Online solution to ukrainian gambling woes?

Online solution to ukrainian gambling woes?

September 18, 2009.

In common with Russia, the Ukraine imposed a draconian blanket ban on gambling earlier this year, but it seems that local operators are already developing workarounds, exploiting loopholes in the legislation to offer "interactive" action.

Local media report that only two months into the gambling ban, "interactive clubs" are springing up using offshore facilities. New clubs have sprung up around Kiev en masse in the last two weeks, newspaper note, adding that gambling experts warn that many more are likely to follow if left undisturbed by the authorities.

"The ban is being circumvented legally," said Danylo Getmantsev, honorary president at Jurimex law firm and author of a book on gambling in Ukraine. "The server is set up in another jurisdiction offshore, where gambling is permitted, and here the owner of the establishment is simply an agent providing access."

The owners' profit comes from payments for use of the Internet and, most lucratively, a share of the money that clients load onto their accounts. The system was brought in from Russia, where a similar gambling ban came into effect on July 1, the media reports claim.

Reporters investigating the phenomenon said that one establishment using Internet terminals was doing steady business. It was a gaming hall before the ban, but now has no branding or identity upfront, with the only signs on the facade resembling the Internet Explorer logo.

Inside, gamblers sat and played away at terminals on screens decked out to look similar to the old gaming machines. An employee, who would give neither his name nor that of the company, called the establishment an "interactive club."

Gamblers pay for access to the Internet, then choose which games they want to play on screen. When they run out of money on their account, they can simply load more on. Although gamblers are playing over the Internet, there is little effective difference from the halls that were on almost every street corner before the ban came into effect.

"In order to ban such practices, Internet gambling would have to be outlawed or a legal precedent set in the High Court," said Getmantsev. Otherwise, he said, their number is likely to multiply as owners become more confident that they are not going to be closed down or fined.

The Internet gambling halls show the difficulties the authorities are experiencing in removing gambling completely from Ukraine. Sources in the Interior Ministry said that a large number of gaming establishments remain open illegally, and there is a lack of consistency in the way the police are applying the law.

Officials at the Interior Ministry's Department for Economic Crime, which is responsible for ensuring the law is being adhered to, were not immediately available for comment. But the department's Kyiv branch placed a statement on its web site at the end of August saying that it was carrying out checks at all sites where large groups congregate, and asking the public to call in any information on "either traditional or Internet" casinos operating "underground."

Valeriy Pysarenko, a local politician who authored the bill banning gambling, said he believes the Internet gaming halls are a temporary phenomenon thought up by businessmen who suddenly had revenues cut off.

"We will solve this problem by legislation as soon as this is possible," Pysarenko said, adding that a bill would also be proposed in the near future on special zones in Ukraine where gambling would be permitted.

He said that the legislation would be tabled soon, "as long as parliament isn't blocked right up to the presidential elections (in January)."

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