In the rapidly evolving landscape of Ukrainian legislation, a recent presidential decree aimed at curtailing the negative impacts of online gambling has sparked significant debate. This decisive action, intended to safeguard national security and address concerns about gambling addiction among military personnel, has opened up a discourse on its broader implications for the economy and the online gambling industry. This article aims to provide a deeper insight into these complex issues. Mr George Mamulaishvili, founder of the Gambling Consulting Authority (GCA), and Alona Leonova, partner at GCA, shed light on the potential economic, social and legal consequences of this decree, revealing a spectrum of challenges and opportunities that lie ahead for Ukraine.

1. Could you provide an overview of the new law and its anticipated implications for the Ukrainian economy, particularly in terms of revenue generation and job opportunities?

Alona Leonova: This is not a law, but a presidential decree that enacted the decision of the National Security and Defense Council of Ukraine ‘On Counteracting the Negative Consequences of Gambling on the Internet’ on 20 April 2024. The decree was adopted due to the growing concern in certain circles over the increasing cases of gambling addiction among military personnel. According to the initiators of this regulation, for many soldiers gambling becomes the only way to cope with stress and eventually leads to their addiction, uncontrollable expenses, loans and ‘debt pits’, while online casinos gain access to personal data of military personnel and other citizens, which creates a direct threat to the national security of the state.

It is worth noting that the decision has both positive and negative sides.

Thus, if implemented correctly, the measures to develop a procedure for restricting gambling advertising, to prohibit the registration of several accounts for one player by the organizer of gambling casinos on the Internet, to introduce the State Online Monitoring System, to prohibit the acceptance of dual-use goods as collateral, and to block payments by credit facilities can be assessed quite positively. But such measures as setting a limit on player's spending on gambling, conducting a national awareness campaign on the danger of gambling, blocking illegal websites, banning access of military personnel to gambling, banning the placement of applications with gambling without the appropriate license in the zone ‘UA’ in their application shops, not only will not bring the expected results, but will create the opposite effect.

In the future we will see how this decision will be implemented, what documents will be adopted in order to implement it and what it will bring to the gambling industry of Ukraine.

George Mamulaishvili: I think the claims of the initiators of the regulatory act are unjustified. Especially stigmatization of certain persons with certain problems does not bring a positive effect, and reading the act, we can say that all military personnel with psychological problems are stigmatized instead of being integrated into society. The statement about data collection of military personnel also looks strange; on such a principle, we should ban all institutions that collect data, and there are many of them. It turns out that if the banking system has access to personal data of servicemen, banks should be closed.

At the same time, it is not clear what is the basis of the decisions made. This once again shows that people who do not understand the industry and do not take responsibility for the consequences, based only on their ideas, mislead not only high-ranking officials but also the public. As a result, it turns out that legislation is adopted that affects society, business, and the state itself.

As I've said many times before, Ukraine has not made much progress in the development of this industry after the legalization of gambling in 2020. On the contrary, huge mistakes were made, which had a negative impact not only on business but also on society and the state as a whole.

2. How will the new gambling law reshape the landscape of online gambling in Ukraine?

George Mamulaishvili: Back in 2020, I said that if Ukraine did not adopt radical legislative changes, it would have a negative effect. And so it happened. Yes, of course, Russia's full-scale invasion of Ukraine has affected the development of the industry, but I can say with full confidence that if Russia had not unleashed the war, the development of the gambling industry would have progressed slowly even without it.

We can say that this is another mistake of the Ukrainian government in relation to the gambling industry. Back in 2021 they were going to change the law on triple licence fee, which would have made it possible to attract new investors.  Introduction of free zones, such as the Danube project. The project itself was ideal for tourism development, but its development was very slow and with big deficiencies in the legislative framework. The term ‘sports poker’, which directly interfered with the development of gambling business and in fact it was a loophole for illegal activities. A lot of illegal slot clubs, which multiplied like mushrooms after rain. There were and are problems in the system of administration of the legislation itself. And many other things.

Based on the already existing mistakes that lead to uncontrolled behaviour of players, in fact the Ukrainian government has decided to develop the illegal sector in the country. I realise that in times of war the government has many other priorities. But with some innovations it will only make things worse in the industry and in society. Many legislative acts will directly contribute to the development of illegal gambling business in the future.

3. What potential adverse effects could arise from the restriction of gambling advertising in Ukraine, particularly in terms of its impact on the revenue streams of both operators and advertising platforms?

George Mamulaishvili: If it is just a question of banning the use of military symbols in advertising, that is one thing. But if we talk about banning advertising in general, it will have a very negative impact on the market. Drawing a parallel between other countries where advertising is banned, it can be said with assertion that by doing so, the government of this state is facilitating the development of the illegal market, which always entails the outflow of large amounts of money from the country, a decrease in revenue to the budget of the country and the most negative is an uncontrolled market.

