All Bets Are Off: Russia and Ukraine Ban Gambling

All Bets Are Off: Russia and Ukraine Ban Gambling

The neon lights are no longer flashing; the roulette wheels have spun
their last turn. Casinos across Russia closed their doors Wednesday as a sweeping ban on gambling went into effect, less than a week after a similar ban hit neighboring Ukraine. Lawmakers in both countries say the actions were necessary to bring under control spiraling addiction and a notoriously shady business. But critics say the moves will leave hundreds of thousands out of work and force the industry underground.

Until June 25, the River Palace was one of the most popular casinos in Kiev, buzzing with customers trying their luck in rooms awash with the sounds of pinging bells and clicking roulette balls. But now the place is deserted, filled only with an eerie silence. The timing couldn’t have been worse for Olha Stupak, who was one of the casino’s senior supervisors. With a child about to enter university, car-loan repayments to make and rent to pay, she’s going to struggle to
get by on her savings and unemployment benefits. “I’m looking for work, but it’s difficult because of the crisis,” she says, looking around at the empty tables. “I know all about roulette, poker and blackjack. But other jobs require different work experience.”

The ban — which affects not only casinos but also slot machines and bookmakers — is set to push up unemployment levels in one of the regions already hardest hit by the economic crisis. In Russia, an estimated 400,000 people will be put out of work, and in Ukraine, “overnight, 200,000 workers have been left without a job,” says Hryhoriy Trypulsky, vice president of the Ukrainian Association of Gambling Operators. “The legislation has been rushed through without any thought of the consequences.”

Russia had been planning its ban for some time, with parliament passing legislation in 2006 that would restrict gambling to four remote areas as of July 1 this year. But Ukrainian lawmakers were slower off the mark and only sprang into action in May, after nine people were killed in a fire at a slot-machine hall in Dnipropetrovsk in eastern Ukraine. After the fire brought national attention to an industry that was already widely frowned upon, lawmakers pounced. The legislation they passed places a temporary ban on gambling while plans are drawn up to restrict gambling to special zones, most likely in Crimea on Ukraine’s southern Black Sea coast.

Supporters of Ukraine’s new law have little sympathy for the crippling effect it will have on the industry. “Gambling has become an epidemic that can be compared with AIDS and tuberculosis,” says the law’s author, Valeriy Pysarenko, a parliamentary deputy from Ukrainian Prime Minister Yulia Tymoshenko’s party. “It is destroying the Ukrainian nation on a moral level.” Gambling has boomed across Russia and Ukraine since the collapse of the Soviet Union in 1991; before the ban, Ukraine boasted more than 100,000 legal gambling establishments, ranging from flashy casinos to dingy slot-machine halls.

Pysarenko says statistics show that 75% of Ukrainians who use gambling establishments are university students or high school kids, and that up to 5% of large-town populations are addicts. A survey in May by pollster FOM-Ukraine showed that 55% of Ukrainians believe gambling leads to addiction in adults, while 46% say it breaks up families and 44% associate it with crime. And experts say that because of lax legislation, around 60% to 70% of Ukraine’s gambling establishments were operating illegally. Pysarenko estimates that the industry is worth about $5 billion per year, only 2% of which made it to the state budget as operators avoided paying taxes.

But for all its vaunted noble aims, the law has drawn heavy criticism. With presidential elections scheduled for January, Tymoshenko’s opponents and the country’s casino workers accuse the Prime Minister of using the gambling ban to enhance her hard-earned reputation as a supporter of working-class voters — a poll by the Kiev-based Horshenin Institute in May showed that 82% are in favor of the law. “She has scored a few political points at our expense,” says the River Palace’s Stupak. President Viktor Yushchenko vetoed the law, calling it “populist,” only to have his decision overturned by parliament. And Interior Minister Yuriy Lutsenko, who will be in charge of enforcing the ban, has expressed his misgivings that all establishments are being tarred with the same brush. “I think it’s wrong to ban casinos,” he told reporters, adding that he blames slot-machine halls, not casinos, for the rise in gambling addiction.

Opponents of the new law also say that while tighter regulation is
needed, the all-out ban risks having the opposite effect by sending the industry underground, where it will be even harder to control. One casino director, who asked not to be named, says he knows of two places that have continued operating illegally since the ban took effect. “If they know your face, they’ll let you in,” he says. And a Ukrainian government official who works closely on the issue tells TIME that he expects some sites to begin opening their doors to a “select few” in the coming weeks.

“It is almost inevitable that establishments will reopen, run by criminal groups,” says Ian Payne, director of operations at the River Palace. “There is a huge, established customer base that still wants to gamble. People will get fed up after a few weeks.” Whether moral crusade or canny campaign move, the decision to ban gambling in Russia and Ukraine is a risky play.

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