Serhiy Tretyakov serves as president of the Ukrainian Association of Gambling Business Operators, as well as an adviser to Prime Minister Yulia Tymoshenko.The gambling association he heads was created in 1998 and has 16 member companies whose main objectives are to lobby for clear, transparent and realistic gambling regulations.

In this Kyiv Post interview, Tretyakov said current gambling laws are corruptly enforced by authorities and ­– as a result – over 60 percent of gambling operations are illegal.

KP: How transparent is the gambling business in Ukraine today?

ST: About two-thirds of the business is still in shadows. Government organizations that are supposed to regulate the gambling business give companies who operate illegally favorable treatment. The association has been working for a decade to help clean this up, but we only have a very basic foundation to work with.

KP: What is Ukraine’s legislation lacking?

ST: It is easier to say what it has – almost nothing. We do not have the laws necessary to adequately regulate gambling in Ukraine.

KP: But there is a law that obliges operators to receive a license for gambling, isn’t there?

ST: Yes, it has been necessary to purchase a license since 2002. In 2005, there was an amendment to the licensing law. The cost of a five-year license is nearly $215,000. In 2006 the Finance Ministry issued a code of requirements that operators need to fulfill to receive a license.

A year later, local authorities started introducing additional demands that contradicted the national requirements. This led to legal confusion that fueled corruption, forcing gambling operators to illegally conduct business.

KP: Still, you said that one-third of the operators are legal. How do they deal with the chaotic licensing regime?

ST: This has created a very unfair, uncompetitive environment for legal operators. But this business is very profitable. And legal market players are doing their best to create responsible legal conditions by advocating for new laws. We have had some success. And the figures show it. Budget income from gambling licensing during the last three years has more than doubled from $57 million to almost $141 million.

KP: What is the size of the casino and gambling market in Ukraine?

ST: With much of the business in the shadows, it is hard to accurately estimate the size of the market. But we believe the market size ranges from $1-$3 billion, where only about 30 percent of the market share rests with operators that operate legally.

KP: How many operators currently work on the market?

ST: Between 4,000 and 4,500, of whom only 1,500 possess licenses, and these are largely licenses issued by local officials. Currently, there are only 173 licenses that have been issued by the Finance Ministry in accordance with the new rules.

KP: Are there many foreign gambling companies operating in Ukraine?

ST: We have many Russian operators. Most of the operators in Kyiv are Russian. There are a few Western companies: Austria’s Novomatic, one of the leading game-machine manufacturers, and Estonian-American Olympia. But most of the players on the market are Russian-backed.

KP: Does this suggest that despite the high profitability of Ukraine’s gambling and casino business, it is not attractive for Western investors?

ST: For a long time, Ukrainian income levels were considered to be too low to justify substantial investment in casinos. This is the first reason. The second reason is the flood of Russian operators and the nature of the business in Ukraine. Russian operators [are used to such conditions] and fled their domestic market to Ukraine when strict regulation was introduced in their country in 2007, (including plans to ban gambling from big cities). Since then, Russian operators have squeezed local players, and frightened other foreign investment away. They have literally broken the market apart.

KP: Ukrainian politicians have also discussed removing gambling from big cities by establishing special gaming zones. What are your thoughts on this?

ST: These were populist statements. Where can we move casinos? To Chornobyl?

We can move them [out of the cities to special zones], but this would only make the business more illegal. I should say that no European countries have taken this strategy. It is not going to work in our country either.

KP: Is the market doomed to fall into deeper lawlessness?

ST: We [the association] hope that the new law we drafted will be approved and make business regulation clear and fair. Of course, there are people in the government that lobby for the interests of illegal gaming businesses.

The good news is that the authorities have begun to listen to the opinions of professionals and, hopefully, the law will be approved.