CIS 2020 in review: Georgia

In 2020 Georgian authorities along with the government authorities of its neighbours (e.g. Ukraine, Russia) decided to introduce rather substantive amendments to its gambling market. In this article we’re giving a brief overview of the key aspects of the following:

• key changes that were introduced in 2020;
• forthcoming changes in Georgian gambling market in 2021;
• our assessment on the upcoming changes.

Key changes that were introduced in 2020

Georgian gambling legislation has undergone significant changes, such as inter alia:

• introduction of the regulation for the B2B sector which includes the requirement that all B2B operators to obtain a separate permit (previously a B2B operator could operate in Georgia without the necessity to obtain any permits) and subsequently in obligation of the permit holder to pay a permit fee in the amount of €25,000 each year (permit for B2B activities is issued for five years);
• creation of the electronic control system which aims to establish control over the compliance of B2B and B2C operators within the provisions of existing gambling regulations. This electronic control system should become fully operational starting from 1 January 2021 and the responsible entity for incorporation and following maintenance of such system is Random Systems Georgia (according to the Gambling Law such organisation is acting as a selected person authorised by the government authorities for such activity); and
• introduction of fees connected with integration and usage of the electronic control system by B2B and B2C operators: some of the fees are payable once (amount of such fees may vary from €2.50 to €25,000) and some of the fees are payable periodically (amount of such fees might be up to 5% of GGR (payable monthly) or no more than €1 (payable daily) per each gambling equipment (slot machine)).

As of December 2020, the Georgian government authorities have already adopted parts of the secondary legislation which aims to create the required infrastructure for the amendments that were described above. However, according to the laws that amend the Gambling Law, some of the secondary legislation is yet to be adopted.

Forthcoming changes in the Georgian gambling market in 2021

Under the changes adopted in 2020, B2B operators are required to bring all operations in Georgia in line with recently adopted regulations until 1 March 2021 (practically this means that it will not be allowed for B2B operators to operate in Georgia without a permit after 1 March 2021).

In order to obtain such a permit, B2B operators, among other vital things, should inter alia:

• incorporate a company in Georgia;
• obtain the authorisation certificate from Random Systems Georgia proving the compliance of the B2B operator’s products with the gambling regulations.

In respect of B2C operators, they should start to comply with new regulations (including requirements to connect to the electronic control system) until 1 March 2021 except slot machines operators and sports betting operators which should bring its operations in line with new regulations until 1 September 2021.

Assessment on the upcoming changes

Experts in the CIS market on the 4H Agency’s team have concluded that Georgian authorities awareness of the functions of the gambling market increased as the new types of gambling activities fell under government control (activities of the B2B operators). To add to that, along with introduction of the regulation of B2B sector, the government authorities also increased state supervision over operator compliance (both B2B and B2C) with the revised gambling regulations by implementation of the electronic control system.

It’s important to point out that the required infrastructure for the new amendments was in the first stages of being built before the new amendments entered into force (not like in some CIS countries where the situation is the opposite). Nevertheless, there are still a number of unresolved questions that have to be addressed in the nearest future.

Ilya Machavariani is a gambling and gaming lawyer for Europe, Russia and the CIS and the senior partner at 4H Agency. 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, a partner at 4H Agency, 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.