Ukraine: Interior Minister Avakov cracks down on gambling, state lotteries

With Christmas and New Year’s Eve coming soon, gambling hall owners operating under the guise of state lottery offices were in for an unpleasant surprise on Dec. 20, when the government decided to revoke all their licenses and sent the police to close them down that very same day.

The raid follows Interior Minister Arsen Avakov’s promise on Dec. 20 to close all gambling sites immediately, while the Cabinet of Ministers issued a decree on counteracting the gambling business.

“The gambling establishments, instant lotteries, poker clubs – all must be closed,” Avakov said.

According to Oleksiy Honcharuk, the prime minister of Ukraine, the national police and tax police will take actions to close all of the gambling halls with state-issued lottery licenses by the end of 2019.

In fact, the police have already closed 152 different illegal gambling facilities overnight, seizing equipment worth $2 million. However, the Ukrainian authorities will have to work hard to reach their goal, as the total number of gambling sites exceeds 8,000 across the country.

“We gave strict deadlines and I’m sure the national police and tax police will take responsibility to make this trouble disappear from the Ukrainian streets as soon as possible,” Honcharuk said.

Such a massive attack on gambling halls across Ukraine reflects the failure of the Ukrainian government to pass a law legalizing gambling, something Ukraine’s President Volodymyr Zelensky promised back in September.

On Aug. 8, Zelensky said that gambling would be legalized in Ukraine, but that casinos would only be permitted in five-star hotels.

“Yesterday, the Verkhovna Rada failed to pass a law on the legalization of gambling. We know who is behind it,” wrote Zelensky on his Twitter on Dec. 20, addressing the message to former ex-President Petro Poroshenko.

“Don’t want to play by the transparent rules in a civil way and pay (taxes) into the budget?” He said. “Well, let’s do it a different way. From now on, we will immediately close all the gaming halls.”

Currently, the state budget gets only about $2 million a year through taxing the industry, while $4 million more is paid by lottery winners. But it can be much more, according to Finance Minister Oksana Markarova. She estimates that legalizing gambling could bring $200–$360 million to the state budget.

Shady history

The speed of the decision is surprising in a political system like Ukraine, but this crackdown is just the latest chapter in the authorities’ endless fight against illegal gambling.

Although the gambling business has been banned in Ukraine since 2009, gambling halls are visible on practically every street. Posing as lottery offices, they allow gamblers to sidestep the country’s gambling ban.

The legal loopholes that allow these shadow businesses to operate started to appear in 2012, when the Ukrainian parliament – then controlled by the Party of Regions of Ukraine’s ousted president, Viktor Yanukovych – relaxed the gambling ban.

It created a bonanza for fraudsters, who opened online gambling salons under the guise of lottery offices, and for those who provide cover for the illegal business while allegedly milking it for bribes.

According to an Anti-Monopoly Committee report on the lottery market published in February 2018, only one in five lottery offices in Ukraine actually sells lottery tickets, meaning that most of them were operating illegally.

“We all understand that slot machine halls on the streets are evil,” Prime Minister Honcharuk said. “Not a single civilized country has them, and Ukraine shouldn’t have them either.”

In Ukraine, only three lottery operators – MSL, Patriot and the Ukrainian National Lottery – received state licenses, which expired in 2014 and were never renewed.

But they continue operating under a controversial clause in the old lottery law that allows them keep working until a new license is issued.

MSL stated that it supported the initiative of the Cabinet of Ministers to make necessary amendments to prevent the illegal gambling business from operating under the “lottery” label.

However, the company has concerns that such an approach won’t help fight illegal gambling halls that have no licenses whatsoever.

Georgy Lozhenko, president of MSL, told the Kyiv Post that the way Avakov and Honcharuk are trying to get rid of the illegal gambling business now is not the way it should be done.

“Globally, this has to happen in a different way,” he said, refusing to offer an alternative approach.