Gaming Law 2020

Last Updated November 24, 2020

Russia

Law and Practice

Authors



4H Agency is a boutique consulting firm fully dedicated to serving members of the gambling business ecosystem in their quest to open up new opportunities, be it a new market, a new vertical, or a new product. The firm's team members, who work in offices in Cyprus, Ukraine and Russia, have experience at the top international law firms as well as international gambling operators and service providers. Moreover, 4H Agency has an established network of various regional service providers and agents (local law firms, HR agencies and seasoned experts in different fields, including marketing and PR, payments and business analytics), which have been carefully chosen in order that 4H is able to act as a “one-stop shop” for international gambling operators entering certain jurisdictions.

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 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:

  • the establishment of limits on the types of events that can be offered by Russian betting operators – such types are now limited to Russian and non-Russian sports events only; and
  • the expansion of Russian betting operators’ obligation to pay special contributions (more details on these contributions can be found in 13.1 Tax Rate by Sector) on the basis of all events offered by such operators (contrary to the previous framework of such contributions, which provided for these contributions being payable only on the basis of Russian sports events).

In a later meeting of the Presidential Council for the Development of Physical Culture, and in addition to the changes already introduced to the Gambling Law, the Sport Ministry of Finance petitioned the Russian President to increase special contributions of Russian betting operators.

The Ministry of Finance received affirmation from the Russian President, who ensured that additional special contributions would be payed and used appropriately.

The President's instructions propose the preparation of draft laws amending various regulations (including the Gambling Law). These laws in turn should cover the following key issues:

  • a minimum of double the amount of special contributions;
  • efficient organisation of the payment set-up of said special contributions and the subsequent usage of such contributions by its recipients; and
  • new measures of state control to ensure the appropriate payments of special contributions (notably, this includes the proposition of a new regulatory authority able to exercise control over the payment and usage of special contributions).

According to the President's instructions, such draft laws should be developed and introduced to Russian parliament by 1 March 2021. As of December 2020, in response to these instructions, two draft laws have already been prepared.

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:

  • betting (it should be separately noted that a betting licence includes both online and land-based offerings); and
  • totalisators (it should be separately noted that a totalisator licence includes both online and land-based offerings).

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:

  • land-based offerings available in the special gambling zones (please see 3.3 Definition of Land-Based Gambling for details) only; and
  • land-based offerings available outside of the special gambling zones.

Gambling Zone Land-Based Offerings

The following sectors are allowed only within the gambling zones on the basis of special permission:

  • casinos;
  • slot-machine halls; and
  • poker.

Non-gambling Zone Land-Based Offerings

The following sectors are allowed outside of the gambling zones (as well as inside them):

  • betting (it should be separately noted that a betting licence includes both online and land-based offerings); and
  • totalisators.

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.

  • Federal Law No 138 “On Lotteries” – establishes the requirements and licensing process for lotteries.
  • Federal Law No 38 “On Advertisements” – describes key points of advertising in Russia and establishes requirements for the content of advertisements and for their distribution.
  • Federal Law No 152 “On Personal Data” – establishes requirements for personal data storage and processing.
  • Federal Law No 54 “On Exploitation of Online Cash Machines” – establishes requirements for receipts and cash machines, which gambling operators (both online and land-based) should use in their operations.
  • Federal Law No 99 “On the Licensing Process for Several Types of Activity” – establishes general guidelines for the licensing process that are further established by secondary legislation.
  • Federal Law No 115 “On Counteracting Money Laundering and Financing of Terrorism” – establishes AML requirements and describes key AML procedures for companies that are operating with customers' funds, including gambling operators.
  • The Code of Administrative Offences of Russian Federation – describes possible offences and violations that may be made by the gambling operator as well as respective sanctions.
  • The Civil Code of Russian Federation – describes customers' rights.

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 is in place as of 2020 (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] 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:

  • unlicensed gambling;
  • non-compliance with the licensing conditions;
  • failure to perform the necessary identification and AML procedures; and
  • failure to comply with the reporting requirements.

The following types of penalties might be imposed for a violation of gambling legislation.

