Tackling illegal gambling starts with stricter lottery oversight

The issue of lotteries imitating gambling is not unique to the Ukrainian gambling market. It is a concern for regulators worldwide, including in well-developed markets such as the United States. This concern is well-founded, as lottery operators have become adept at circumventing legal restrictions and enabling access to gambling through modern technologies. These operators often lack proper licenses, meaning they do not contribute to the state budget through taxes or fees. Therefore, efforts to combat the grey market should not only focus on shutting down illegal land-based gambling venues but also on restricting the operation of lotteries—particularly in the online segment.

The United States has long been considered a model of regulatory efficiency in many sectors of the economy, and the gambling market is no exception. Its experience in addressing current industry challenges is highly instructive. One of the most pressing issues is the fight against illegal operations, including gambling disguised as lottery activity.

For example, the state of New Jersey recently took action by banning lottery-casino websites. Governor Phil Murphy signed legislation prohibiting the "lottery-based betting model," introducing fines and expanding regulatory powers. These platforms had operated in a legal grey area, using internal currencies—such as "sweep coins"—that could later be exchanged for real money. This marks the sixth such ban in the United States this year, following similar actions in New York, Nevada, Connecticut, Montana, and Louisiana. A similar bill is currently under consideration in California. This growing trend at the state level highlights the need for clearer regulation at the federal level.

The need to streamline lottery legislation has existed since the very beginning of the legalisation of the gambling market in Ukraine. We at UGC have repeatedly emphasised this. The Ukrainian national legislation should clearly define the boundaries of lottery operators' activities in order to establish clear and transparent rules for the industry and create a fair competitive environment for all market participants.

The absence of such a system leads to the active functioning of the grey market in Ukraine. Its representatives are certainly not interested in paying taxes or buying licences, let alone respecting the rights of players. That is why the issue of lotteries should be one of the first to be resolved.

It is a positive factor that the new national regulator PlayCity understands the importance of restarting the lottery business and streamlining the relevant legislation. According to the Ministry of Digital Transformation, this market currently operates without licensing conditions, which means it does not pay licence fees and is not controlled by the state. Accordingly, players remain unprotected, and playing with illegal immigrants increases the risk of gambling addiction and/or losing money.

However, it is important to recognize that the issue extends beyond taxes and license fees. At stake is the creation of a fair and competitive market environment. When one segment of the market remains unregulated while another is subject to excessive regulation, it creates distortions that undermine compliant operators and empower those who disregard the rules. In the end, everyone suffers—except those profiting from illegal activities. This is why there is hope that stricter regulation of lotteries will soon begin to yield positive results for the market as a whole.