CIS 2020 in review: Russia

2020 heralded a number of high profile shake-ups in Russian gambling legislation, which is rather unusual for it. However, these changes all had one clear objective to those in the know, which is to increase the state control over the gambling market (sports betting and tote verticals in particular as these two are the only verticals available online in Russia).

In this article we’re going to briefly cover the key aspects of the following:

• key changes that were introduced in 2020;
• forthcoming changes in Russian gambling market in 2021
• 4H’s point of view on the upcoming changes.

Key changes that were introduced in 2020

In 2020 the Russian gambling legislation has been changed dramatically. The key changes which can affect operators are the following, inter alia:

Limitation of types of events available for wagering: types of events on which sports betting operators can accept bets were limited to the sports events (Russian sports events and non-Russian ones) only;

Modifications to the special contributions mechanism: according to the new mechanism, the special contributions (these contributions are used to gather government revenues) is calculated in the amount of 1.5 % from quarter “revenue” of sports betting operators, which is defined as “the full amount of proceeds received by the sports betting operator from its activities in terms of accepting bets, interactive bets in relation to the sports competitions”, but not less than €333,000 – previously the basis for the calculation of the special contribution was the 5% of quarter GGR (gross gambling revenue) of the sports betting operator, but not less than €166,000.

Creation of the Unified Gambling Regulator (the “UGR”) with the following main functions, which include, inter alia:

• to retain and transfer special contributions to Russian sports organisations
• to identify and combat illegal online gambling
• to prepare suggestions for improvement of Russian gambling regulations
• to arrange for the development and operation of new IT-systems of a monitoring nature with the main aim being to provide supervision over the activities of the sports betting operators. Among the functions of such IT-systems is inter alia to gather information on all placed bets, paid and unpaid winnings, all cashier operations of the sports betting operators.

Creation of the Unified TSUPIS: the Unified TSUPIS is intended to function under the supervision of the UGR, and is also intended to replace the existing similar infrastructure which was operated under the umbrella of self-regulated organisations (which are to be excluded from the Russian gambling landscape as well), with a main function to retain special contributions of sports betting operators.

All changes above were introduced by different sets of legislation amending the Russian Gambling Law. Some of them have entered into force already (for instance, the limitations on the events’ types), while others are yet to enter into force — it is provided that these changes will enter into force by the end of 270 days since the date of adoption and publication of the relevant law amending the Russian Gambling Law — 30 December 2020.

Along with rather substantive changes described above, 2020 also saw a process of so-called “regulatory guillotine” — this process was covering all lines of businesses in Russia: from fire safety to alcholol manufacturing and distribution and, finally, gambling. The goal of this process was to identify and eliminate excessive legislative requirements together with the renowned experts representing relevant businesses, which are jeopordising the potential of relevant industries.

4H Agency was honoured to participate in this process and we are able to conclude that this process eliminated a lot of outdated and technical requirements that were present in the Russian gambling legislation.

Forthcoming changes to the Russian gambling market in 2021

We would not say that there are any forthcoming changes per se as all changes are already public and incorporated into the Gambling Law. However, there are a lot of tasks and steps that Russian authorities need to undertake in order to implement these changes in the intended way.

In other words, the main question in the air for the Russian gambling market in 2021 is how all these new concepts are going to be weaved into the already complicated fabric of Russian gambling.

Such tasks and steps include inter alia:

• creation of the UGR;
• creation of the Unified TSUPIS;
• development and implementation of the mentioned above IT-systems;
• preparation of all secondary legislation and technical documentation required for the creation and further implementation of new concepts.

Assessment of the upcoming changes

Russia seems to follow the ongoing worldwide and Eastern European trend of revisiting gambling legislation in a way to regulate it properly. However, both devil and God is in the detail here — the “proper” way of regulation is different from government to government and it is almost impossible to predict how any new concepts will unfold themselves after they are implemented.

In the case of Russia, the situation is really complicated: at first glance the proposed changes are rather liberal and might be assessed as Russia’s baby steps towards the European framework of gambling regulation — creation of a separate regulatory body overseeing the industry is an obvious sign of that. On the other side, all these changes are a rare example of the Russian gambling market being united — each and every operator in Russia considers these changes as underdeveloped, vague and believes that they might jeopardise the whole industry in Russia.

In turn, we believe that it is too early to make any definitive conclusions on the Russian market’s future at this point since the outcome is dependent on the practical way of implementation of such reforms. The changes are indeed underdeveloped and vague, but if we would be looking at the situation from the optimistic point of view, then we would be able to conclude that all these issues could be resolved at the further stages.

However, we also ought to outline that we have almost never seen the pay off from such an optimistic point of view taken in Russia.

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.