Gambling addiction epidemic in Ukraine

Recently the authorities of Georgia, which Ukraine used to point to as an example of successful gambling legalization, spoke about introducing a strict ban on online casinos. According to a statement by the prime minister Irakli Garibashvili, huge amounts of money are being taken out of Georgia’s economy through this gambling sector, and the population is being totally infected with gambling addiction. Could the same be waiting for Ukraine?

A paradise for gamblers

Anyone who has ever been to the airports of Tbilisi and Batumi has seen men in long white shirts with checked scarves on their heads held by a headband. Women in black clothes with covered faces and children usually follow the men. These Muslims from the Arab Emirates, Qatar and Kuwait arrive in Christian Georgia to have fun in casinos, which do not exist in those Islamic states. Obviously, those who come to Georgia are not poor people and they leave a lot of money in the country.

Gambling in Georgia was legalized back in the early 1990s, when the authorities decided to make the gambling business one of the revenue items in the state budget. In Ukraine, gambling was legalized only last year, and representatives of the gambling industry constantly cite Georgia as an example of a successful case.

For example, the first deputy head of the expert council of KRAIL Boris Baum stated: “Our ambition is to collect from 5 to 7 billion hryvnias in the budget. We understand that the turnover of this market, the profitability, is about 50 billion hryvnias. Because in little Georgia this figure is 120 billion lari, 4 billion dollars. And Ukraine is much bigger.”

Here is what Shangri La casino top manager Darren Kin thinks: “Georgia should become an example for Ukraine in developing the gambling business… Georgia is a place where it is very easy to do business… In Georgia they made it so that foreigners find it convenient to come and spend money: there is no tax on winnings, and there are simplified entry and visa rules.”

Statistics also speak to the profitability of the gambling business in Georgia. As of January 1, 2021, the turnover of the gambling industry amounted to 31.7 billion lari, and by growth rate this sector outpaces all other sectors of the economy. For example, in 2010 the turnover of the gambling sector was 143 million lari. So over 10 years the growth was 22,000%.

The flip side

It would seem that the revenue figures from gambling to Georgia’s economy are impressive, and the country’s authorities have something to be proud of. But, as is known, every coin has two sides. And in this particular case, the flip side of the “Georgian gambling coin” is rather unpleasant. It is even called a national tragedy.

The thing is, besides land-based casinos, where mostly foreigners play, there are also online casinos.

In February 2020 a protest action “Say no to gambling” took place in front of the building of the Government Administration of Georgia. The reason was rampant gambling addiction. The reason is that gambling for Georgians has ceased to be a way to entertain and relax, and has become an attempt to earn money. The method of earning has become playing in online casinos. And more and more young people are getting involved in this game.

“Ads are everywhere. They are not in Georgian, tourists don’t read them, do they? Tourism is good, but when they write that the Georgian people spend much more on games per year than on food, that more than 70% of Georgia’s population is dependent on gambling – that is already equivalent to a tragedy and a national calamity,” says Georgian expert Petre Mamradze.

And indeed, gambling addiction in Georgia has reached alarming proportions. The non-governmental organization “Center for Gambling Research and Prevention of Gambling Addiction” conducted a survey in ten Tbilisi schools, which found that 48% (!) of students play gambling games.

The NGO draws attention to the fact that schoolchildren get information about online casinos mainly from online advertising. In addition, outdoor gambling ads are located near schools in Georgia, not to mention public transport.

There is no official statistics on the number of people suffering from gambling addiction in Georgia. But unofficial data confirm that the number of gamblers in Georgia has already exceeded half a million people, with a population of 3.723 million. That is, one in five residents of Georgia is a gambling addict.

Guga Beselia, founder of the Center for the Prevention of Gambling Addiction, calls gambling addiction a disease. “Gambling addiction is a disease. This problem should be considered in the context of disease, not in the context of a social problem. It is a disease that creates the social problems we are talking about,” the expert noted.

By the way, the World Health Organization officially considers gambling disorder a mental illness.

