Ukraine Moves Forward With Far-Reaching Gambling Bill But Regional Attorney Urges Investor Caution

Posted on: November 7, 2019, 09:53h. 

Last updated on: November 7, 2019, 10:17h.

Ed Silverstein @casinoorgedsilv Read More

Expertise: Legal, Tribal Gaming.

Ukrainian legalized gambling, which will allow licenses for up to 20 brick and mortar casinos and 10 online gaming operations, is coming closer to reality. An initial bill was submitted Wednesday to the Parliament for a first reading.

Under the proposal, Ukraine’s 2009 gambling ban would be lifted. Beyond the opening of casinos, the bill permits in-person and online sports betting, slot machine parlors, land-based poker clubs, online poker, and lotteries, according to attorney Alexander Skoblo, a partner in Dentons’ Moscow office, and head of the firm’s CIS (Commonwealth of Independent States) Gaming and Gambling practice group.

He predicts a bill could be approved by the end of this year. As the proposal now reads, gaming licenses that would last for five years will be issued through an electronic auction.

The auctions, which could start as early as Q1 of 2020, will set the annual license fee, with minimum starting bids for land-based casinos in Kiev being $1.5 million under the legislation. Minimum bids for licenses in other Ukrainian cities start at $1 million.

Given that the annual licensing fee will be established based on electronic auction and the number of licenses will be limited, the final licensing fees may be rather hefty,” Skoblo cautioned in a statement to Casino.org. “But this is not the end, because such licensing fees are subject to taxes based on the GGR [gross gaming revenue], with the tax rate set at 12.5 percent for casinos and poker. Hence, these figures could be big and raise some concerns.”

Also, casinos only can open in 5-star hotels. Land-based casinos apparently can hold poker games, but not poker tournaments.

“The draft law provides for 20 available casino licenses. But it seems that the number of casinos after its adoption will highly depend on the amount of the hotels that are in compliance with the draft law requirements for running a casino — 5-star hotels with no fewer than 200 rooms — for Kiev, and 5-star hotels with no fewer than 150 rooms for other cities,” Skoblo said.

On one level, he added that the current draft is “rather reassuring, because it may result in the pretty open and modern gambling market. But everything may still change.”

Ukraine Gaming Market Promising

Ukraine also holds a lot of promise as a gaming site for investors. “New markets are always helpful, especially given the geographical location of Ukraine in between Europe and Russia,” Skoblo said. “Another thing that we would consider attractive for global casino companies is that since Ukraine is further enhancing its ties with the European Union, its legislation should be harmonized to some extent with the principles of the EU legislation.”

“There is hope that even additional regulation that is to be adopted on top of the draft law will not include provisions that can scare any international investor in his right mind,” he added.

But Skoblo cautions that the final outcome of gambling legislation in Ukraine could wind up being different from the current proposal.

As someone who has worked in this market for more than 20 years already, we would say that this part of Europe is lucrative in terms of gambling and the draft law looks promising,” Skoblo said.

“It is still hard to advise on rushing into decisions, because future regulations and associated implications are not clear yet. One should keep in mind that [the] former Soviet Block is the place where everything — including legislation — may change in one day,” Skoblo warned.

Many Gaming Companies Interested in Ukraine Market

He said Dentons now has “a myriad of clients from casinos to lottery companies to betting shops, both land-based and online, on the new Law on Gambling in Ukraine…. We were also involved in the drafting of the law when it was first floored.”