About Difficulties of Obtaining a Gambling License in the Russian Federation. Interview with the Lawyer Olga Berezina from LAWBOOT

04.06.2019

At RGW 2019, gambling lawyer Olga Berezina will talk about the regulation of the bookmaker’s activity in Russia, and about possible consequences of the sovereign Internet law.

Olga Berezina works at LAWBOOT legal firm that has been providing services to advertising networks, gambling facilities, and arbitrage specialists throughout the world since 2012.

At RGW 2019, Olga will make a presentation on the theme “Activity of gambling operators in Russia. Legal environment and prospects for 2019”. We asked the expert about the legal problems that licensed operators face in their activity and about the main difficulties of acquiring a betting license.

Interviewer: RGW 2019 (RGW)
Respondent: Olga Berezina (O.B.)

RGW: What main legal risks do bookmakers that work in Russia officially face?

O.B.: In fact, there are few officially operating bookmakers in the country. The requirements are so tough that the operator willing to obtain a license has to own a total of 1 billion rubles in net assets. If regulators detect violations of requirements or the law of the Russian Federation, the operator can lose the license (although, the consequences may be even worse). Besides, the operator has to own land-based betting shops only in the allowed areas. Operators had to exclude all forbidden addresses from the license by June 2, 2019 – Ingushetia, Tyva, the Irkutsk Region, the Kaluga Region, the Ryazan Region, the Tambov Region, Chukotka, the Vologda Region, and Chuvashia.

RGW: What legal aspects should operators primarily pay their attention to in order to get a license in different jurisdictions?

O.B.: The current situation is that operators violate many things. For example, they operate in forbidden markets and do not comply with the GDPR. Besides, there are many corporate violations such as untimely reporting, unregistered employees, intellectual property rights (or right of use) to software does not fully belong to the operator. Not to mention advertising collaborations with YouTube and Instagram bloggers, and Telegram channels of cappers.

Some of our entrepreneurs lack financial and juridical culture, the fact that unfortunately is creating a grey trace in the gambling industry. The funniest thing is that they violate rules even in cases when one could avoid violations without any financial and other expenditures.

As to license acquisition, giving a comprehensive answer in an interview is hardly possible. However, at the conference, we will be definitely able to discuss this issue with anyone interested. The thing is that dozens of jurisdictions issue licenses, for example, Curacao, Malta, Russia, the Republic of Belarus, the UK, Spain, Romania, Isle of Man, Gibraltar, and others.

Each of them has its own requirements to the future operator, but general terms include requirements to the beneficial owner, his reputation, and source of incomes used to establish a company and run business.

In practice, let’s say in Curacao, regulators do not monitor these things so closely as, for example, when you open a bank account in Germany for a licensed company. In Gibraltar, the situation is quite different, the beneficial owner should be crystal clear, have filed tax declarations and excellent reputation.

I would highlight the requirements for the software. Especially, issues connected to the random number generator certification. No certificate – no license. Software suppliers issue certificates, but in case software is ‘self-written’, you will have to undergo the certification procedure on your own.

RGW: What main legal problems do operators licensed in Curacao face and how can you prevent them?

O.B.: Huge problems are waiting for operators that are trying to enter the market with an app on the Apple Store or Google Play. Marketplaces have rules that regulate the placement of gambling apps.

Besides, some operators do not know that they have to obtain the abovementioned random number generator certificate. Startups can have problems at the stage of adding payment systems and banks, as payment systems tend to refuse to work with high-risk startups with no processing history today.

Sometimes companies that want to enter the EU market bump into the GDPR. According to these regulations, companies have to handle all personal data of customers in a proper way ensuring that all information is safely protected.

To prevent such legal hitches, the best option is to analyze the market from the start, talk to payment systems reps, and find out the requirements set by regulators and platforms.

RGW: Is the law about the restriction of payments made to foreign operators beneficial for the Russian gambling business?

O.B.: It depends on how you assess it. Some bookmakers that do not hold a license in the Russian Federation have left the market. Some operators use illegal depositing methods (for example, miscoding) even when they have international gambling licenses.

The conclusion is that operators licensed in the Russian Federation got an advantage in the market just over foreign official operators. We will be able to see what effect the law has on the revenue of the Russian business the next year – after annual reports are ready.

RGW: How will the Sovereign Internet law influence the activity of bookmakers?

O.B.: According to the information on the website of the State Duma, this law “can restrict access to resources with forbidden information through not only web addresses but also the ban of transmitted traffic”. Currently,Roskomnadzor is blocking websites when they have already been present on the RuNet for some time. With the arrival of the sovereign Internet, Roskomnadzor theoretically will be able to block the operator’s website instantly. This is the most pessimistic scenario, but to implement it, one has to create the sovereign Internet. Therefore, it is still early to talk about that.

RGW: Tell us what will you be speaking about at RGW.

O.B.: At the event, I will share LAWBOOT’s expertise for the first time, tell about the juridical realities and business prospects for both local and foreign operators. I will also note what beginners and seasoned industry players should pay attention to.

Olga Berezina will make a report at the Russian Gaming Week 2019 exhibition-forum held in Moscow on June 6-7.

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