Contributed By 4H Agency
The main framework law that regulates gambling activities, both online and land-based, in Russia is Federal Law No 244 “Federal Law on State Regulation of Gambling Activities and on Amending Various Legislative Acts of the Russian Federation” (the Gambling Law).
The year 2020 is rather unusual for Russian gambling as there have been many developments, both ongoing and expected. For more details, please see 1.2 Recent Changes.
The most recent key changes to the Gambling Law were introduced in July 2020. The full list of these amendments is rather long, but the key changes relate to betting and include:
It should be noted that some of the changes have already entered into force (eg, establishment of limits on the types of events) while others (eg, creation of the Unified Gambling Regulator, the Unified Centre for Accounting of Bet Transactions) will enter into force starting from 27 September 2021.
In addition, there is an ongoing process of so-called regulatory guillotine (this process is applicable to each and every main line of business existing in Russia), the purpose of which is to assess the current regulatory framework for various industries with the involvement of industry representatives and decide if that framework is excessive and/or requires amendment or modification. This process also concerns the gambling industry and might lead to a decrease in regulatory pressure put on the industry.
Online offerings in the Gambling Law are structured on the basis of the overarching restriction of any online gambling, with special exceptions established by the Gambling Law for:
Lotteries are not considered as gambling in Russia but are allowed online in accordance with Federal Law No 38 “On Lotteries”.
It is practical to divide land-based sectors that are permitted in Russia into two groups, namely:
Gambling Zone Land-Based Offerings
The following sectors are allowed only within the gambling zones on the basis of special permission:
Non-gambling Zone Land-Based Offerings
The following sectors are allowed outside of the gambling zones (as well as inside them):
Lotteries are not considered as gambling in Russia but are allowed on a land-based basis in accordance with Federal Law No 38 “On Lotteries”.
As was mentioned in 1.1 Current Outlook, the main law that regulates gambling activities (except lotteries, which are not considered as gambling) is the Gambling Law, which outlines the key requirements for gambling operators.
Apart from this, the following federal laws are applicable to gambling activities.
In addition to the federal laws outlined above, there are a number of pieces of secondary legislation in the form of Russian government resolutions, which provide for the detailed framework of gambling industry regulation.
It should be separately noted that the secondary legislation regulating the gambling industry is now under review in accordance with the regulatory guillotine mechanism that was in place for 2020 and is in place for 2021. Please see 1.2 Recent Changes for details.
The Gambling Law does not contain a definition of “gambling” per se.
Instead, the Gambling Law provides for a definition of a “game of chance”, which is defined as “a risk-based winning agreement between a player and another player or between a player and a gambling operator according to the terms and conditions of the operator”.
A gambling operator is defined as “a legal entity which organises games of chance”.
The Gambling Law does not contain a definition of “land-based gambling” per se.
Owing to the fact that online offerings are construed on the basis of exceptions from the existing prohibition against online products with the use of the specific term “interactive bet” (please see 3.4 Definition of Online Gambling), exclusively land-based offerings are distinguished on the basis of the absence of such “interactive bets” within their perimeter.
The Gambling Law does not contain a definition of “online gambling” per se.
Instead, online sectors are distinguished by their offering of an “interactive bet”, which is defined as “monetary funds, including electronic funds which are transferred by way of electronic means of payment, including through information/telecommunication networks and the... Centre for Accounting of Interactive Bet Transactions [known, in Russian, as TSUPIS, and which is going to be replaced by the Unified Centre for Accounting of Bets Transations] to the gambling operator on behalf of the player and considered as a condition of participation in a game of chance in accordance with the rules established by such an organiser of gambling”.
This definition is one of the reasons why the Russian gambling market is one of the most challenging in the Commonwealth of Independent States (CIS). It is not clarified by the authorities what is meant by this definition: the deposits of the players or bets made online. This ambiguity affects other provisions of the Gambling Law as well as day-to-day operations in Russia.
The key offences that may be committed by a gambling operator are violations of the licence requirements. Such violations include:
The following types of penalties might be imposed for a violation of gambling legislation.
The main legislation that is pending, as of February 2021, is secondary legislation that is meant to be adopted in accordance with the recent changes described in 1.2 Recent Changes. This legislation should provide additional details and guidance with regard to how betting operators should pay special contributions based on non-Russian sports events.
