New restrictions on online gambling
The decision introduces new restrictions on online gambling and bans it for military personnel during martial law regime. But will it work or be effective?
At the end of March, a serviceman of the 59th Brigade of the Armed Forces of Ukraine, Pavlo Petrychenko, posted a petition on the president's website demanding restrictions on online gambling and a ban on access to online casinos for Ukrainian soldiers by martial law. Unfortunately, Petrychenko died on the front line on April 15. But he has launched important changes in this area. His petition collected more than 26,000 signatures within hours of it being launched. And President Zelensky responded by instructing the relevant authorities to "gather analytics and propose solutions."
On April 20, the National Security and Defense Council of Ukraine (NSDCU) published its decision on “Counteracting the negative consequences of gambling on the Internet", which was immediately put into effect by the Head of State.
WHAT EXACTLY THE DOCUMENT IS ABOUT
The document obliges the Cabinet of Ministers to do the following during one-month time (till May 20):
• draw up a procedure for restricting all forms of advertising of gambling activities, in particular, those involving the use of electronic communications, symbols of the Armed Forces, other military formations formed in accordance with the laws of Ukraine, as well as the distribution of relevant contextual material;
• prohibit the registration by a casino gambling operator of several accounts for one player in online casinos;
* determine the maximum time of continuous participation in a gambling game on the Internet per day for one account and introduce mandatory breaks in the game; determine the maximum playing time per week;
• oblige the organizers of gambling games on the Internet to set before the start of the game the limit of the player's spending on the game for a certain period (day, week, month), with an option to change such a limit no more than once a month;
* Implement the State Online Monitoring System;
* Launch a nation-wide awareness campaign on the dangers of gambling;
* Oblige the National Commission, which carries out state regulation in the fields of electronic communications, radio frequency spectrum and the provision of postal services, to make decisions on blocking illegal websites that provide an access to gambling, at the request of the central executive body responsible for the formulation and implementation of state policy in the field of organization and conduct of gambling and lotteries.
At the same time, the Commander-in-Chief of the Armed Forces, Oleksandr Syrskyi and other members of military leadership should implement a ban on gambling for military personnel.
The Ministry of Health must ensure within a three-month period the adoption of a clinical protocol for the treatment of strong gambling addiction and provide relevant training for healthcare practitioners.
The Ministry of Social Policy must designate, within a three months period, a national standard for the provision of social services "017.4. Socio-psychological rehabilitation of persons with gaming addiction" and provide relevant training for social service providers.
The decision allows the SBU two months’ time to conduct inspections of gambling operators regarding their compliance with Ukraine’s sanctions legislation.
At the same time, the NSDCU has recommended the National Bank of Ukraine to do the following:
• introduce a ban on accepting dual-use items as collateral
* Approve methodological recommendations for banks issuing payment cards regarding compliance with the requirements of the Law of Ukraine on "Prevention of and Counteraction to the Legalization (Laundering) of the Proceeds from Crime or Terrorism Financing, as well as Financing of the Proliferation of Weapons of Mass Destruction" insofar as it pertains to P2P transfers; and banks regarding the blocking of payments by citizens with credit funds to the accounts of organizers of gambling games for participation in gambling games on the Internet.
The Ministry of Digital Transformation should within a month’s time hold talks with Apple and Google regarding a ban on placing in their application stores gambling applications without a relevant license in the "UA" zone.
IMPORTANT FIGURES AND INITIAL MEASURES
According to Opendatabot (Ukrainian company that provides access to government data from the major public registers for citizens and businesses, - ed.), the top ten companies involved in the gambling industry had multiplied their cumulative proceeds 28-fold over the past year. Spaceix (Cosmolot brand) became the leader, and Favbet (FAVBET brand) reported an increase of 425 times, the largest increase in earnings.
Last year, the turnover of the gambling industry in Ukraine amounted to 12-15 billion UAH per month, or up to (!) 180 billion UAH per year. Online casino players in Ukraine were spending about UAH 400 million every day.
At the same time, according to figures posted online, donations from Ukrainians to the three largest fundrising platforms in support of Ukraine -- United 24, Return Alive and Serhiy Prytula Charity Foundation -- amounted to UAH 18.75 billion, and through mono banks - UAH 27.4 billion over the past year.
How many people suffer from gambling addiction in Ukraine? The Register of Ludomans, which has been officially operating in Ukraine since 2021, provides some insight.
As of April 4, the Gambling and Lottery Regulatory Commission (CRAIL) listed 6,057 addicted players into the Register – a substantial increase compared to 3.700 persons listed as of the beginning of the year and 315 in 2022.
There are three instances an individual can find himself listed in the Register:
• an individual seeking to be self-excluded from gambling submits a relevant application voluntarily;
• an individual is included in the Register by relevant CRAIL decision based on a request from family members;
• by court decision.
