UKRAINIAN GAMBLING LAW

This Alert (“Alert”) is based on the Ukrainian gambling law (“Gambling Law”) that was approved by the deputies of the Ukrainian parliament (Verkhovna Rada) in the second reading on 14 July 2020 and finally signed by the President Volodymyr Zelensky on 11 August 2020.

PLEASE BE ADVISED THAT THE CONCLUSIONS MADE IN THIS ALERT MAY CHANGE IN COURSE OF FURTHER DEVELOPMENT OF UKRAINIAN SECONDARY GAMBLING LEGISLATION.

REGULATED ACTIVITIES

The Gambling Law provides for the following eight verticals that will become regulated upon adoption of the Gambling Law:

1. Land-based casinos;
2. Online casinos;
3. Land-based sports betting;
4. Online sports betting;
5. Slot machine halls;
6. Online poker;
7. Totalizator;

Each activity should be carried out on the basis of the respective license, issued by the Ukrainian Gambling and Lottery Commission (which was created on 23 September 2020) (the “Regulator”) to the gambling operator (the “Operator”) for a certain amount of time.

The Gambling Law establishes 11 types of licenses that may be obtained for the pur- poses of carrying out the activities mentioned above.

The list of activities and corresponding licenses can be found in Annex 1 to this Alert.

HOW TO OBTAIN A LICENSE

Entity wishing to obtain a license should apply for it, provided that the applicant (i.e. the entity that will be the Operator upon obtaining a license) is in compliance with the requirements that are established for Operators by the Gambling Law, inter alia:

1. legal entity that is applying for a license should be incorporated and act under the laws of Ukraine;
2. legal entity that is applying for a license should not be directly or indirectly controlled by residents of a foreign states recognized as an occupier or aggressor^[1] or acting in the interests of such states;
3. managers, head of accounting and UBOs of the applying entity should not be citizens of a foreign states recognized as an occupier or aggressor or acting in the interests of such states;
4. shareholders of a legal entity that is applying for a license should not be:
   • UBOs of the residents of a foreign states recognized as an occupier or aggressor;
   • legal entities domiciled in the countries listed in FATF blacklist.
5. legal entity that is applying for a license should not directly or indirectly own shares in the entity that is a resident of a foreign states recognized as an occupier or aggressor;
6. the amount of the applying entity’s charter capital at the moment of application should be no less than 30,000,000 hryvnia (approx. EUR 890,000) – it is worth noting that the current Gambling Law provides for that the charter capital may consist of various assets (e.g. securities, receivables, real estate);
7. it is forbidden to use for the payment of charter capital funds that are from the budget^[2] or of unknown origin.

Together with the application for a license, the applicant should provide the following documents and information, inter alia:

1. information about the UBO of the applicant;
2. information about the amount of the charter capital and the date of completion of its formation confirmed by an independent auditor;
3. documents confirming the origin of the funds used for the payment of charter capital;
4. information about the brand of the Operator, which is defined as corporate style, name, logo and other means (including objects of intellectual property) allowing for the individualization of Operators – please note that the Gambling Law establishes that only one brand may be used under one license;
5. information and documents confirming rights to domain names in .UA zone as well as information about the hosting service provider and domain name registrar (for online licenses);
6. information in respect of the rights of the Operator to the software and hardware;
7. other standard documents and information – confirming the absence of criminal liability of the management, shareholders, UBOs of the applicant, extracts from the relevant registers etc.

Moreover, we would like to add that amongst the key requirements to enter Ukrainian market there is a requirement to obtain either bank guarantee or set up a bank deposit in amount of approx. EUR 1,280,000 (UAH 43,200,000).

CURRENT STATUS

As of the beginning of February 2021, in spite of the fact that the Gambling Law was adopted on 14 July 2020, the Regulator begun its work on 23 September 2020,

Licensing Terms (secondary legislation concerning the licensing process) were adopted on 21 December 2020 and the Regulator issued first license on 02 February 2021, it is still impossible to operate on the Ukrainian gambling market without violation of the Gambling Law.

The reason for that is that there are a number of issues that should be resolved before the Ukrainian gambling market become fully operational (e.g., adoption of the technical requirements for the purposes of certification of the gambling equipment, adoption of the taxation framework of the Ukrainian gambling market, creation of the system of online monitoring etc.).

Please also see two Annexes attached to this Alert neatly summarizing the following:

1. Annex 1 – Regulated activities and corresponding licenses;
2. Annex 2 – Particulars of the licenses.

CONTACTS

ANNEX 1 — REGULATED ACTIVITIES AND CORRESPONDING LICENSES

ANNEX 2 — PARTICULARS OF THE “MAIN” LICENSES⁶

• Please note that this chart does not include (i) the general requirements for Operators or standard requirements for premises akin to Russian ones or (ii) information on lotteries (as they are state-controlled), (iii) information in respect of the investment license (which is issued in relation to the investment projects that are approved by the Cabinet of Ministers of Ukraine) and (iv) information on totalizators license as it is available only for racetracks owners.
• All “main” licenses are issued for the term of 5 years.
• License fees are calculated on the basis of the level of minimal wage amount set by the Ukrainian budget law for each year. Starting from 1 January 2021 minimal wage amount equals to 6 000 hryvnia (approx. EUR 180); licensee fees are calculated on the basis of a 5 year term. For instance, the 5-year price of the casino license for Kyiv is calculated in the following way: EUR 180 * 60,000 (number of minimum wage amounts payable for such license according to the Gambling Law) = EUR 10,800,000 (UAH 360,000,000) for five years.

ANNEX 2.1. — PARTICULARS OF THE “ANCILLARY” LICENSES

This document is intended to provide a brief overview and does not compulsory cover every aspect of the topic. Information in this document can not be considered in any case as legal or any other advice.

[1] Status of the occupier or aggressor is determined by the Ukrainian legislation.

[2] Aside from Operators, which have rights to the horse racetracks and are going to organize a totalizator.

[3] Please note that the licenses in italics may be considered ancillary ones as they may be (i) obtained only under the “main” license (i.e. land-based casino license) and (ii) used only together with the “main” license

(e.g. an “ancillary” license for slot machines can be obtained both under the “main” license for a land-based casino and a “main” license for land-based slot machine halls). ⁴ For example, the supply of software used by Operators to determine the outcome of gambling.

[4] This license is issued free of charge for 10 years in relation to the investment projects that are approved by the Cabinet of Ministers of Ukraine.