The advertising market will also suffer. Advertising should not be intrusive and call to play. But that doesn't mean it should be banned. There are so many tools that can control the content of the advertising. The way it is received and advertised to certain individuals. Naturally, the use of military symbols is an immoral act, and each operator must understand and take its share of responsibility to society for this. By banning advertising to legal operators, who will be fined, the state risks attracting illegal advertising on the Internet from illegal operators. Blocking their content will not give a positive result, but on the contrary will put legal operators in an uncompetitive position.

4. How might the prohibition of multiple online gambling accounts and the imposition of playing time limits affect the competitiveness and profitability of the Ukrainian gaming industry?

Alona Leonova: Banning multiple accounts only has a positive effect on business. This practice is used everywhere, and I think that it will not create problems for business, as this tool contributes to strengthening the principles of responsible gambling.

As for the second part - limiting the maximum time of continuous participation in game - I think this is a big mistake. How is this time calculated? And why are my civil rights being violated? Such restrictions will only lead to an exodus of players to foreign markets and to the sites of illegal operators.

There are many different tools that have been successfully tested in different countries, such as breakout sessions and warning pop-ups. These tools have already shown their effectiveness in practice.

The gambling business and player behavior should undoubtedly be controlled, but within reasonable limits.

5. What challenges might online gambling operators face under the new legislation, and how might it impact the attractiveness of the Ukrainian market for international operators?

Alona Leonova: Foreign investors have been watching the Ukrainian gambling market since 2020. It has always had great potential for development, but due to the incorrect legal framework it has always remained only interesting for investors. Large operators such as Entain and Flutter Entertainment have always been cautious about the negative trends in the Ukrainian market.

Naturally, at the moment it is difficult to talk about large investments in this industry, but for the future, unless there are radical changes in legislation, I doubt that large companies will be interested in investing in this industry.

It should be understood that the development of the gambling industry is not only the development of a particular industry, but also the development of related industries, such as payment systems, IT sphere, advertising market, tourism and others. And this, of course, will have a positive impact on the economy, which has already suffered due to military operations.

6. How will the implementation of a state online monitoring system impact consumer privacy rights and the operational expenses of gambling operators?

George Mamulaishvili: Naturally, the monitoring system will increase the operators' costs. But it will make the business more transparent and attractive to investors. The rights of every operator and consumer will be protected. The state will have access to business turnover and illegal operations will be drastically reduced. The most important thing is to have a competent look at the essence of the question and to organize this system in the right way.

I can give an example from the Georgian practice in the gambling industry. When adopting the law on identification and verification of users, at the initial stage there were many negative aspects for both operators and users. After a number of changes were made with the help of qualified experts who took part in finalizing the legislation, it had only a positive effect. And we can say that today phishing operations and laundering of such operations through online operators have been minimized in Georgia. This has naturally had a positive impact on business and consumers.

7. What are the shortcomings and potential inaccuracies of the national information campaign on gambling addiction?

Alona Leonova: Undoubtedly, the adopted measures will have a negative impact on the work of legal online operators in general and will contribute to the reduction of their presence in the market, while opening the way for illegals and causing even greater harm to the industry, the country's budget and society.

Legal gambling is part of the economy. Any government action that stigmatises the industry will lead to negative consequences and an increase in illegal content. And the main message of awareness-raising campaigns should be that gambling is for entertainment, not to improve the financial situation of gamblers.

8.What consequences can be expected from the decision to block illegal gambling websites?

George Mamulaishvili: This is the right solution, but it has little effect. Also relying on international practice, blocking illegal content mixed with new bans will certainly not have a positive effect. Because with the development of technology it is very difficult to fight against illegal operators. Illegal operators will always find a loophole to circumvent any ban or restriction.

In terms of liability, we put them in a better position than legal operators, because if a legal operator violates one law or another, they will be heavily fined. But this does not work with illegal operators, as they are not under the jurisdiction of a particular state.

The blocking effect is there, but it has to work in conjunction with other tools that add more value. And at the moment I don't see those tools being used.

If we look at the practice, blocking illegal content reduces the work of illegal operators by 3-5% on average, which is a drop in the ocean. Maybe many opponents of the gambling business will say that this is one tool, and there are others, but against the background of other prohibitive measures and restrictions, as well as based on statistics and practice, it increases the interest of illegal operators by 20-25%. And if we take simple arithmetic, it turns out that on the one hand we reduce accessibility to illegal operators by 5%, and on the other hand we increase it by 25%. Where is the benefit? I can also give examples, referring to world practice: the development of legal operators proportionally reduces the development of illegal operators.

It turns out that if we create a favourable environment for legal operators, where there is healthy competition, illegal operators will automatically be weeded out. Add to this the right tools of regulation and responsible gaming, and we can say that within a few years Ukraine can become a completely white market for gambling business.