Gambling reform presents multiple obstacles for Zelensky ‘The Entertainer’

Industry stakeholders are monitoring the movements of newly installed Ukrainian President Volodymyr Zelensky closely, as dialogue arises of Ukraine overturning its prohibitive gambling code.

Since 2009, Ukraine has operated under the ‘Prohibition of Gambling Law mandate first sanctioned by the Viktor Yushchenko administration, which has seen all forms of gambling (expect lotteries) – be it land-based or digital – banned by Ukrainian authorities.

Having secured what many have branded as 2019’s biggest political upset winning April’s Ukraine General Elections, observers wait to see how ‘The Entertainer’ Zelensky and his cabinet of political novices will handle the reality of governing Eastern Europe’s most geo-complex country.

Aiding Zelensky’s prospects, this July the President’s ‘Servant-of-the-People (SoP) party secured the first comprehensive parliamentary majority in the nation’s post-Soviet history.

Zelensky and SoP’s popularity has been garnered on a campaign agenda, which aims to modernise Ukraine’s economy by ending state corruption and protectionism of industries, hence a propositioned reform of Ukrainian gambling laws could well become the alarm bell that ends Zelensky and SoP’s honeymoon period.

Despite the prohibition, Ukraine’s gambling frameworks remain conflicted as the nation’s lottery contracts are serviced by monopoly incumbents Patriot, MSL and UNL, at least one of these enterprises closely aligned with former President Petro Poroshenko’s administration.

Stakeholders seeking a liberalised market have criticised the lottery operators of forming yet another Ukrainian monopoly governed by cronyism, in which contracts are subleased to partners incapable of collecting taxes, developing social benefits or adding any form of economic value.

Having taken office, Zelensky maintains that SoP is open to reforming gambling laws, as long as directives can be served that are aligned to aiding Ukraine’s modernisation projects and creating fairer business conditions.

Ukraine’s new President has been swift in developing a gambling agenda, instructing SoP delegates to work with industry stakeholders with the aim of delivering a draft bill to be reviewed by Parliament in the coming months.

Nevertheless, SoP’s fresh directive has raised concerns of potential conflicts of interest arising as powerful oligarchs are reported to want to limit Ukraine’s gambling framework to service a remit of ‘limited Master Licenses‘, managed by ‘eligible companies’.

Developing any industry mandate, concerns will arise again of a further Ukrainian government repeating mistakes in business legislation, as gambling could take the same shape as lotteries where conditions favour oligopolies rather than any form of free market… an all too familiar story for Ukraine’s business community.

In reforming Ukraine’s gambling laws, Zelensky has been served a two-fold mandate, in which SoP has to prove that it can develop a balanced regulatory framework for businesses to operate, which in turn will encourage inward investment from wider European operators – fulfilling SoP campaign policies on competition and innovation criteria.

As Zelensky’s presidential tenure begins to take shape, Ukraine’s sixth President will be judged on how he can harmonise and de-politicise relationships between the state organisations and industry actors.

The drafting of progressive gambling reforms could lead to Ukraine developing a new business sector, further supporting Zelensky’s modernisation goals of delivering thousands of new high-paid jobs.

Estimates on the size of a potential Ukraine gambling marketplace remain obscure with limited resources pointing towards a Ministry of Finance 2014/15 study which detailed that a regulated industry could provide approximately UAH 5 billion (€170m) of additional revenue for the state’s budget.

Zelensky’s government has just finished its first 100 days in office. Whilst Ukraine’s President talks refreshingly about delivering fairer business conditions, industry incumbents will see whether they are served a further entertainer or the actual taskmaster it needs.

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