Gaming Industry in Ukraine: First Results, New Prospects, and Growth Potential

Author: Ivan Mostovoy

18 june 2021

In July 2020, the authorities legalised the gambling business and allowed casinos and bookmakers to operate after an almost 12-year pause. A year has passed. It means it is time to consider the first results of the gaming establishments’ work in Ukraine.

Gambling business in Ukraine: results, prospects, potential

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Features of the Gaming Legislation in Ukraine

The main provisions of Law No. 768-IX "On State Regulation of Organising and Conducting Gambling":

All types of gambling are allowed — online and offline activities

Entrepreneurs can open land-based or online casinos, start betting businesses, and organise the work of poker rooms

A licence is required for legal work

The permit is valid for 5 years. After that, the document can be prolonged according to a simplified scheme.

The cost of the licence depends on the type of activity. The launch of an offline casino is the costliest option. Such a high price is caused by the need of obtaining permits for each unit of equipment

Mandatory certification of casino hardware

The law contains a regulation on the inspection of equipment — slot machines, bookmaker and lottery terminals, game consoles, electronic video attractions.

Besides, entrepreneurs need to certify online systems for launching internet casinos

The nuances of localising entertainment clubs

Land-based casinos and slot machine halls can be located only based on 4- and 5-star hotels.

The space of establishments is calculated in proportion to the number of hotel rooms. The type of populated locality should be considered too

Special gaming zones

The government will name five locations with preferential terms for launching casino businesses soon. It is expected that it will be the Black Sea coast, the Carpathians, as well as border regions

Which Land-Based Casinos Are Already Interacting with Visitors?

Ukrainian land-based casinos: opened establishments

In May 2021, the first casino complexes in Ukraine opened their doors:

  1. Billionaire Casino. The establishment is located in the historical centre of Kyiv in the 5-star Intercontinental Kyiv hotel. Users have access to 5 halls with land-based slot machines from Novomatic, IGT, and EGT, as well as roulette and card tables.
  2. Shangri La Casino. The gaming club was created based on the prestigious Fairmont Grand Hotel Kyiv in the capital of Ukraine. The establishment has equipment from outstanding vendors of slot machines — Novomatic, EGT, Scientific Games. The operator offers users to play in the VIP room with increased limits and chances to win the jackpot.
  3. First Casino. This is the earliest gaming establishment located in Odessa, based on the 5-star Gagarinn Hotel. Besides card games, slots, and roulette wheels, the operator guarantees exciting leisure — performances of stand-up comedians, a fire show, and a relaxation zone.

The owners of Billionaire Casino note that they have already spent over 90 million hryvnias on opening their land-based establishment. The lion's share of the costs is associated with licensing. The operator paid the price of the casino general permit (72 million hryvnias) and also incurred the expenses of licensing equipment (18 million hryvnias) — ground-based slot cabinets and gaming tables for card games and roulette.

Law No. 768-IX states that the government will redirect the proceeds from licensing to the construction of infrastructure: roads, transport interchanges and access routes, social facilities (hospitals, schools, kindergartens).

Key Tendencies in the Ukrainian Market

Casino operators note the following trends in the development of the gaming industry in Ukraine:

  1. High interest of foreigners. Almost half of the capital casinos’ visitors are tourists from the Middle East. As a rule, these are residents of Turkey, men aged 25-40 years with above-average earnings. The male audience makes up 80% of the visitors and the female group is 20%.
  2. The predominance of slots. Stationary gaming machines provided 80% of entrepreneurs’ revenues. At the same time, other entertainments (poker, card games, roulette, etc.) brought only 20% of profits. Today, businessmen are trying to improve their assortment of slot machines by adding novelties from Novomatic, EGT, Aristocrat, and other acknowledged brands.
  3. Demand for bookmaker services. The increased interest in sports betting is associated with the seasonal factor. Several top competitions are held in the summer of 2021. First of all, these are the European Football Championship and the Olympic Games in Tokyo. The placement of betting machines and bookmaker terminals in establishments will significantly increase the operating income of entrepreneurs.

Challenges Faced by Businessmen

Launch of casinos in Ukraine: challenges

Despite the growth prospects, many operators have to deal with some issues associated with the launch of casinos and conducting businesses.

Casino Hardware Certification

According to Law No. 768-IX, operators are required to test equipment and the online system before launching casino start-ups. This is the only way to obtain a licence and manage an establishment legally.

The certification procedure requires improvement:

  • the government has not provided for unified technical regulations for testing hardware and software (slot machines are equated to low-voltage and electromagnetic devices today);
  • only 5 certification centres operate in Ukraine; this amount is not enough to cover the large market to the full;
  • a partnership with foreign laboratories has not yet been established — NMi, QUINEL, and other prestigious organisations.

Features of Business Taxation

It is worth considering such controversial issues:

  1. Licence fees for the transition period. The government plans to launch a full-fledged system of online monitoring of operators' activities. In the meantime, the service is at the development stage. Entrepreneurs have to pay threefold licensing fees.
  2. The concept of minimum winning has not been introduced. In international practice, the term “minimum non-taxable winning” is used. However, Ukrainian legislation does not imply this concept. Its absence scares off foreign junket tourists wishing to visit land-based casinos.

Competition

As many experts note, the issue of underground gaming clubs has not been resolved to the full in Ukraine. Such establishments create competition with legal casinos that work honestly — provide employment opportunities, invest in infrastructure, pay all taxes.

The Main Things about the Legalisation of the Gambling Industry in Ukraine

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  • In July 2020, the Ukrainian government legalised the gaming field. All types of gaming (online and offline entertainments) are allowed in the country. However, it is necessary to pass the certification of equipment, software and obtain a licence for a full-fledged operation.
  • Entrepreneurs who were the first to receive permission for conducting land-based businesses note several tendencies in the industry’s development. Most of the visitors are foreign tourists from Turkey and the Middle East. Slot machines are very popular among players. They bring almost 80% of operators' revenues.

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