A city square during the day.

KRAIL Cracks Down on Unlicensed Websites

Ukraine’s Gambling Authority, Gambling and Lotteries Regulatory Commission of Ukraine (KRAIL), has recently announced its efforts to stop unregulated gambling in the country. As a part of the efforts, the Authority undertook a major investigation that concluded by finding websites operating without licenses and illegal land-based establishments in the big cities. KRAIL is the state regulator responsible for the licensing and regulation of gambling in the country. The results of the efforts saw a huge number of unlicensed operators shut down operations in the country upon receiving notices from KRAIL.

A city square during the day.

Ukraine’s gambling regulatory authority shuts down illegal websites. ©Glib Albovsky/Unsplash

Ukraine’s Gambling Authority, KRAIL, has been in force since September 23, 2020. Like all countries that allow gambling activities, Ukraine is also worried about the growth of unregulated markets and the harmful effects of gambling on its citizens. Therefore, the Government created KRAIL to monitor and regulate all gambling activities within Ukraine’s borders. The KRAIL is a state body controlling gambling and lotteries in Ukraine. The commission is responsible for forming and implementing state policies for gambling and lotteries. In August 2020, the Law of Ukraine on State Regulation of Activities Concerning the Organization and Conduct of Gambling entered into force, legalizing 11 types of gambling in Ukraine, except for lotteries. The law allowed all types of gambling, except for lotteries, which are not described in the law adopted in June 2009. Gambling in Ukraine was illegal between 2009 and 2020, but it was legalized again on July 14, 2020, with regulations and age restrictions (minimum age of 22).

The Commission for the Regulation of Gambling and Lotteries (KRAIL) is the Ukrainian state regulator that deals with the licensing and regulation of gambling in Ukraine. KRAIL operates as a collegial body consisting of a chairman and six members, with the committee’s meetings only valid if five members are present, which is necessary for an application for a license to offer games of chance to be approved by the body. In 2022, KRAIL received 667 applications for gaming licenses, out of which 603 were issued. The regulator has over 300 employees and is headed by Ivan Rudyi, a Ukrainian soldier, ATO veteran, and captain of the Ukrainian national team at the Invictus Games, who was appointed for a term of 4 years on October 22, 2020.

KRAIL has faced backlash from the Ministry of Digital Transformation, questioning its requirement and its ability to control the gambling environment in the country. The ministry presented a draft bill to the parliament (Verkhovna Rada) to dissolve KRAIL and relieve it of its duties as a regulator. Chairman Rudyi defended the KRAIL, stating that a country at war should focus on ending the war instead of creating new regulations instead of existing ones. Ukraine’s requirements for gambling within the country are quite strict, and the authority is doing its best to sustain gambling within the country while discouraging illegal gambling. Only Ukrainian companies can operate gambling businesses in Ukraine. All online casinos must have a .ua domain name and a registered website through which they operate. KRAIL issues licenses for land-based casinos, online casinos, offline and online bookmakers, slot machines, online poker, and lotteries. In July 2022, Krail launched a legislative initiative to preserve gambling in the country. During a time of war, it is important for the country to keep its economy afloat by encouraging legal gambling activities.

As a result, in a recent crackdown on illegal websites in the country, KRAIL issued notices to all operators running websites without a license. The regulator reported that over 70% of unlicensed online gambling platforms in Ukraine had ceased operations. It has also blocked access to unlicensed gambling websites in Ukraine. 72.3% of unlicensed websites stopped working from January 25, 2022, to August 8 of the current year. Regulatory measures were applied to websites without an appropriate license that targeted the citizens of Ukraine. Any operator receiving a KRAIL notice must cease their activities in the country within three working days. The regulator did not disclose the number of websites it had investigated. The figures demonstrate the effectiveness of KRAIL’s efforts to eradicate illegal gambling businesses.

KRAIL increases effort in the fight against Illegal Gambling

In July 2022, KRAIL implemented a new law detailing the procedures that organizations subject to anti-money laundering and counter-terrorist financing must comply with. The inspections of gambling businesses were made stricter by these laws. According to the new law, KRAIL licensees may face facility inspections that are scheduled or surprise. The law specifies the conditions under which a license holder may be subject to an inspection by the regulator. KRAIL also proposed a change in the laws regarding the suspension of licenses of operators who violate the laws.

The country is fighting against the problem of illegal gambling with vigor. The Economic Security Bureau of Ukraine (ESBU) revealed in March 2023 that it had uncovered a criminal conspiracy involving Ibox Bank and plenty of gambling operators. The participants of the scheme worked together to evade taxes. According to ESBU, they owed the state over UAH400 million in taxes. More recently, The ESBU raided illegal land-based gambling operations in the city of Kyiv. Four underground establishments were shut down. Technical equipment worth UAH1.5 million was confiscated by the police. In June, detectives busted seven other illegal gambling establishments as well as an underground casino.

KRAIL made $31m in revenue in 2022

Though the future of KRAIL is in doubt after the proposed dissolution by the government in 2023, the gambling industry has performed well despite the conditions in the year 2022. The regulator raked in a revenue of $31 million for the year. Amidst the war against Russia, the Ukrainian Finance Ministry has to work hard to preserve the economy and generate revenue from all sectors. A report released by KRAIL disclosed that the regulator received 667 applications for new licenses in 2022. Out of the total applications received, KRAIL green-lit 603 licenses throughout the year. The other 63 were rejected due to errors in their paperwork.

The gambling sector in Ukraine is still performing well despite being under martial law owing to the Ukraine-Russia war. In the aforementioned report, KRAIL also revealed that half of the approved licenses were issued while under martial law. The gambling sector also contributed a total of UAH1.166 billion ($31.7 million) to the Ukrainian State Budget. This is owing to Ivan Rudyi’s procedures that encourage license holders to pay their fees on time. In a bid to increase the revenue for the year 2023, the Ukrainian government has reinstated the 18% turnover tax on online gaming operations. This tax will not be charged on the gross gaming revenue (GGR) but only on the turnover as outlined under article 136.4 of Ukraine’s tax code.

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Author: James Richardson