The alarming statistics, albeit unofficial, finally worried the authorities of Georgia. Thus on November 22 the prime minister Irakli Garibashvili at a government meeting announced the need to ban online casinos.

Garibashvili noted that the overwhelming majority of gamblers in Georgia are unemployed and needy people. According to the head of government, as a result of the work of online casinos Georgia has already lost 1.5 billion (!!!) lari, because most of these companies are foreign.

But it turns out the authorities in Georgia realized this too late – when the ulcer of gambling addiction had already affected a significant part of society.

Tripping on the same rake

And what is happening with the gambling business in Ukraine? Here it can be stated that our country is moving down the path of Georgia, but not in terms of the amount of money earned from gambling to the budget (there are none – no tax revenues at all, and the money from licenses is several times less than planned, – ed.), but in terms of lack of control and absence of protection from gambling addiction.

After legalization of gambling, operators of the gambling industry focused mainly on online. Moreover, here, as in Georgia, online casino advertising has flooded not only YouTube, Facebook and other social networks. Online gambling platforms offer their services wherever possible: in public transport, on city streets. And in order to attract as many Ukrainians as possible to play, online casino owners use celebrities such as Oleg Skrypka, Oleksandr Usyk, Olya Polyakova and others. Moreover, as we previously wrote, the image of the President of Ukraine Vladimir Zelensky was even used in online casino advertising.

By the way, people involved in building the legal gambling business admit that they cannot do anything about online platform advertising. Here is what Boris Baum said about this: “What can we do about this Skrypka? (Skrypka participated in one of the online casino ads, – ed.) The city pasted their ads. We also cannot do anything.”

Candidate of political sciences, lawyer Oleksiy Buryachenko expressed his opinion to Apostrof about whether Ukraine faces the same problems as Georgia now.

“We are step by step repeating what is happening in Georgia. The question here is the state’s control,” says the expert, “And the state does not fully control online casinos. The creation of an online monitoring system has been postponed for several years. Foreign investors, on whom the authorities rely so much, calculated the profitability and entered the online segment, which is in high demand. Why should they build anything, invest money in infrastructure? You don’t need to invest much in online. That’s why we ended up with a significant skew towards online. As in Georgia, money from online platforms flows out of the country, because the final beneficiaries of these operators are in offshore jurisdictions.”

According to Oleksiy Buryachenko, there are also many gambling addicts in Ukraine. Yes, there is a registry of people suffering from gambling addiction, but it relates to offline establishments, and online nobody controls gamblers.

“I am in favor of legalizing the gambling business. But it must be organized with intelligence and bring real money to the budget. Our authorities, on the contrary, with the legalization of gambling have played into the hands of the shadow economy,” Buryachenko believes.

“Foreign experts once noted that a system of control over the gambling business should be built first, and only then allow establishments to operate. Otherwise we risk getting an uncontrolled business and not getting money into the budget. An online control system is what legalization should start with. It is essentially the foundation on which the entire gambling sector should be built. Nevertheless, we decided to ‘go our own way’ and start building the house from the roof. Nothing good could come of that,” Agiya Zagrebelskaya, founder of the “Antitrust League”, state commissioner of the AMCU in 2015-2019, previously told Apostrof.

Indeed, even before the launch of the legal gambling market in Ukraine a European expert, managing partner of the law firm Pharumlegal EU Philippe Vlemmink also said that when drafting the law on gambling it was necessary to ensure that it supported a consistent policy, and not only sought to maximize receipts to the treasury. First and foremost, this is protection of the population from gambling addiction.

“Until a market development strategy is ready, until control instruments are developed and player protection tools are prepared (that is, a plan to counter gambling addiction, criteria for assessing the legality and fairness of games), the market should not be launched,” the expert warned.

However, the Ukrainian authorities launched the gambling market anyway, and ignored the opinions of experts. The fruits of that decision will have to be reaped in the near future. And, looking at today’s decisions of the Georgian government, one can already confidently state – following Georgia’s path, as representatives of the gambling industry urge, is not something we should do. Instead, we should concentrate on immediately ensuring transparency of the gambling market, its control by the state and protection against gambling addiction.