iGaming's Impact on Ukraine - From Modest Growth to Economic Lifeline

Author: Matthew Haynes

In recent times, Ukraine has faced unprecedented uncertainty and suffering. In late February, as the country's economy was recovering from the global pandemic with thriving steel exports, an unexpected invasion by Russia plunged Ukraine into turmoil. Stocks plummeted, and the country became a war zone, with tens of thousands of civilians fleeing. The economy struggled as manufacturing shifted towards weapons production.

Amidst this chaos, the iGaming industry emerged as a potential helping hand. As desperate times called for desperate measures, the iGaming industry provided much-needed revenue to help Ukraine’s economy recover. Despite the war, Ukraine still had hundreds of companies that allowed employees to work remotely, ensuring continuous income for the government. Technology and digital roles became crucial in keeping the country operational.

The iGaming industry, known to flourish during times of economic uncertainty, stood out significantly. Over the previous two years, it had grown substantially, offering a lifeline to Ukraine's beleaguered economy. In the midst of conflict and hardship, the resilience and adaptability of the iGaming sector provided a beacon of hope for economic recovery.

Ukraine's Gambling Boom – How the Industry Revenue Skyrocketed

In 2022, the revenue from iGaming in Ukraine was a reported $50 billion; the industry was growing at a modest rate, and although it certainly couldn’t be classed as a major sector in the country, it was definitely progressive.

However, just 12 months later, according to a recent report by Opendatabot (Ukraine’s service for monitoring company registration data), the iGaming landscape could not have been any more different. The gambling revenue had sky-rocketed by 28 times, posting $1.4 billion for the year.

As a result, it meant that the top 10 gambling companies in the country had recorded profits; some by a staggering amount, in their hundreds such as Favbet and Slots YU, while others still enjoyed a decent increase.

Of the 10 companies; nine of these being online casino sites, the last being a lottery operator. The highest profit was recorded by Spaceix, which is a brand that is also known by the name, Cosmolot. Its profit soared by 51 times for 2023 to a staggering $716.5 million. The second-highest was the brand Favbet which witnessed a 425x growth in revenue to $251 million, marking the biggest increase in profit for all operators last year.

Meanwhile, the PIN-UP brand, which belongs to Ukrainian Game Technologies also enjoyed a fruitful year, ranking third in overall revenues at $92.8 million, which was an increase of 4x for the company, year-over-year.

What Motivated the Ukrainian iGaming Surge?

Such a significant increase in gambling profits was clearly driven by a higher number of new users gambling frequently and it was no coincidence. It is understood that the vast increase in revenues is largely being attributed to the country being at war with Russia and the majority of the gambling participation was connected with soldiers as a means of letting off steam, escaping their reality and filling time.

Soldiers gambling in wartime is nothing new. Indeed, this dates back as far as the Romans who would play dice, among other games to fill their time in between battles, while during the second world war, poker and blackjack were common pastimes among US soldiers, often playing for cash or cigarettes. Even some of the most popular world leaders had a passion for gambling.

For many Ukrainian soldiers, it has been revealed that following the high levels of stress that they go through, gambling online has acted as a form of relief. Despite this, there have been calls for iGaming restrictions to be imposed on military personnel by serviceman Pavlo Petrychenko, who led a petition urging that authorities take action.

Following the filing, it took only several hours for it to get the minimum number of votes in order for the petition to be reviewed by President Zelensky. Since then, the country’s head of state has liaised with a number of organizations, including the Ukraine Security Service (SBU), the State Service of Special Communications, the Digital Transformation Ministry and the National Security and Defense Council Secretary.

In a statement, President Zelensky said: “We are preparing corresponding steps which will increase control over the industry and help to protect the interests of the society.“

Gambling Revenues Provide а Lifeline for Ukraine

During a period in which the country has endured arguably some of its worst anguish in recent times, a small glimmer of hope was fashioned, albeit seemingly having negative connotations.

In March, Ukraine’s Ministry of Finance brought out its latest tax report, which illustrated details that related to proceeds courtesy of the gambling industry for February. It noted a significant increase in gambling company contributions, $47 million in total, which represented an eye-watering 370 percent uptick compared to February 2023.

At a time when the country is experiencing major upheaval due to the war, which has had knock-on effects, such as its ability to focus on foreign trade, which was a major contributor to its economy, plus a decrease in productivity in key industries due to manpower being utilized in military operations, the income from gambling revenue will be invaluable.

Having relied on European and mainly US aid for much of the last two years, the potential financial effects caused by the decision to restrict soldiers from online gambling activities could well be significantly adverse. There is no doubt that the income generated by online gambling will play a key part in helping to rebuild the country and while the exact allocation of the revenue is unknown, there is no shortage of areas where it will be well received.

The repairing of infrastructure destroyed by artillery, such as roads and bridges is certainly one key part of a rebuild that needs attention, in addition to many buildings, while it would also create much-needed jobs.

Medical services is another sector that would benefit greatly from the considerable boost in revenue generated by online gambling firms, which has relied on volunteers from other countries, though the added economic boost would allow for the training and recruitment of nurses and surgeons, in addition, access to medicine.

Implications of a Gaming Ban for Soldiers

All of this will have to be carefully taken into consideration by the president as he mulls over if gambling restrictions should be placed on UA soldiers. Banning it completely makes for a compelling argument.

Even for those who have the luxury of at least not being on a frontline anywhere, the popular pastime can cause many problems, the most troublesome of which being gambling addiction, which can be bad enough, causing a withdrawal from ‘normal’ life in some cases; the weight of such a worry triggers uncharacteristic behavior.

It is likely that this, among other arguments, has been presented to the Ukrainian president, and it would raise the concern that a soldier going into battle has developed a gambling addiction to the point where he has been plunged into debt could not only be a danger to himself, but his comrades - making rash decisions that lead to physical harm due to judgment clouded by the stress of debt. Or, indeed, it could be seen as an ‘easy way out’. There is no doubting the difference that income from gambling taxation could make, especially towards the war effort; however, equally, the welfare of soldiers is just as important.

One solution could be that a sensible limit is imposed for soldiers who find gambling as a stress reliever. As such, implementing both a daily maximum deposit and also time limit could be a compromise that keeps everyone happy in what is a delicate situation.

Major Economic Impact and an Uncertain Future

What cannot be ignored though, is that the online gambling industry has positively impacted Ukraine in a major way. While it remains to be seen if foreign gambling operators express an interest in gaining a license, Ukraine is in a unique situation. Should the president not approve the bill, it could well be a selling point, however, the question would be, for how long?

Prior to two years ago, online gambling was somewhat of a sideline industry, generating a few million dollars in taxation each year, courtesy of one main source. However, upon a return to peacetime, who’s to say that popularity wouldn’t dwindle once more? It certainly makes for interesting debate and President Zelensky has serious thinking to do as to which solution, if any, he decides to implement.