The government's attempt to bring order to the gaming industry is being torpedoed from the most unexpected angles...
Critics of the current Cabinet, which constantly stumbles in its attempts to somehow reform the country's stagnant economic system, should at least occasionally pay attention not only to the fact of the latest embarrassment, but to the underlying causes. Because their roots can stem from the most curious places. A perfect illustration of this point is the Ministry of Finance's recent initiative to regulate the current situation in the gaming industry—an entertainment industry that many moralists find unpleasant, but nevertheless, a real one.
From the history of the question
Like the state, the gambling industry has existed under the sun since ancient times and is constantly intertwined within two established constructs: either the authorities legalize the game or drive it underground. And, essentially, the difference between these positions is the same: legal business feeds the treasury, while the shadowy one feeds the "government people." The first path has been chosen by civilized countries, while the second, as usual, is chosen by corrupt regimes.
In Ukraine, however, they approached this situation inventively and came up with a third "hybrid" of coexistence. In 2009, having formally banned all forms of gambling, the government legalized some of them three years later under the guise of state lotteries, which was reflected in the relevant laws (zakon1, zakon2). Legal market players with full licenses to conduct this type of business were designated by then-Prime Minister Mykola Azarov. (read more about it in the article Nikolai Azarov. The Survivor) the state-owned Oschadbank and three private operators were determined: M.S.L. LLC, Patriot PJSC, and UNL Private Enterprise. Since the state-owned bank, due to its busy schedule and incompetence, never carved out its niche in the "game," the field was carved out for itself by these private "lucky ones." I think it's unnecessary to mention that all three were founded by offshore companies at that time. Another interesting detail in that section was that the majority of the market (105 lotteries) was run by the first two companies, while UNL Private Enterprise managed only 7 (less than 10% of the market). Industry experts say this was explained simply—the leaders had grown out of large Russian gaming holdings that possessed the necessary technology, personnel, and resources for rapid development. But the third "modest man" - "originally" from Austria, the country where the Azarov family's businesses traditionally nest, was simply inserted into the profitable business scheme only because of Nikolai Yanovich's habit of not letting anything slip past his tenacious hands.
The resulting picture is as follows: of all gaming options, only casinos were banned, while betting (bookmaking), online games (poker/roulette/etc.), and "cylindrical gambling" (all types of slot machines) continued to operate serenely in the gray zone, sheltered under the aforementioned "state lotteries." And if we analyze the structure of funds in this market, it turns out that only one-fifth of the official $9 billion turnover in 2013 (and unofficially, experts estimate its volume at no less than $50 billion) came from "classic lotteries," with the remaining 80% coming from formally prohibited forms of gaming.
Game by rules
Following the victory of the Revolution of Dignity, the government faced the dire need to increase budget revenues. One solution was to restore order to the gaming industry. Furthermore, cleaning up these messes was a legal imperative: all operators' licenses had expired by the spring of 2014, and the new authorities were in no hurry to renew them after the flight of the Yanukovych regime's leaders, despite generous promises from private companies. By the summer, a working group had been established within the Ministry of Finance, which held talks with all market participants and determined the optimal strategy for state regulation of the industry.
The result of her work was a proposal to legalize the gambling business within a strict and transparently regulated framework. At a briefing on August 15, Finance Minister A. Shlapak announced the development of three bills aimed at streamlining the situation in this area in the country for the benefit of the budget. Their submission to parliament was expected soon.
In short, the gist of the deal is this: the entire gambling business (except slot machines, which are extremely addictive) is legalized and regulated by sectoral laws: "On Casino Activities in Ukraine," "On Bookmaking Activities in Ukraine," and "On Lotteries in Ukraine." As far as the reaction to the minister's speech goes, most market participants are fundamentally interested in such a policy—strict restrictive and licensing requirements for operators contribute to the natural purge of "temporary operators" and fraudsters. Moreover, they also agree to increased social responsibility—as long as the funds go to the intended recipients: racetracks, stadiums, relevant sports federations, cultural development funds, etc.
But, as is usual in our system of power, it was not to be... Nothing is transparent here.
Top-notch coasters
On the eve of the minister's speech, a parallel media campaign began—the industry had long been crying out for order. Its driving force was the program "Nashi Groshi," which conducted its own objective and honest investigation into the situation with "state lotteries." A number of other reputable publications also covered the issue. However, the current market masters decided to exploit the fruits of these journalists' honest work in a specific way. Specifically, by carefully adjusting the information and exploiting Ukrainians' natural outrage... to clear the field for themselves.
Almost immediately, the media began to inundate itself with various messages, ostensibly from the perspective of experts. Specifically, in "Zerkalo Nedeli" (No. 29, August 22-29, 2014), Doctor of Law D. Getmantsev delivered a scathing critique of the Ministry of Finance's initiative. The gist of his message was: leave everything as is, don't disturb the market. However, the esteemed professor "forgot" to mention that he is... a co-founder of M.S.L. LLC—the leading company in terms of the number of lotteries it runs and the volume of funds it attracts. So, one can certainly doubt the author's objectivity.
At the same time, secret negotiators began working in government offices. The emphasis here was different: according to available information, Oschadbank's management was essentially offered to retain the old system, under which one new operator would replace the three compromised operators with a single "state lottery." The argument was that the state-owned bank, once again, had neither the resources, nor the time, nor the personnel for such a task, while interested, experienced foreigners appeared on the horizon, literally eager to help the country on the most favorable terms.
Lobbyists are also trying to reach Prime Minister Yatsenyuk in a slightly different way. The gist of their message is this: there's no need to overregulate the market now; the Finance Ministry's legislation is pointless; it's perfectly sufficient to pass a Cabinet of Ministers resolution to change operators. Moreover, people close to Minister of Youth and Sports Bulatov are actively participating in these "negotiations." Their goal, in addition to lobbying for this project, is to win over as many sports federations as possible to this position, thus creating the appearance of support for the new initiative from the professional sports community.
But the most interesting thing is this: the initiator of this "new/old" business scheme, according to some reports, is the most modest of the old "lottery operators," the very same Austrian private enterprise "UNL." And its emissaries are proposing to introduce to the market an unblemished company with an equally Austrian pedigree, which, of course, does not act in the interests of the fugitive former Ukrainian prime minister. Journalists from "Nashi Groshi," having brilliantly unearthed the Russian roots of the two main operators, simply overlooked the third—the smallest in terms of size. This is what the third is now trying to exploit, undermining its former business partners.
But it's unlikely that either the state or the average Ukrainian will be pleased by the fact that their money will no longer be used to pay for the Russian army, but to support a "respectable Austrian" family. After all, you can't hide an awl in a sack, and sooner or later, the state leadership will have to explain to voters the re-creation of one of the most odious schemes from the Yanukovych era.
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