  • Imprisonment for up to four years of individuals found to have organised illegal gambling.
  • Administrative fines, which may be imposed because of the following violations:
    1. granting spaces for illegal gambling activities – from RUB800,000 (approximately EUR8,800) to RUB1.5 million (approximately EUR16,500), if the violation is repeated, the amount of penalty increases to RUB1.5 million to RUB2 million (approximately EUR16,500–22,000);
    2. violation of the permission requirements (for gambling zone gambling) or licensing requirements (for betting and totalisators) – from RUB300,000–500,000 (approximately EUR3,300–5,500);
    3. presence of underaged persons in the gambling entity – from RUB30,000–50,000 (approximately EUR330–550) for officials, and RUB300,000–500,000 (approximately EUR3,300–5,500) for legal entities;
    4. accepting bets or interactive bets from clients that did not complete identification procedure – from RUB30,000–50,000 (approximately EUR330–550) for officials, and RUB500,000–700,000 (approximately EUR5,500–7,700) for legal entities; and
    5. breach of the rules regarding provision reports that are required by the federal law – from RUB70,000–100,000 (approximately EUR770–1,100) for officials, and RUB800,000 to RUB1 million (approximately EUR8,800–10 000) for legal entities.
  • Suspension of licence up to 90 days or until the violation is eliminated.
  • Revocation of licence.

The main legislation that is pending, as of October 2020, 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 will enter into force on 1 January 2021.

To add to that, as described in 1.2 Recent Changes, the President's instructions propose the introduction of draft laws covering the increase in Russian betting operators' special contributions. This includes ways of payment, the usage of such contributions and the addition of new regulatory authority to Russian parliament by 1 March 2021.

Regulation powers with regard to the gambling sector lie within the domain of the Federal Tax Service.

Moreover, the Gambling Law also provides that gambling zones are regulated by particular regional authorities. In accordance with the local legislation, these authorities are:

  • for the Krasnaya Polyana gambling zone – the Department of Property Relations of the Krasnodar Region;
  • for the Republic of Crimea gambling zone – the Ministry of Finance of the Republic of Crimea;
  • for the Sibirskaya Moneta gambling zone – the Department of Tourism and Resorts Development of Altai Region;
  • for the Primorye gambling zone – the Department of International Co-operation and Tourism Development of the Primorye Region; and
  • for the Yantarnaya gambling zone – the Ministry of Regional Control (Supervision) of Kaliningrad Region, the Ministry of Economy of the Kaliningrad Region.

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:

  • betting licences;
  • totalisator licences; and
  • gambling zone permits (which include casinos and slot-machine halls).

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.

  • Only a Russian legal entity may apply for a licence or a permit.
  • The shareholders or ultimate beneficial owners of this entity should not have criminal records of particular types (for instance, criminal records with regard to economic crimes).

Application Requirements for Betting or Totalisator Applicants

Requirements for the companies applying for a betting or totalisator licence include the following.

  • The applicant should have a processing centre (a place where all information about clients and their bets should be processed).
  • The applicant should have a betting shop that is compliant with the applicable requirements of the Russian laws.
  • The applicant should meet certain financial thresholds, such as:
    1. at least RUB100 million (approximately EUR1.1 million) as charter capital (paid with non-loaned funds); and
    2. at least RUB1 billion (approximately EUR11 million) of net worth.

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.

  • For a betting or totalisator licence – up to 45 business days.
  • For a gambling zone permit – up to 30 business days.

Application fees depend on the type of application:

  • For a betting or totalisator licence – up to RUB30,000 (approximately EUR330) per licence.
  • For a gambling zone permit – the fees are set additionally for each gambling zone by the relevant local authorities.

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:

  • gambling premises should be located only in the capital objects (there is a restriction on locating gambling premises in temporary objects);
  • gambling premises should be divided into a clients’ zone and a technical zone; and
  • gambling entities cannot be located in the same building (or on the same plot) as sporting, medical or children's institutions or within a household.

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.

