Ukraine Trade Group Hits Back At Government's 'Arbitrary' Action Against Online Operators

April 23, 2024
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A trade group has accused Ukrainian authorities of exerting political pressure to block bank accounts belonging to licensed online gambling operators after the government moved to introduce new restrictions.
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A trade group has accused Ukrainian authorities of exerting political pressure to block bank accounts belonging to licensed online gambling operators after the government moved to introduce new restrictions.

President Volodymyr Zelensky signed Decree 234/2024 on April 20, which bans members of the Ukrainian Armed Forces from using the services of online and brick-and-mortar gambling outlets as long as the country remains under martial law.

Before signing the decree, President Zelensky demanded that Ukrainian authorities address the negative impacts of online gambling on March 29, after a petition submitted by soldier Pavlo Petrychenko demanding a raft of new restrictions quickly received the necessary signatures to require his consideration. 

The petition includes calls for a ban on gambling and access to online casinos for military personnel during martial law, banning the use of military symbols to promote gambling, and an obligation for internet providers and mobile operators to block illegal casino websites.

“Many Russian online casinos target Ukrainian consumers to gain access to personal data of military personnel and other citizens, which poses a direct threat to the national security of our country. Huge debts of servicemen with gaming addiction can also become an element of pressure and manipulation by the special services of the aggressor country,” the petition claims.

In addition to the ban on gambling for the country’s military, the regulation includes several other measures such as limiting all forms of advertising related to online gambling, especially ads that refer to the symbols of the Ukrainian Armed Forces and other services.

Ukraine-based online gambling operators are required to introduce procedures that would prevent them from registering more than one account for a single user, and determine the maximum time a user can spend per day and week using their account, and introduce compulsory breaks for users while they use their accounts.

Local online gambling operators are also obliged to determine a maximum spending cap per user and an online monitoring system will also be launched to help state authorities monitor the industry. 

Additionally, the changes require the Ukrainian Ministry of Digital Transformation to carry out negotiations with Apple and Google within a month to discuss introducing a ban on adding gambling apps in their online app stores without making sure that the apps’ creators hold the necessary licence.

The Security Service of Ukraine (SBU) will also investigate whether local gambling industry stakeholders have been following regulations and collaborating with other relevant state authorities.

In a separate address on April 2, President Zelensky told the nation that the government is looking to tighten its control over the online gambling industry to “help protect the interests of the society".

Weeks after the address, the Ukrainian Gambling Council (UGC) has accused state authorities of blocking companies' current accounts in an attempt to exert political pressure on the industry due to “nonsense” allegations of some online operators' links with Russia, in a blog post by the UGC chairman Anton Kuchukhidze on April 17.

“At the same time, government authorities and law enforcement agencies have a neutral stance towards illegal gambling service providers. Today, more than 1,200 websites operate in Ukraine without a licence and without any responsibility regarding players,” Kuchukhidze wrote.

The UGC demands that state authorities and the Business Ombudsman Council, an independent advisory body of the Cabinet of Ministers of Ukraine, end “arbitrariness against licensed market organisers”.

Kuchukhidze also accused an unnamed lottery lobbyist of being the pressure, adding that “after all, only lotteries and illegal gambling benefit from this, not the state”.

Dmitry Hotsyn, the head of CIS and a senior consultant at 4H Agency, said that based on their sources, “UGC is referring to the suspension of bank accounts belonging to two major Ukrainian online operators: Pin-Up and Vbet”.

“This is not the inaugural instance of stringent measures imposed by Ukrainian authorities on the legal gambling sector. In the past, similar actions were taken, such as the freezing of bank accounts belonging to Cosmolot, citing tax evasion charges. Furthermore, certain operators have had their licences revoked; one notable case was Parimatch, which faced local Ukrainian sanctions in March 2023,” Hotsyn told Vixio GamblingCompliance. 

He fears this trend is a concern for the gambling market.

“Even if these companies were found to violate regulations, the lack of clear communication from relevant government bodies perpetuates ambiguity, leaving potential operators and the public in the dark. This uncertainty adversely affects investor confidence in an economy already grappling with the ramifications of the ongoing war,” Hotsyn said.

Earlier this month, the Finance, Taxation and Customs Policy Committee of the Verkhovna Rada, the lower chamber of the Ukrainian parliament, approved a draft bill that proposes to shut down the country’s Commission for the Regulation of Gambling and Lotteries (KRAIL).

Under the plan, the agency’s competencies will be transferred to the Ministry of Digital Transformation. The move is related to various allegations against KRAIL and its leadership.

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