legally operate. And this is not limited to football clubs only — other local sports and championships benefit as well.
Therefore, the launch of the sports betting market will serve as a stimulus to the development of sports in the country, matching the government’s goal to secure a future for their national sports, make the industry more competitive and attract more talent, professionals and tourists to the country.
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.