  • the Krasnaya Polyana gambling zone;
  • the Republic of Crimea gambling zone;
  • the Sibirskaya Moneta gambling zone;
  • the Primorye gambling zone; and
  • the Yantarnaya gambling zone

The only recent or forthcoming changes in the land-based gambling sector are:

  • the resolutions of the Russian government — reviewed and refined during the regulatory guillotine process — that will enter into force on 1 January 2021; and
  • the developments related to the special contributions of Russian betting operators as described in section 1.2 Recent Changes.

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.

  • Website blocking – if the website is violating Russian gambling regulations, the Federal Tax Service may issue a decision on the basis of which the Russian media government authority (Roskomnadzor) will include that website in the “prohibited websites register”.
  • Financial blocking – Russian credit institutions and payment agents can no longer facilitate payments between individuals and operators that are included in the “illegal gambling operators register”, which is maintained by the Federal Tax Service.

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:

  • transactions (both deposits and withdrawals) which exceed RUB600,000 (approximately EUR6,600); and
  • transactions that were made with the purpose of money laundering.

Also, gambling operators have to conduct regular screening of their customers using Rosfinmonitoring lists. These include:

  • the list of entities and physical persons who are involved in terrorism or extremist activities – this list must be downloaded by gambling operators every week from the operator's account on the Rosfinmonitoring website;
  • the list of physical persons whose funds, or any other assets, were blocked in accordance with the interdepartmental commission on counterterrorism; and
  • the list of entities and physical persons who are involved in the distribution of weapons of mass destruction.

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:

  • be addressed to the underaged;
  • use images of people or animals (except for advertising within a gambling zone);
  • create an impression of gambling being a source of income;
  • create an impression of guaranteed winning;
  • use statements that may overstate the winning opportunity or understate the risks associated with gambling; and
  • use statements that create an impression that gambling plays a significant role in achieving public acknowledgement, professional, sports or personal success.

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:

  • for individuals – RUB2,000–2,500 (approximately EUR22–27);
  • for officials of legal entities – RUB4,000–20,000 (approximately EUR44–220); and
  • for legal entities – RUB100,000–500,000 (approximately EUR110–550).

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:

  • the Federal Tax Service;
  • Rosfinmonitoring;
  • the Federal Anti-monopoly Agency; and
  • Roskomnadzor.

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 ability to suspend or revoke the licence through the courts;
  • the ability to impose various penalties on the gambling operator through the courts; and
  • the ability to conduct inspections, test purchases and employ other control measures.

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:

  • a gambling tax;
  • special contributions; and
  • personal income tax.

Gambling Tax

The taxable base for this duty consists of particular items of gambling equipment.

  • Gambling table – from RUB50,000–250,000 (approximately EUR550–2,700) per table.
  • Slot machine – from RUB3,000–15,000 (approximately EUR33–150) per slot machine.
  • Processing centre of a bookmaker – from RUB50,000–250,000 (approximately EUR550–2,700) per processing centre.
  • Processing centre of a totalisator – from RUB50,000–250,000 (approximately EUR550–2,700) per processing centre.
  • Processing centre of a bookmaker’s interactive bets – from RUB2.5–3 million (approximately EUR27,000–32,000) per processing centre.
  • Processing centre of a totalisator’s interactive bets – from RUB2.5–3 million (approximately EUR27,000–32,000) per processing centre.
  • Totalisator shop – from RUB10,000–14,000 (approximately EUR110–160) per shop.
  • Betting shop – from RUB10,000–14,000 (approximately EUR110–160) per shop.

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.

Special Contributions

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 EUR20,000) quarterly.

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).

4H Agency

Georgiou Katsounotou, 6
3036, Limassol
Cyprus

+7 915 353 34 08

im@4h.agency www.4h.agency
Author Business Card

Law and Practice

Authors



4H Agency is a boutique consulting firm fully dedicated to serving members of the gambling business ecosystem in their quest to open up new opportunities, be it a new market, a new vertical, or a new product. The firm's team members, who work in offices in Cyprus, Ukraine and Russia, have experience at the top international law firms as well as international gambling operators and service providers. Moreover, 4H Agency has an established network of various regional service providers and agents (local law firms, HR agencies and seasoned experts in different fields, including marketing and PR, payments and business analytics), which have been carefully chosen in order that 4H is able to act as a “one-stop shop” for international gambling operators entering certain jurisdictions.

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