Regulation

CIS and Baltic states market focus: Russia

In the second of this five-part series, EGR Compliance examines emerging gambling markets for operators in the CIS region and Baltic states, in partnership with law firm Dentons

Modern Russia is a melting pot of different peoples, philosophies and considerations, both economic and political. The end of the former Soviet Union may have sounded the death knell for Communism across Europe, but where former communist bloc states have moved further towards a more gambling-regulation friendly environment in a quick manner, Russia has been more hesitant.

However, as times change and the world economy moves towards a more digital and truly global environment, Russia cannot afford to stay in the shadows forever. Little by little, the great bear has to end its hibernation and emerge into a new period of social and economic freedom. The gambling sector is no exception to this rising tide and sooner or later Russia must get in on the action.

In this five-part series, EGR Compliance, in partnership with international law firm Dentons solicitors, aims to provide clarity to those looking to make the CIS and Baltic states their next big operating market. Today we tackle what could be the next big undiscovered empire for gambling: Russia.

Russia in numbers

Population: 145.8 million

GDP per capita: $12,055

Internet penetration: 79%

President: Vladimir Putin

Principal regulatory body: Split based on type of licence operated

What types of licences are available to operators?

There are two types of licence:

1) licence for casino, slot machines, and poker (the “Casino licence”);

2) licence for betting shops and totalisators (the “Sports betting licence”).

Online gambling is possible only under a sports betting licence (in other words the only verticals available online are sports betting and totalisators).

Meanwhile casino and slot machines are allowed only in designated gambling zones (there are five gambling zones in Russia).

Lotteries are not considered as a type of gambling.

What taxes are payable by operators?

Moreover, sports betting operators are obliged to deduct at least €185,000 (£164,000) on a quarterly basis to the Russian sports federations on the basis of agreements concluded between an operator and relevant federation.

How long do licences run for? What are the costs of applying?

Term

All types of licences do not have an expiry date.

Licence fee

Sports betting licence fee (payable once upon application for a licence): €400 (£350).

Casino licence fee: free.

Costs

For a casino licence, prospective applicants should have at least €7m (£6.2m) of net assets.

For a sports betting licence, prospective applicants should have at least approximately €12m (£10.6m) of net assets and its charter capital should be at least approximately €1m (£890,000) paid using own (i.e. not loaned) cash funds.

Moreover, sports betting operators are also obliged to have a bank guarantee in place in the amount of approximately €6m (£5.3m)

What restrictions are placed on operator marketing to players?

Advertising of gambling is only considered legal when it is conducted by operators which hold a casino licence or sports betting licence.

A range of restrictions applies to such advertising. For instance, such advertising cannot, inter alia:

  • be addressed to minors;
  • use images of humans or animals (except for advertisements within a gambling zone);
  • create an impression of guaranteed winning.

Generally, gambling advertising is permitted only if it occurs on TV and radio between 7am to 10pm, within gambling venues and in sports advertising print media.

It should be noted that advertising online is currently only permitted by sports betting operators.

  • Such advertising can be placed only on certain websites (e.g. websites registered as online sports media, websites of professional sport federations and leagues). Sports betting activities can also be advertised during sports broadcasts, provided that such broadcasting constitutes no more than 20% of all advertising during the broadcast, and in some other sports-related cases.

Where are the big opportunities for operators looking to expand into the market?

The main opportunities for international operators may come in the future. At present Russian gambling legislation is now undergoing a process of the top-to-bottom review by state authorities (In particular a review of the gambling legislation is part of a bigger process of legislation review in each and every industry).

The purpose of such review is to reveal and eliminate possible barriers and limiters for the gambling business in Russia. Therefore, it may be argued that the Russian market could become more attractive for operators.

What do operators need to be aware of if expanding into the market?
 

There are certain things that operators should know if considering expanding into the Russian market:

  • Online casinos are forbidden and authorities’ perception of such gambling verticals is highly negative;
  • Russian gambling business community is sharply polarised, and the regulatory bodies are fierce towards the industry;
  • There is a special online “controlling” system (called TSUPIS) that is obligatory for online operators – this system is used for transfer of monies from and to the players (with the aim of making virtual player funds stay within the Russian jurisdiction).

Local expert view – What do you think of the market?

It takes a lot to succeed in Russia, but it could be an ultimately very rewarding experience for the operator who manages to avoid all pitfalls and difficulties.

 

Ilya Machavariani, associate, Dentons

Ilya Machavariani is a gambling and gaming lawyer for Europe, Russia and the CIS heading Russian and the CIS gambling practice group at Dentons. He has extensive experience advising on gambling issues and advises clients on operating in the Russian Federation and the CIS, on the full range of regulations relating to the activities of gambling operators, as well as drafting the necessary contracts and internal documents. He also handles licensing processes for gambling operators that are entering new markets throughout the world.

Ivan Kurochkin, associate, Dentons

Ivan Kurochkin being an associate at CIS gambling practice group at Dentons has broad experience on gambling issues, especially in regulatory matters. His work involves advising clients doing business in the Russian Federation on various activities of gambling operators (including bookmakers), focusing on issues related to compliance with gaming licence requirements, applicable AML requirements, and issues relating to advertising of gambling operators.

Dentons Solicitors | Market Focus | Market Focus | Online gambling | Regulation | Regulation | Russia | Sports betting

Latest