Ninety-nine percent of gambling addicts are entering the Register on their own application, and the remaining one percent - according to a CRAIL decision. At the same time, not a single person got there by a court’s decision. Regarding the age category of "banned" players, relevant data is only available for 2023: 21-30 years – 1,939 persons, 31-40 years – 1,084 persons, 41-50 years - 272 persons, 51-70 years - 66 persons.
What does it all mean? It means that the number of ludomaniacs has grown 19 (!) times over the past 2.5 years. That's really a lot. However, the figures seen in the relevant Register, however, do not reflect the full picture regarding the number of citizens with gambling addiction. Unfortunately, there is no explicit statistics on numbers of gambling addicts in Ukraine. So let's just assume that the scale and scope of the problem is way more serious.
There is good news, however.
According to data provided by the Office of the Prosecutor General (OPG) as of April 2024, more than 2,500 websites that used to provide access to gambling services have been blocked in Ukraine, and more than 450 criminal offenses are being investigated based on the facts of their illegal organization.
"Currently, more than 450 criminal offenses are being investigated based on the facts of the illegal organization of gambling. Suspicion has been notified to 21 persons. Indictments against 72 persons, including 7 indictments against 68 members of criminal groups, have been sent to the court," says a report posted on the OPG’s official website.
EXPERTS: THE DECISION IS URGENT AND NECESSARY, BUT SOME QUESTIONS REMAIN TO BE ANSWERED
Ukrinform requested experts to evaluate the NSDCU’s decision, its pros and cons, to what extent it will be effective in solving the problem, and why it incorporates a separate mention of the introduction for the duration of the legal regime of martial law of a clause that prohibits service personnel from having access to gambling websites and/or participating in gambling games on the Internet during its validity period. How will this all be working?
Let's start with the last question first.
Political expert Yevhen Savisko argues that such a decision is necessary, but it is twenty or so years overdue - it was then when online gambling began to assume massive proportions.
"Gaming addiction is a disease, and even more widespread than drug addiction. And more money is spent. The fact that there are gamblers among military personnel was an open secret, except for the military command. But this is well known to the addicts’ families, to whom this is a tragedy they cannot do anything about”, - says the expert. - Gambling is dangerous not only because it destroys families, but also because it makes it easier to find traitors among the addicts. It’s hard to imagine how many Judas the Ruzzians have managed to recruit thanks to their gambling addiction. So the decision by the President of Ukraine was urgent and time critical."
However, as commented by President Zelensky, the only question that remains is how these new restrictions will be applied to military personnel: "After all, you cannot control every soldier, you cannot remove all smartphones. Especially when many of them may have several different phone numbers registered with different mobile operators. You can't put a "casino patrol" near everyone. In addition to the whip, attractive incentives are also needed to ensure it is economically beneficial for casino owners, etc. not to let the military in. Failing that, this whole business will go underground."
Taras Zahorodniy, a political analyst notes in this regard that the plan is generally correct yet insufficient to reduce gambling addiction among Ukrainians.
First, the decision by the National Security and Defense Council skips mention of the need to restrict access to online gambling for teenage persons.
"Being the most vulnerable category of the population in this respect, teenagers are getting quickly addicted to gambling," says Mr. Zahorodny.
Second, numerous investigations carried out by members of the media are exposing Russian traces in well-known online casinos.
"That's why a thorough check of gamblers needs to be conducted and a complete ban imposed on everything related to the Russian Federation," he added.
Third, the political analyst says the decision is lacking a mechanism how to ensure in practice that service members be prohibited from playing in online casinos.
"But even if they find such a mechanism to ensure that servicemen will not play, others will do, because there are no restrictions for them," Taras Zahorodniy argues.
The analyst also touched upon the scope of the problem. In 2023, Ukrainians gambled away UAH 55 billion in casinos. But that’s only a part of the profits earned by gambling companies which they declared officially. According to the National Bank's figures as of February 2023, Ukrainians were spending 12-15 billion UAH every month, or from 400 to 500 million UAH per day in online casinos, on bets, and in offline gambling establishments. In annual terms, this amounts to UAH 144-180 billion.
"What’s worst in this situation is that part of these billions go not even to Ukrainian businesses, but, rather, to companies with Russian roots," says Mr. Zahorodniy.
Oleksiy Bebel, deputy chief of the "Alibi" Bar Association, believes that the very fact of such a decision being taken indicates the existence of an acute problem with regard to the regulation of online gambling activities. Moreover, he considers this decision to be balanced and well thought out.
"No one is talking about a complete ban on the organization of gambling on the Internet, because not only is it generating revenues for the State budget, but also makes it possible for online casinos to work legally. The introduction of simple bans has led and will lead to nothing but this business going into the shadow, and the money that could otherwise be paid as taxes will instead be paid as bribes to officials and law enforcement officers. Among the measures Mr. Bebel considers to be most appropriate he mentioned the blocking of unlicensed casino websites, the prohibition of the registration of several accounts per one player by gambling operators, an obligation to determine the maximum time of continuous participation in a gambling game per day, and the establishment of a limit on the player's spending per game during a certain period (day, week, month), etc..
