Reform still on the agenda in war-torn Ukraine

The military aggression in Ukraine has posed serious challenges to the development and regulation of the gambling and lottery markets in the country. However, at the same time, these challenges have accelerated long-overdue changes and reforms in the sector that had stalled.

Establishment of a new regulator

Amendments to the gambling legislation introduce significant changes in the regulation of the gambling and lottery sector starting from April 1, 2025. First and foremost, the Gambling and Lottery Regulation Commission has been dissolved, and a new regulator has been established – the State Agency “PLAYCITY.”

Despite numerous criticisms from certain political factions and segments of the public, the dissolved Commission was the first regulatory body in Ukraine’s history to effectively implement the initial stage of gambling market legalization. And it did that in an incredibly short period of time. In less than six months, it established from scratch all the necessary preconditions to enable operators to obtain licenses and operate legally within Ukraine.

Naturally, as with any process starting with a blank sheet of paper, the initial stage of market legalization contained its share of mistakes. Nonetheless, during nearly five years of the Commission’s existence – three of which took place amid military aggression – the gambling market continued to function, paying licensing fees and taxes. It also went through the difficult process of removing operators linked to the aggressor state, as well as dealing with a number of major upheavals and scandals.

From 2021 to 2025, the Commission issued 7,217 licenses, contributing nearly UAH 7 billion UAH (US$167 million) into the state budget. It’s also worth noting the increase in taxes paid by legal operators to the state during the period of military aggression.

The Commission established and maintained the Register of Persons Restricted from Gambling Participation, which currently includes over 13,300 individuals. Efforts to combat illegal operators and their unlawful advertising were also initiated.

Judged by these achievements, the first five years of the Gambling and Lottery Regulation Commission’s work can be considered a success. The Commission undoubtedly established a legal gambling market in Ukraine and laid a foundation that must now be further developed and strengthened in response to current challenges and the evolving needs of the market, society, and the state.

As of now, the Ukrainian gambling and lottery market is regulated by the PLAYCITY Agency. Unlike the Commission, this body has a single-head structure, which is a significant advantage, as the collegiate decision-making model of the Commission proved inefficient, making rapid regulatory decision making difficult, while also diluting accountability.

Now, the functions of policymaking and policy implementation in the gambling and lottery sector have been separated. The Ministry of Digital Transformation of Ukraine will be responsible for developing policy and approving regulatory acts and licensing conditions. The PLAYCITY Agency will implement this policy by issuing and revoking licenses, conducting inspections, imposing fines, and more.

Positioning the regulator under the authority of the Ministry of Digital Transformation of Ukraine may offer significant benefits for the newly formed body. The Ministry possesses extensive resources and experience in implementing large-scale digital projects across various sectors of the economy. This could be a great support for PLAYCITY making it more likely to achieve the objectives set for it.

Main goals and challenges for the new regulator

The primary challenge for the new regulator is the creation and implementation of a state online monitoring system. This was mandated under the main gambling law since 2020 but was never established by the Commission for the Regulation of Gambling and Lotteries. This failure was one of the main sources of criticism against the former regulatory body.

The development and operation of such a system appears to be technically complex and potentially financially costly, especially when considering how the system is defined by current legislation. Concerns have been raised over its effectiveness and alignment with the goals it is meant to serve. It is worth noting that no jurisdiction with highly developed control systems for gambling operators has a system similar to the one mandated by Ukrainian law.

According to the law, the system must collect, process, aggregate, and analyze in real time all the data — including information on all deposits, bets, winnings, and payouts — generated by the online systems of both online and land-based gambling operators. Managing and analyzing such an enormous volume of data to detect violations and anomalies appears to be an extremely ambitious task.

While it may be technically possible to build such a system using the latest digital technologies, whether it will result in a truly functional regulatory tool that ensures a transparent and secure gambling market remains uncertain. International experience shows that effective regulation can often be achieved using simpler instruments or a combination of simpler, and therefore more effective, tools.

For example, taking the technical regulation and certification of technological solutions used by operators, especially in the online segment. Currently, Ukraine lacks a technical regulatory framework and clear requirements for software and other tools used by operators. This gap essentially prevents real oversight of how operations are conducted. Therefore, even a powerful system capable of processing large data volumes will not ensure transparency if there is no confidence that the data is collected and processed in a consistent way that prevents manipulation — something which is all but impossible to ensure without proper technical regulation.