Moreover, the resolutions of the Russian government that were reviewed and refined during the regulatory guillotine process entered into force on 1 January 2021. In addition, as the regulatory guillotine process is still in place, various other resolutions of the Russian government are yet to be reviewed and refined.
To add to that, as described in 1.2 Recent Changes, at the end of 2020 the Gambling Law was significantly amended and some of the changes (eg, creation of the Unified Gambling Regulator, creation of Unified Centre for Accounting of Bet Transactions) will enter into force starting from 27 September 2021.
Regulation powers with regard to the gambling sector lie within the domain of the Federal Tax Service.
To add to that, starting from 27 September 2021, the new Unified Gambling Regulator (UGR) is going to be created. Its main functions will be:
Moreover, the Gambling Law also provides that gambling zones are regulated by particular regional authorities. In accordance with the local legislation, these authorities are:
The regulatory approach in the Russian gambling market is defined as risk-based. In accordance with Russian laws, a risk-based approach to regulation should oblige the regulatory bodies to construe applicable sets of requirements based on the particular risks for society arising from the particular activity.
However, from a market perspective, the regulatory approach might be described as ultra-restrictive and very pro-government.
The following types of licences/permits are provided by Russian laws:
Licences are readily available.
There are no expiration dates set for the licences/permits.
Most requirements for the applicants depend on the type of activity that such an applicant intends to conduct. However, there are two basic requirements, which are applicable to any applicant.
Application Requirements for Betting or Totalisator Applicants
Requirements for the companies applying for a betting or totalisator licence include the following.
The applicant should also be prepared to obtain a bank guarantee in the amount of RUB500 million (approximately EUR5.5 million) as soon as the betting licence is obtained.
Application Requirements for Casino Permission Seekers
Requirements for companies applying for a gambling zone permit include that the applicant should meet certain financial thresholds, such as at least RUB600,000 (approximately EUR6,600) of net worth.
Additional requirements are also set for each gambling zone separately by the relevant local authorities (please see 4.1 Regulatory Authority).
The timescale for considering applications depends on the type of the application.
Application fees depend on the type of application:
Russian laws do not provide for annual licence or permit fees.
The Gambling Law does not provide for separate premises licensing requirements.
However, there are certain requirements for premises that are used in gambling activities, such as:
In addition, the Gambling Law allows for the establishment of land-based gambling premises only in special gambling zones, which are located in different regions of the Russian Federation. Right now, there are five gambling zones.
There are no recent or forthcoming changes in the land-based gambling sector, aside from:
Please see 2.1 Online.
Russian legislation does not provide for any B2B licences.
The Gambling Law does not provide for any explicit regulation of the use of affiliates.
The Gambling Law does not provide for any explicit regulation of the use of white-label providers.
Please see 1.2 Recent Changes.
The following technical measures are intended to be used against offshore operators.
The Gambling Law does not provide for any responsible gambling requirements.
The Gambling Law does not provide for any gambling management tools.
The main law that outlines AML requirements is Federal Law No 115 On Counteracting Money Laundering and Financing of Terrorism. All gambling operators should comply with the requirements of this law.
The AML authority is Rosfinmonitoring.
According to the Federal Law No 115, all gambling operators should inform Rosfinmonitoring of the following:
Also, gambling operators have to conduct regular screening of their customers using Rosfinmonitoring lists. These include:
Gambling operators should use the above lists for the regular rescreening of their existing players and for checking their new players during identification (KYC) procedures. If a gambling operator discovers a person on one of these lists is among their existing or new players during the identification process, they must immediately notify Rosfinmonitoring and turn down the player.
In addition, gambling operators should also conduct identification procedures with regard to the players. This identification is conducted on the basis of the player's ID.
The authority which is responsible for the control and regulation of advertising is the Federal Anti-monopoly Agency. The main law which sets out the requirements for advertising in Russia is the Federal Law No 38 “On Advertising”.
According to the Federal Law No 38, “advertisements” are defined as “information distributed in any way and form using any means of communication, which is addressed to an indeterminate number of people and whose aim is to attract attention or create (or keep) interest in the object of an advertisement”.
In turn, the “object of an advertisement” is defined as “a product or result of intellectual activity or event which is the object of attention”.
The key provision that concerns advertising is that gambling advertising is allowed only for gambling operators with a relevant licence or permit.
Furthermore, there are a number of restrictions applicable to such advertising; please see 9.4 Restrictions on Advertising.
