What the Ukrainian gambling market lacks to replicate the Pennsylvania experience

Pennsylvania has become the fourth US state to legalize online gambling. It happened not too long ago, in 2018. The state authorities legalized sports betting, online casinos and online poker.

Gamblers are now able to place bets both offline and online. Online casinos ended the year 2021 with record revenue of USD 127.6 million, where most revenues came from online bets. How can Ukraine repeat the experience of Pennsylvania?

Over the past year, Pennsylvania has set many new records in a number of gambling market areas, with the state’s total gambling revenue reaching USD 4.73 billion. Only in 2020, due to restrictions against Covid-19, gambling revenue decreased.

So what is in this state’s experience? Among the other forty-eight states with legalized gambling generating budget revenues, Pennsylvania has one of the highest license fees. In this sense, the gambling legalization model is somewhat similar to the one in Ukraine: high cost of licensing.

However, in Pennsylvania, the revenues of the gambling market are growing; there are more and more budget revenues, as well as those willing to get a license. In Ukraine, the deputies are cautious to adopt the draft law 2713-d on the harmonization of the gambling tax system, and as a result few people want to buy licenses and face corresponding losses and risks.

The example of Pennsylvania is indicative of the fact that the high cost of licenses is not a problem for market operators, and their revenues depend on other parameters. The main thing is not the license fee, but the regulated taxation of the sector and the effective governance the entire gambling industry, as well as the fight against illegal gambling operators. High license fees and low taxes, or vice versa, but by no means high taxes and an expensive license.

In the US, work is continuing on the legalization and legal regulation of virtual gambling establishments. Resourceful Americans quickly realized long-term benefits of the online gambling, and they want to maximize profits from the gambling sector, with proper public control.

Why wouldn’t Ukraine borrow the US experience in attracting funds from the gambling market development to the budgets at various levels? Especially since the first successful steps in this direction have already been made.

Since legalization of the gambling market in 2020, there have been many positive developments recognized, including by opponents of the reform.

First, most of the slot machine halls, which could be found in practically every courtyard of any Ukrainian city, were removed from the streets.

Second, it is guaranteed at the legislative level that only citizens over 21 years of age may gamble, and this norm is supported by the majority of Ukrainians. For instance, according to a sociological study carried out by Info Sapiens on behalf of UGC, 70.8% of respondents believe that gambling is for those who are 21 or older.

Third, a register of gambling addicts was created and the procedure for introducing self-restrictions and restrictions on access to gambling at the request of gamblers’ relatives was established. All licensed operators follow responsible gambling principles and introduce them in their products. In addition, within UGC, the Office of Psychological Support for Gamblers began its operation. Under this project, gambling addicts and their families may receive free psychological consultations by calling the hotline.

Fourth, in 2021, the state budget received more than UAH 1.7 billion only in the form of license fees from legal gambling operators.

Fifth, the budgets at various levels received about UAH 30 billion of additional revenue from the development of related gambling industries. Experts claim that the legalization of gambling has become the impetus for the development of about 20 related areas.

And sixth, to date, about 20 foreign gambling companies are planning to enter the Ukrainian gambling market immediately following the adoption of draft law No. 2713-d.

It is the delay in the settlement of the gambling taxation issue that is the tripping stone generating criticism towards the gambling reform. Like, gambling was legalized, but the amount of tax payments from the gambling sector is scant.

So first, feasible rules of the game for market participants must be specified, and only then one can criticize inaccurate predictions, should there be any.

Viktoriya Zakrevskaya