Gambling ban in Russia sees cheeky workaround

The gambling ban has spawned another workaround

The Moscow Times reports that gambling operators are still determinedly trying to circumvent the government's ban on gambling in the city, with the latest wheeze being touch screen console offerings which purportedly are lotteries supporting unspecified charities.

The workaround is based on a loophole in the law which permits lotteries on electronic terminals provided that at least 10 percent of the proceeds go to a charity.

The loophole has spawned a whole new range of terminals in what were formerly slot parlours and gambling establishments throughout the city.

The Moscow Times reports that industry sources and government officials claim the 'lottery clubs' are often operating well outside the law, and federal and regional authorities have complained that the industry must be better regulated and policed, something that legislative efforts have thus far failed to do effectively and comprehensively.

Operators are desperate to find new ways to sustain their businesses, badly hurt by a Russian law implemented in July this year which limits gambling to four remote and undeveloped areas of the country, far removed from comfortable urban environments.

Following an initial blitz which saw 525 gambling venues closed by the authorities, Russian operators have been deploying online gaming and other ruses to get past the ban. The government closed one loophole - poker - when it withdrew the game's accreditation as a recognised Russian sport (see previous InfoPowa reports).

The rapid proliferation of electronic lottery terminals, however, has been a harder nut to crack. Lotteries have to be licensed by tax authorities and transfer no less than 10 percent of their revenues to charity funds each quarter. The prize fund must be no less than 50 percent of revenue and no greater than 80 percent.

However, lottery club terminals rarely specify a charity. And terminal makers are not shy about advertising the profits that the “lottery business” can make.

“Lottery machines [terminals] can bring a noticeable profit to their owners, although they are, above all, intended to develop socially focused charity work,” ENGY, a payment and lottery terminal maker, says on its web site. “At the present, there are no legal limitations on the lottery business that prohibit obtaining or distributing tickets through self-service lottery devices.”

The company’s terminals sell for between 87,000 rubles and 120,000 rubles ($3,000 to $4,100), according to its web site. The firm also breaks down a “business plan” for potential buyers, which says the terminals can become profitable within half a year, with 150 transactions per day averaging 100 rubles each.

The problem is not confined to Moscow. The governor of St. Petersburg, Valentina Matviyenko, wrote to Prime Minister Putin in June to express her concern about the spread of lottery facilities that “look like gambling machines and have the same operating principle,” Kommersant reports.

The loopholes for lotteries may be short-lived; Putin has directed the Russian Finance Ministry to develop amendments, and these are being discussed with the Interior, Economic Development and Industry and Trade ministries.

But additional regulation on lotteries could face opposition from some lawmakers, says the Moscow Times, quoting Yevgeny Fyodorov, who chairs the Duma’s Economic Policy and Entrepreneurship Committee, and sees no reason for additional legislation.

“If we saw violations, we would make a move. But there has been no law enforcement experience so far that shows the law needs to be amended,” Fyodorov said. “Lottery terminals themselves pose no danger, but gambling machines disguised as lottery machines do.”

About one-third of former Moscow casinos and slot machine halls that were closed in July are now selling instant lottery tickets. In addition “surrogate technologies,” namely lottery terminals and Internet clubs providing access to online gambling are appearing widely.

Moscow has 91 registered Internet clubs, six bookmakers, 42 lottery clubs and 51 stand-alone lottery terminals.

The police have closed 35 such places, opened 17 criminal cases and seized 618 lottery terminals, and the city shuts down about four so-called lottery clubs every week, said Filipp Zolotnitsky, a spokesman for the Moscow police’s economic crimes department.

In an apparent effort to stem the growing outcry, 36 lottery companies last week signed an agreement to create a self-regulating body for the industry. Terminal makers and organisers say electronic lotteries are no different a from traditional one, and that they have nothing to do with gambling.

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