Issues regarding the taxation of gambling operators also remain unresolved. The draft law, which was expected to clearly and transparently define the procedure for taxation in the gambling sector has been actively discussed in the Ukrainian Parliament since 2020, but has not yet been adopted. The minor changes that have been made to tax legislation over the period have failed to establish a comprehensive, fair, and understandable taxation regime for gambling operators. The new regulator, drawing on the successful experience of the Ministry of Digital Transformation in initiating new laws, is clearly capable of acting as a moderator in shaping and implementing tax reform for the gambling sector through new legislative proposals.

Challenges arising from the conditions of military aggression

Since the start of military aggression, the Commission for the Regulation of Gambling and Lotteries has annulled the licenses of several operators found to be connected with Russia. As a result, both the public and the state have called for a cleansing of the gambling market, which remains particularly vulnerable to money laundering and other illicit financial activities. This demand remains highly relevant, placing the responsibility on the new regulator to reform the licensing process and prevent operators connected to Russia from entering Ukraine’s gambling market.

The Ministry of Digital Transformation has also tasked the new regulator with simplifying the licensing process to minimize the risk of corruption. One proposed measure is the maximum automation of the licensing procedure, reducing human involvement in decision-making. While this approach could effectively address corruption concerns, it is important to ensure that comprehensive due diligence remains a priority. A superficial or overly simplified evaluation process could allow operators to take advantage of automated licensing to conceal their true ownership and intentions.

Furthermore, global trends in gambling regulation indicate a shift towards stricter licensing requirements and extended review periods to prevent undesirable entities from entering the market, driven by the broader international effort to combat money laundering and ensure market transparency.

Developments in the lottery market

Unlike the gambling market, Ukraine’s lottery market has seen little change since 2020 and remains largely unregulated due to the government’s failure to approve licensing conditions. Until April 1, 2025, the Ukrainian law on state lotteries included a provision that effectively prevented new operators from entering the market.

The Ministry of Digital Transformation is expected to develop and submit licensing conditions for lottery operators and define the procedure for conducting license competitions. This will enable foreign companies with experience of operating lotteries in other jurisdictions to participate. The entry of such operators would mark a new stage in the development of Ukraine’s lottery market, likely influencing both its structure and dynamics significantly.

Key changes aimed at protecting players and promoting responsible gambling and advertising practices

The ongoing military aggression has exacerbated many social issues, including those related to the risks of gambling. At some point, both society and the government acknowledged that these risks also affect citizens involved in military activities. Significant violations of advertising regulations by licensed operators were documented by the Commission for the Regulation of Gambling and Lotteries, leading to numerous fines and public dissatisfaction. The public outcry reached the President of Ukraine, who, in April 2024, issued a decree banning all forms of gambling advertising and promotion, along with other measures aimed at protecting players.

Amendments to the gambling law followed, and effective April 1, 2025, operators are required to prevent users from playing without first setting mandatory limits. They must also implement mandatory breaks and maximum weekly playtime limits. The new regulator has announced a simplified self-exclusion procedure, enabling citizens to register themselves in the Self-Exclusion Register via the national digital platform “Diia” in just a few clicks. This will significantly enhance the effectiveness of this protective tool.

As of April 1, 2025, new rules on gambling advertising and promotion have come into effect. It is too early to assess their effectiveness, but they appear to strike a reasonable balance and help reduce advertising-related risks during this sensitive time. However, illegal gambling and illegal advertising online remains a significant challenge that will require new approaches, collaboration with social media and digital platforms, and innovative regulatory strategies. Amendments to the gambling law include mechanisms that could enhance the fight against illegal operators, but success will depend not only on the new regulator but also on other government agencies responsible for telecommunications and media oversight.

Outlook

The new regulator is just beginning its work and has all the prerequisites needed to elevate the regulation of the gambling and lottery markets to a qualitatively new level. With an optimized structure, subordination to one of the country’s most dynamic and capable ministries — the Ministry of Digital Transformation — and the foundation laid by the first regulator, there are strong prospects for further positive evolution. This includes development for both market operators and regulatory instruments that ensure player protection and promote responsible gambling.

A re-licensing phase is expected in early 2026, as many operators received five-year licenses in 2021 from the former regulator. The new regulator will likely manage this process under new conditions and requirements, enabling a comprehensive review of the market following five years of legalized gambling in Ukraine.