Gambling advertising materials should not, inter alia:
To add to the above, gambling advertising is allowed only on TV or radio between 10pm and 7am, in gambling premises or in designated print magazines (either specialised advertising print media or special gambling zone media).
Moreover, advertising of betting is allowed during sports broadcasts, provided that it constitutes no more than 20% of all advertising materials during such broadcasts (and, in some other cases, is related primarily to sports) as well as online. Russian law provides, however, for a closed list of cases where such types of advertising are permitted (eg, websites registered as online sports media and websites of professional sports federations and leagues).
If the Federal Anti-monopoly Agency considers advertisements as violating applicable regulations, it may impose penalties on the gambling operator and advertisement provider.
Such penalties are typically:
The Gambling Law does not provide for any definitive disclosure requirements pertaining to acquisitions and changes of control with regard to gaming and gambling companies, aside from the general obligations of gambling operators to provide government authorities with information on their ultimate beneficial owners and corporate structure.
The Gambling Law does not provide for any definitive change of corporate control triggers.
The Gambling Law does not provide for any definitive passive investor requirements.
There are four main regulatory bodies that are involved in the regulation of the Russian gambling market:
In addition to the above regulatory bodies, there are different local regulatory bodies for each gambling zone (please see 4.1 Regulatory Authority).
The Federal Tax Service's powers of enforcement are related mostly to compliance with the licensing requirements and include:
The main functions of the Unified Gambling Regulator are described in 4.1 Regulatory Authorities)
Rosfinmonitoring may impose administrative fines on the gambling operator, through the courts, in cases of the violation of applicable laws.
The Federal Anti-monopoly Agency's enforcement powers are related to advertising offences (for more details, please refer to 9.5 Sanctions/Penalties).
Roskomnadzor has powers of enforcement that lie primarily within the online sectors (for more details, please refer to 6.6 Technical Measures).
Sanctions enforcement is described in 3.6 Penalties for Unlawful Gambling.
Financial penalties enforcement is described in 3.6 Penalties for Unlawful Gambling.
The concept of “social gaming” is not recognised by the Gambling Law and there are no specific regulations for this activity.
Esports became recognised as official sports in Russia in 2016. Therefore, esports are eligible for betting and it is anticipated that, owing to the recent changes limiting the types of events that can be wagered on and the COVID-19 pandemic, esports’ market share is going to increase.
The concept of “fantasy sports” is not recognised by the Gambling Law and there are no specific regulations for this activity.
The concept of “skill gaming” is not recognised by the Gambling Law and there are no specific regulations for this activity.
The Federal Law “On Digital Financial Assets” was adopted in July 2020. This law is of a restrictive nature and further cements the anti-blockchain/anti-cryptocurrency position of Russian authorities that has applied, albeit less concretely, during recent years. This Federal Law prohibits the use of cryptocurrency as a means of payment within the Russian Federation.
Please refer to 1.2 Recent Changes.
The taxation framework of the gambling industry is triune and consists of:
The taxable base for this duty consists of particular items of gambling equipment.
The Russian Tax Code provides that each subject of the Russian Federation (ie, each region, of which there are 85) has the right to set its own tax rate concerning the gambling tax. If a certain subject does not set this rate, then general rates specified in the Russian Tax Code should apply.
At this moment, each and every subject of the Russian Federation has either set a respective tax rate or forbidden gambling in its entirety within its borders.
Betting operators are also obliged to deduct, each quarter, 5% of their gross win in favour of Russian sports federations and leagues, which is calculated as 5% from the amount of bets on all events relevant to each particular federation or league. At the same time, the entire amount of sporting levies cannot be less than RUB15 million (approximately EUR165,000) quarterly.
However, starting from 27 September 2021, the mechanism of special contribution calculation will be changed, namely the amount of special contributions will be calculated as 1.5% from quarter “revenue” of sports betting operators, which is defined as “the full amount of proceeds received by the sports betting operator from its activities in terms of accepting bets, interactive bets in relation to the sports competitions”, but not less than RUB30 million (approximately EUR330,000).
Personal Income Tax (PIT)
This tax is payable by the operator on behalf of the players. The PIT rate is 13% calculated on the basis of winnings minus bets or interactive bets made. Operators are obliged to pay this tax on behalf of the particular player if his or her winnings have exceeded RUB15,000 (approximately EUR200).