A new authorised body must be established to replace the Commission for Regulation of Gambling and Lotteries (CRGL) CRGL is a body established in 2020 to regulate activities in the field of organising and conducting gambling and lotteries, namely, the implementation of state policy and state market supervision in these areas. by 1 April 2025. It is expected to be more effective in areas of regulation such as strengthening control over financial flows, combating gambling addiction and restricting advertising.
However, there is a risk that the new regulator will not be able to eliminate the key shortcomings of the CRGL unless it carries out high-quality work on mistakes and takes other important steps, such as launching an online monitoring system, developing mechanisms for detecting violations in the gambling sector and establishing clear conditions for interaction with other responsible actors. The unclear legislation and not always orderly interaction with other structures and government agencies played a role in the liquidation of CRGL to a certain extent. Therefore, it is important to focus on each problematic aspect and approach the regulator’s reorganisation in a rather complex area with a better understanding of all processes.
Collegial principle
The Ministry of Digital Transformation initiated a draft law on the liquidation of CRGL back in May 2023. At that time, the Commission’s work was blocked for about three months due to the resignation of one of its members and a lack of quorum The quorum is 5 members. The KRAIL works on a collegial basis; it can consist of 6 members, headed by the chairman. During the full-scale war, there were 5 of them, and the mobilisation of the chairman and resignations of the Commission members caused its blocking. . There have also been precedents of blocking individual meetings by members of the Commission. Although the draft law of the Ministry of Digital Transformation was not adopted, the new regulator will not work collegially. Some of the CRGL’s powers have already been transferred to the Ministry of Digital Transformation, while others will be transferred to the new regulator.
Control over financial flows
CRGL was unable to exercise full control over gambling finances due to the absence of the State Online Monitoring System (SOMS) SOMS is a software and hardware system for monitoring the activities of gambling organisers, compliance with licensing conditions, collecting and processing transaction data, as well as protecting information and ensuring the principle of responsible gambling. . Although the creation of the SOMS was a precondition for the legalisation of the gambling business, it would have allowed for real-time monitoring of gambling operators.
CRGL was responsible for all SOMS stages. The system was supposed to be commissioned no later than July 2022, but only in June 2023 did CRGL start developing the SOMS Procedure, and the Cabinet of Ministers approved it in February 2024. Although the state budget does not include an expenditure item, SOMS creation was included in the CRGL’s budget programme in 2021. The Commission announced a corresponding tender, but the bidding did not take place. In contrast to previous years, the State Budget for 2025 already includes the creation and implementation of the SOMS as a separate item of expenditure. CRGL must report on the use of these funds for the first time by 10 April. This will allow the system to assess its degree of readiness when it is transferred to the new Authorised Body.
However, even with the creation of the SOMS, the illegal gambling segment remains uncontrolled, and the CRGL did not have clearly defined mechanisms to detect it. When illegal games were detected, operators were not always punished: the CRGL did not have the authority to implement the imposed sanctions independently, and in case of non-compliance, the Commission could only send files to law enforcement agencies. However, in 2022, the CRGL sent the Economic Security Bureau (ESB) information about 1,698 illegal websites and 605 gambling offices, but the ESB opened only 34 criminal proceedings without making a decision on any of them.
The level of tax evasion schemes used by the gambling sector also depends on law enforcement agencies. During the time of the CRGL, miscoding Miscoding is the use of a different payment purpose code to pay taxes at different rates. and drops ‘Drops’ are people who provide criminals with access to their bank details for a fee.
were popular. Miscoding caused Ukraine to lose UAH 2 billion in tax revenue per month, and drops were used to ensure transactions to illegal gambling websites. The new regulator will not be autonomous, so it will interact with law enforcement agencies like CRGL. Therefore, the new regulator’s ability to control finances will depend on:
- the availability of mechanisms for tracking illegal business;
- a defined procedure for interaction with law enforcement agencies;
- the degree of effectiveness of law enforcement.
Combating gambling addiction
The CRGL, the Ministry of Health, and the Ministry of Social Policy did not divide their powers regarding the prevention and combating of gambling addiction. In 2023, the Commission attempted to resolve this by developing a relevant draft law, but it was not submitted to the Verkhovna Rada. Therefore, the new regulator’s success in combating gambling addiction will depend on the clarity of its powers and the conditions under which it interacts with other responsible parties.
The new Authorised Body will not be more effective than the previous regulator if it continues to use CRGL tools to combat gambling addiction.
First, Ukrainians could complete an application for restriction, blocking access to all legal casinos and lotteries for themselves or their family members Relatives of the first degree of kinship only. . This system was imperfect, as illegal casinos remained available. Unstable operations, manipulation of results, and non-guaranteed payouts could stress players. Thus, the registry will remain ineffective if there is an easily accessible illegal segment.
Second, the gambling business was obliged to adhere to the principles of responsible gambling, in particular, to warn about possible negative implications of gambling, not to incentivise with prizes or gifts, identify players, etc. In case of non-compliance with these principles, CRGL was supposed to impose sanctions, but the sector often went unpunished due to the lack of a systemic mechanism for identifying violators.
Third, CRGL used social advertising to spread messages about non-guaranteed payouts in illegal casinos, possible links between unlicensed gambling businesses and Russia, etc. However, social advertising was placed based on local initiatives, and its number was low compared to gambling advertising. On the other hand, an increase in social advertising will not have a dramatic impact without stricter control over the advertising of gambling services and brands.
Control over advertising
Control over gambling advertising was not envisaged when the Commission was established. It was only in October 2023 that the CRGL was vested with such powers. No structural unit responsible for the advertising segment was created within the CRGL. Mechanisms for monitoring gambling advertising and detecting violations were not developed, either. Therefore, a new regulator is being formed with the function of controlling such advertising.
The shortcomings of the legislation on gambling advertising were also eliminated. During the CRGL, the gambling business circumvented the restrictions by using paid journalism and advertising that speculated about volunteering and war. However, stricter rules for gambling advertising will be introduced effective 1 April 2025. For example, sponsorship, the use of military and patriotic topics, and participation in advertising of military personnel, volunteers and popular figures will be prohibited.
However, identifying violators remains a problem. Despite the fact that outdoor gambling advertising has been banned since 2020 when the above provisions were being developed, MPs received reports of potential “catastrophic consequences for the outdoor advertising industry.” This indicates the ineffectiveness of the previous restrictions, so it is necessary to develop procedures for informing the advertising industry, tracking gambling advertising and detecting offences.
Can we say that the liquidation of CRGL and the creation of a new Authorised Body guarantee the solution of key problems in the gambling sector? The new regulator needs to launch the SOMS and clear mechanisms to combat illegal business, which complicates the regulation of all the above issues. Law enforcement agencies’ work also has problems, and the new regulator should be interested in ensuring that the procedure for their interaction is defined in detail. Otherwise, all the problems accumulated by the previous Commission will become the baggage of the new body, and they will definitely not contribute to making the state policy in the field of gambling clear, consistent, and, most importantly, intended to overcome the shadow segment and challenges related to gambling addiction.
