Russia’s online industry entangled in regulatory web

Russian bookmakers continue to struggle with a tangled web of regulations aimed at controlling the online market, with a new centralized online payments hub coming under fire for being overly complicated.
Industry participants gathering at the recent Betting Trends Forum, on March 17th in Moscow, said they were having a hard time with the so-called TSUPIS system, which was mandated by the government to track payments and ensure the collection of tax revenue. A proposal for bookmakers to pay 5 percent of revenue to support Russian sports teams and a mooted plan to introduce instant lottery terminals across Russia also raised consternation. 
The TSUPIS system is mandatory for all deposits and withdrawals at nationally licensed online gaming sites and works something like Skrill or NETELLER.
“All the problems with the collection of personal data and personal income tax, etc, will, unfortunately, lead to the self-discreditation of TSUPIS under the SRO control and then to its transfer under the state control,” Nikolay Oganezov, chairman of the Bookmaker's Self-Regulatory Organisation told the conference. “Especially whey they [the authorities] will understand that one can get profit from a top up fee. And bookmakers will have to accept this decision as given.”
TSUPIS was first introduced in federal law 222, which regulates online sports betting and came into force on 22 August 2014. Its two main functions are accepting and tracking payments from individuals and their subsequent transfer to bookmakers, as well the identification of online gamblers.
According to the law, Russia’s two SROs may have their own TSUPIS platforms under a license from the Russian Central Bank. There are currently two major SROs - the one led by Oganezov and First SRO, which headed by Oleg Zhuravskiy, who did not participate in the forum.
However, the rollout of the TSUPIS system has been delayed due to disagreements between the two rivals and concerns that some bookmakers would face higher transaction fees than others. The first test of this system was carried out in December 2015 and the launch of the first TSUPIS took place two months later.
The registration process requires a client to first open an account with the betting site, then open an account with TSUPIS. Gamblers then need to show up at betting shops with their passports for the final identification step.
According to lawyer Mariya Lepshchikova, under the Russian law only national bookmaking license holders are permitted to accept online bets.
Bookmakers are required to store all information on e-bets and wins on Russian territory and thoroughly check players, including monitoring the terrorist lists. A foreign company wanting to access a database with players’ personal information is required to have a Russian intermediary, which will request agreement from its customers to share the data.
The obligatory membership in SROs for bookmakers was stipulated by the same federal law 222 for better control and accountability of their activities. A bookmaker needs to join an SRO 30 days after obtaining a license for activities.
Zhuravskiy’s organization launched its TSUPIS system on February 15, whereas the Bookmaker’s SRO postponed its version due to the addition of new members. Earlier Oganezov said that he wanted to analyze mistakes made by the First SRO.
In February several members of First SRO left in favor of the rival Bookmakers’ SRO, citing better TSUPIS conditions as one of the factors. They involve such majors as Bingo Boom and Fonbet. Zhuravskiy denied the TSUPIS launch prompted their departure, saying that a service fee for a single transaction amounted to just 1 percent.
Taxation is also complicated. According to the Finance Ministry's bill, a player earning less than 4,000 rubles (about $60) is exempt from taxes, on winnings between 4,000 - 15,000 rubles the player pays the tax (13 per cent), but if he, or she, is lucky enough to win more than 15,000 rubles, the operator is responsible for paying the tax. In addition, if a player fails to pay the tax, the operator is required to inform financial authorities.
At the conference, Oganezov also criticized his colleagues for their early endorsement of a fee of 5 percent of revenue to support Russian sports clubs and federations, which was proposed by Russia’s Sports Minister Vitaliy Mutko. In return, bookmakers were promised a relaxation of some of the stricter norms governing advertising of gambling services.
“One needs to thoroughly consider and discuss all the proposals regarding the legislation and only then say that we are ready to pay. One needs to negotiate. Otherwise, each such statement that we are ready to pay for God knows what leads to the result that we would pay for air,” he stressed.
At present a TV advertisement cannot promote gambling as a way to obtain revenues or achieve success. It also cannot contain images of people or animals (the only exception is advertising in gaming zones and lotteries).
TV channels are only allowed to show bookmaking ads from 22:00 to 07:00 local time. However, the top Russian channel - Channel One, which also has the audience most sought after by bookmakers - does not accept any gambling advertising due to its program policy.
Moreover, gambling ads are prohibited on the Internet, but there is a way to bypass the ban, by representing them as information.
Two bills that may relax the rules have recently been discussed, but it’s unclear whether either has been submitted to parliament.
Another state regulation, which is currently being considered in the Russian parliament, is also causing much concern among bookmakers. Russian Finance Minister Anton Siluanov has introduced some amendments to the law on lotteries, which some analysts believe will blur the lines between state lotteries and the gambling business.
The bill has been recently tabled with parliament. Its authors believe that an instant lottery is the most convenient form of gaming for Russians who got used to it during Soviet times. They also think that this initiative will help get the gaming market under full control of the state. Tickets will be available from Video Lottery Terminals situated in special lottery shops. The prize fund of the entire lottery shop should amount to at least 50 percent of its proceeds, while the rest should be transferred to the federal budget and spent on social programs.
One bookmaker participating in the forum said the recent initiatives showed the government was “tightening the screws”.
The law was also criticized by one of the main investors in the Primorye gaming zone, who claims it will permit the installation of lottery slot machines and VLTs in many establishments, removing them from the ambit of Russia’s specially designated gaming zones.
Goran Miloshevski, director of gaming at Diamond Fortunes Holding, told the Vladivostok Daily News online publication that “possible amendments means the widespread return of slot machines in the walkable catchment of every Russian.”
“Investments in the construction of entertainment centers in the territory of gambling zones - is, above all, creating jobs for inhabitants of these regions and bringing major tax revenues to the regional budget. Amendments in the law may call into question the profitability of projects in the gambling zones and therefore significantly slow down the development of these territories,” Miloshevski predicted.