On top of that, there has been developed a set of measures to counter the organization of illegal gambling on the Internet, as well as regarding the treatment of gambling addicts and the introduction of a number of restrictions.
"These proposed measures taken into account, it can be said that the issue was studied in a meticulous manner, and what has been planned will contribute to the improvement of the situation in respect to the organization and operation of Internet casinos. That is, there is talk not about declarations or slogans that are aplenty in other programming documents, but about a clear understanding of the problem and the determination of specific ways to address it," added Mr. Bebel.
Here is what experts think about how to implement online gambling ban for military personnel…
"There are no restrictions of human rights here. A service member is doing his job while in a special legal status, and the establishment of prohibitions like these would therefore be appropriate and permissible. Moreover, it is necessary to take into account all the possible negative consequences of a serviceman’s involvement in gambling. First is that a person can quite easily become addicted to gambling due to the psychological and physical overload, and he will easily gamble away his hard earned money in a casino. Second is that gambling can influence a person, driving him into “debt pit”, and there are also many other bad consequences related to a possibility to establish the player's location," the lawyer says.
And this is how Oleksiy Volokhov, partner of SLA Attorneys, defense lawyer, PhD in Jurisprudence views the issue: "Abuses in this area have long required an adequate response from the authorities. Online casinos have flooded the advertising space on the Internet, and it is often difficult for the user to verify whether such resources have the appropriate license or work legally."
In addition, an investigation found people employed by the operator have been running unlicensed online gambling. More than 30 “mirror” sites similar to that of the licensed operator were offering gambling illegally and without paying taxes.
Some online casinos use "miscoding" (a type of fraud in bank systems, which consists in changing purpose and origin of payment for purposes of tax evasion - ed.) and, in complicity with unscrupulous banks, transfer the money they receive from players into the shadow turnover.
"And I even don’t mention the fact that the owners of some online casinos are actually located on the territory of the aggressor country and pay taxes there," the lawyer emphasized.
The advertising campaigns conducted by major online casinos often contain information about their financial assistance to the military -- the purchase of equipment, drones etc. – that may be helpful in forming a positive attitude towards them on the part of the military and the population in general. Such advertising campaigns, however, are a kind of manipulation: "After all, it is impossible to verify the amount of the aid, its recipients, and evaluate the amount of this aid as a percentage of the actual proceeds casinos earn by proving gambling services to military personnel."
“When talking about military personnel in particular, I’d say that there have even been cases where some of them, being addicted to gambling and having gambled away all their money in online casinos, handed over to pawnshops for the purpose of lending and sold military equipment and other items that they needed to perform combat missions”.
"However, the decision by the National Security and Defense Council does not provide for a procedural mechanism that would prohibit for service members an access to gambling establishments and/or participation in gambling on the Internet during the period of martial law. It instead delegates authority to implement these prohibitions to the high command of the Armed Forces. How exactly such a ban will work is still uncertain, but with VPN connected (a technology that allows remote Internet access while maintaining full data confidentiality, - ed.) any blocking of traffic from the front-line or other deployment areas of Ukrainian military units will have little if any effect." - believes Mr. Volokhov.
It is likely that the central military command will issue a directive (with field commanders being personally obliged to control its enforcement by subordinates) mandating commanders in the field to supervise their subordinate personnel, hold accountable those who fail to comply with the directive, and explain to them the dangers and harms of gambling while serving in the Armed Forces.
"But in practice, this will not mean anything, since there is no penalty provided for a failure to enforce this ban. If we are talking about how far such a ban is fair specifically in relation to military service members, most of the arguments mentioned above, including the risks of the enemy being able to acquire an access to personal data of members of the Ukrainian Armed Forces of Ukraine, play in favor of such a ban," he said.
The lawyer calls this decision a road map, which only indicates the directions for further actions that government authorities should undertake. That is, it is a kind of an action plan: "Any restrictions on the Internet are difficult to enforce in practical terms. It is necessary to develop a whole package of regulatory acts of government bodies of various levels that would determine: 1) who exactly is responsible for blocking payments and at what stage; 2) who controls access restrictions to unlicensed online casinos; 3) how to and who will monitor the enforcement of the NSDC’s decision. After all, in order to block a website, you need to have a relevant court decision, which would later be executed."
On the other hand, the NSDC’s decision provides for the implementation of the State Online Monitoring System in accordance with the requirements of Cabinet Resolution No. 171 dated February 16, 2024.
"If such a system is effectively launched, then there will be an opportunity to respond in due time to violations of legislation in the field of gambling, although this seems unlikely in the short term," Oleksiy Volokhov said in conclusion.
Myroslav Liskovych, Kyiv
