In 2020, a number of changes were made to the gambling legislation in the Russian Federation. Some of these changes are already in effect in 2020, with more changes expected in 2021. This year promises to be one of the most important years in the history of gambling regulation in the former Soviet Union.
Over the past year, the Russian gambling market has changed at an almost disruptive pace. The government has embarked on a major overhaul of the regulatory framework affecting all aspects of the sports betting market. It seemed that the legislative machine in Russia was working at full capacity, creating numerous bills, laws and all kinds of other legislative acts. We have studied them all and selected the most important changes that will have a profound impact on the gambling market in the country:
Limit betting on sporting events only . The amendment bill came into force at the end of September 2020 and limited sports betting operators to accept bets strictly on sporting events that take place in the Russian Federation and abroad. Gone is the ability to bet on the outcome of an election, to land people on Mars and other non-sports betting markets.
Initiation of a new approach to the special contributions mechanism . Until October 2020, in order to support national sports, betting operators in Russia had to contribute 5% of their quarterly GGR (but not less than 165,000 euros) from betting on local sports events in Russia. Starting in October 2020, this requirement has also been extended to international sporting events. And in December 2020, the Russian government approved a bill that introduced a different approach to the mechanism of special deductions. Upon entry into force at the end of September 2021, the mechanism will require the following:
- Special contributions are to be calculated on the basis of " quarterly income received by the sports betting operator from its activities in terms of accepting bets, interactive bets in relation to sports competitions. At the same time, revenue means the entire amount of income received by the sports betting operator from its activities in terms of accepting bets, interactive betting in relation to sports competitions ”, is a quote taken from the account itself. It is important to note that this "income", as defined in the bill, is not GGR and should be treated exactly as specified in the bill. Unfortunately, its definition has caused more confusion than clarity among representatives of the Russian gambling business.
- The special contributions will be set at 1.5% of the "income" defined above, but in any case the quarterly special contribution must be at least €330,000.
Creation of a single regulator of the gambling business (" UGR " or " ERAI" , an abbreviation used in Russia) to solve the following tasks:
- retention and transfer of special deductions from sports betting operators to Russian sports organizations;
- detecting and combating illegal gambling on the Internet;
- work on improvements in Russian gambling legislation
- creation of an IT infrastructure for the development and implementation of monitoring systems with the main goal of supervising the activities of sports betting operators. Among other functions of such systems is the collection of information about all bets made, paid and unpaid winnings, all operations of the cashier of sports betting operators.
Creation of the Unified TSUPIS . TSUPIS is the Russian abbreviation for organizations that act as agents between gamblers and sports betting operators for the purpose of managing financial transactions and tracking bet amounts in order to determine the amount of special fees due to betting operators. Currently, there are two TsUPIS organizations in Russia for sports betting operators operating under the auspices of self-regulatory organizations (which should also be excluded from the Russian gambling business), but recent changes in legislation provide for the creation of a “Unified TsUPIS”, which is intended to operate under the control of a single regulator, replacing existing TSUPIS organizations.
Introducing a New Control Engine lists self-exclusion of players. Recently, a bill was submitted to the Russian government, according to which the list of players who expressed their intention to limit their gambling activities should now be maintained by a single regulator (ERAI), according to which bookmakers are required to send information about such players to ERAI. However, it is currently unclear what information (as well as the form and procedure for providing such information) should be provided to ERAI. According to the draft federal law under consideration, these parameters should be determined by the Ministry of Finance of the Russian Federation.
Amendments to federal laws to improve measures to combat illegal gambling . This bill changes the risk profile for non-Russian licensed operators when accepting players from Russia, as it removes the possibility of doubt as to whether the operator is operating legally or abroad. In addition, the law introduces black and white lists of bookmaker operators and payment service providers. It is worth noting that the bill itself lacks clarity and is likely to undergo a number of changes before it is approved, as it has already left the gambling community concerned about how this law will be implemented and enforced.
Looking at these changes, it is clear that the Russian government has taken drastic steps to tighten the rules and emphasize sports in the sports betting market.
With regard to special contributions, expanding the range of activities to include international ones has allowed the government to collect larger amounts of special contributions and direct them to the development of national sports in the country. Contributions quadrupled year-on-year in 2020 despite a slowdown in betting activity in the first half of the year caused by the cancellation of sporting events due to the pandemic.
The new Unified Gambling Regulator and Unified TSUPIS aim to make the regulatory process more streamlined and centralized by making certain aspects of operations mandatory rather than optional, as illustrated by the change in the mechanism for managing player self-exclusion lists.
Representatives of the gambling community in Russia do not hide their concern about how these changes will actually be implemented and how exactly these new organizations will fulfill their regulatory responsibilities.
It is worth noting that some sports betting operators were less optimistic about the innovations in Russian gambling legislation, and some have already decided to leave the market. Others are considering various options to continue operating in Russia, but with the latest bill to tighten control over financial transactions, it looks like the government was trying to limit the number of fraudulent operators, which would inevitably have an impact in the future - either we see more bookmakers leave Russia or excel in circumventing stricter rules.
The regulatory saga in Russia is far from over, with 11 more minor pieces of legislation coming in 2021 to support the changes made by recent laws. At the moment, we can only guess how the regulatory horizon will change by the end of this year.
While the future of regulation in the Russian Federation looks uncertain at the moment, there is still a lot to be done in 2021, so let’s get ready for what many would call a bumpy ride, but many will want to jump in as Russia remains one of the largest and most dynamic markets. betting, one that no major sports betting operator would miss if they saw a more transparent, clear and concise way to regulate the industry in the country.
Ilya Machavariani is a lawyer in the field of gambling and gambling business in Europe, Russia and the CIS and senior partner of 4H Agency. He has extensive experience in advising on gambling issues and advises clients on activities in the Russian Federation and the CIS, on the entire range of regulations relating to the activities of gambling operators, as well as on drafting the necessary contracts and internal documents. It also deals with the licensing of gambling operators that enter new markets around the world.
Ivan Kurochkin, partner at 4H Agency, has extensive experience in gambling, especially in regulatory matters. His work includes advising clients doing business in the Russian Federation on various aspects of the activities of gambling operators (including betting shops), with particular attention to issues related to gaming license compliance, applicable AML requirements and issues related to advertising of gambling operators.