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Russian Gambling Market: Current Situation

Author: Yana Kryvosheina
13 December 2019, 10:03
Votes: 1

July 1, 2019, marks ten years since all Russian casinos were banned. However, it cannot be said that the law forbidding gambling on the territory of the Russian Federation has put an end to the gambling business development. It was decided to create several gambling zones, where everyone could gamble. However, what is the situation with the Russian integrated entertainment zones’ (IEZ) owners?

Russian Gambling Market: Current Situation

How the Industry Responded to the Ban

The ban on gambling was a shock for many casino owners. It is not surprising, because the industry development with a turnover of about $3.6 billion per year had to be stopped. In view of such an ambiguous relationship to the gambling business on the part of the authorities, many market participants have decided to reorient themselves to completely different industries unrelated to gambling. Others did not want to part with such a profitable industry and moved their business abroad, continuing their operation through offshore companies. According to experts, this form of business is much more profitable compared with owning a legal gambling zone in Russia. However, there is one significant difference – the first one is illegal. These casinos can be closed at any time, and their owners are to be brought to justice.  

After the ban, four official gambling zones were approved: Primorye in the Primorsky Region, Azov-City in the Krasnodar Region, Siberian Coin in the Altai Region and Yantarnaya in the Kaliningrad Region. Later, the Russian government decided to carry out a kind of replacement: the first established gambling zone Azov-City was shut down, and a new one with the name Krasnaya Polyana was created instead. It has been operating until the present day. In addition, conversations around the idea of ​​creating another gaming zone are still ongoing. It is planned to be located in the Crimea, in the village of Katsiveli. The head of the republic, Sergey Aksenov, has already announced that there was a potential gambling operator, who would launch a new gambling zone there by the end of this year. But first things first.

Read more: Europe Faces Major Changes in the Matter of Gambling Policy in 2019

Why Russian Gambling Zones Did Not Become an Alternative to Las Vegas

The creation of Russian gambling zones in 2009 seemed to be a very ambitious and promising undertaking, but the magnificent revival of the gambling business in another format did not happen in the country. Moreover, it has created even more difficulties and problems for some market participants. For example, for ex-owners of the very first gambling zone Azov-City.

Why Russian Gambling Zones Did Not Become an Alternative to Las Vegas

What Happened to Azov-City

Perhaps the Azov-City gambling zone’s closure was a giant step back in the gambling business development in the country. According to the legislation of the Russian Federation, only one IEZ can function on the territory of a region. After the creation of a gambling zone in Sochi, the government decided that the new facility would be much more promising. Neither the persuasion of Azov-City workers who were left without jobs (by the way, it is very hard to find one in the region) nor the arguments of the facility owners who had invested billions in its development did not affect the authorities’ decision. On January 1, 2019, the gambling zone was finally and irrevocably closed.

The facility had been successfully operating for ten years. The employees of Shambala JSC and Royal Time Group LLC had been working there.

Despite numerous attempts investors have made to obtain monetary compensation, it is doubtful the companies will get their money back – the court rejected all claims. Experts are convinced that such actions of the authorities will scare off potential investors of this Russian market's segment. It is unlikely that any company wants to repeat the IEZ Azov-City investors’ bitter experience.    

Read more: States with Zero Gambling Tax on Winnings (Part 1)

Siberian Coin Is Waiting For Investors

Today, in the territory of the Siberian Coin gambling zone there is only one gambling establishment – Altai Palace owned by Vladimir Kutyev. The entrepreneur is proud of his project, especially by the luxurious four-star hotel, which its visitors like very much. However, the owner does not yet have plans to increase the number of facilities and expand activities. He believes that there is no point in doing this until competitors appear. But when will they appear there? According to the businessman, the gambling zone is not attractive for companies because of poor logistics of the region – you can get there solely by S7 Airline planes. Therefore, the casino’s audience consists mainly of local residents.

Siberian Coin Is Waiting For Investors

Another significant problem, according to Kutyev, is the existence of underground gambling establishments in the region. Thus, according to the Siberian Coin’s owner, it is necessary to create good conditions in order to attract new investors. Or at least establish a logistics system for better access to the gambling zone.

Ambitious Plans for the Yantarnaya Gambling Zone Development

IEZ Yantarnaya is located on the Baltic Sea. It was originally planned that its objects will cover over 1 million square meters. However, probably for the same reason as in the case of Siberian Coin, there are only two establishments on the gambling zone territory – Sobranie Casino and Magic Crystal Slot Room. The investors (both foreign and local) are not interested in this IEZ’s development. Therefore, a large territory of the gambling zone remains free.

Read more: States with Zero Gambling Tax on Winnings (Part 2)

How Things Are Going With Primorye

If you look at the results of the Primorye gambling zone’s operation, we can conclude that its owners’ business is much more successful than that of the above-mentioned integrated entertainment zones. At least, for now, Primorye is the only IEZ that has managed to attract foreign investors. Of course, the geographical situation plays an important role here. Being located near Asian countries, it attracts a lot of foreign visitors who are happy to gamble and relax in Primorye. It takes only a couple of hours to get there by plane.

New facilities have been constructed throughout the gambling zone territory. By the end of 2020, the Shambala casino owned by the aforementioned Shambala JSC, and the hotel and entertainment complex Naga Vladivostok supervised by Naga Corp Ltd. will have been opened there. By the way, the casino Tigre de Cristal is already operating in the gambling zone.

Krasnaya Polyana Gambling Zone – The Pearl of the Krasnodar Region

Krasnaya Polyana Gambling Zone – The Pearl of the Krasnodar Region

The Integrated Entertainment Zone Krasnaya Polyana, which is the one that replaced Azov-City, is also actively developing. According to the facility development director, Dmitry Anfinogenov, this gambling zone is not afraid of the competition. On the contrary, he says, it helps other IEZs to develop. At the same time, the flow of foreign tourists coming to Krasnaya Polyana is growing. Gambling establishments are finding new ways to attract tourists, and it seems to be bearing some fruit.

Sochi Casino, the Bonus Slot Room, and Boomerang Casino operate on the territory of Krasnaya Polyana.

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Gambling Zone in the Crimea – A Project Shrouded In Mystery

Another gambling zone will soon appear in the Crimea. As of today, little is known about it. The names of investors have not been disclosed. It is only known that they are entrepreneurs from Russia, Korea, and China, who have already been engaged in the gambling business development. Experts explain that confidentiality is maintained due to the numerous sanctions imposed on Crimea by the world community.

This IEZ will be located in the village of Katsiveli. The regional Ministry of Finance will regulate this gambling zone’s operation. The casino premises are currently under construction. According to forecasts of the republic’s administration, it will be put into operation by the end of 2019.

Russian Casino Players’ Features

The Krasnaya Polyana gambling zone representative, Dmitry Anfinogenov, described the main characteristics of a modern Russian casino player. According to him, gambling establishments customers are currently much more respectful towards both staff and each other than, for example, 10-15 years ago. The expert explains that a casino is no longer a place for familiarity and rudeness. In addition, any gambling establishment that cares about its reputation is equipped with an effective security system. Thus, a player who behaves too emotionally may simply not be allowed into the casino next time.

Russian Casino Players’ Features

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Ban on Gambling – Who Took the Advantage?  

After the Russian casinos had been closed, there has been a significant increase in revenues in the segment of state lotteries and legal bookmakers.

Representatives of these two segments believe that their success is not related to the ban on land-based gambling establishments, but the results say otherwise. So, if the betting market volume was 65 billion rubles in 2008, it increased to 650 billion rubles in 2017.

The Russian state lottery operator Stoloto also has excellent performance. If in 2014 about 4% of Russians participated in lotteries, this value reached 27% by 2019.

Thus the lottery operator believes that this form of gambling can not cause addiction and is only a form of family leisure. However, you should know when to stop.

As mentioned earlier, according to the Finance Minister of Ukraine, the legalization of gambling business in the country will bring a huge profit to the state budget.

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