Volume 11 - Issue 54

/ June 2022

357

https:// www.amazoniainvestiga.info ISSN 2322- 6307

DOI: https://doi.org/10.34069/AI/2022.54.06.34

How to Cite:

Pohoretskyi, M., Cherniak, A., Serhieieva, D., Toporetska, Z., & Iskenderov, E. (2022). State monopoly on gambling on the

example of the organization lotteries by state-owned banks. Amazonia Investiga, 11(54), 357-366.

https://doi.org/10.34069/AI/2022.54.06.34

State monopoly on gambling on the example of the organization

lotteries by state-owned banks

Державна монополія на гральний бізнес на прикладі організації лотерей державними

банками

Received: April 12, 2022 Accepted: May 19, 2022

Written by:

Mykola Pohoretskyi136

https://orcid.org/0000-0003-0936-0929

Andrii Cherniak137

https://orcid.org/0000-0003-1803-0673

Diana Serhieieva138

https://orcid.org/0000-0003-1005-7046

Zoriana Toporetska139

https://orcid.org/0000-0002-2441-4852

Elchin Iskenderov140

https://orcid.org/0000-0002-9613-3806

Abstract

The article analyzes the model of absolute state

monopoly on gambling on the example of the

idea of the Government of Ukraine to organize a

lottery market by state-owned banks. The object

of the study is the process of assessing the risks

and economic benefits of involving state-owned

banks to the organization and conduct of

lotteries. The methodical instruments of the

study were general scientific and special research

methods (system-structural, formal-logical

(dogmatic), economic, comparative,

sociological, statistical). The study period is

selected from 2014 to 2021. Based on the

research conducted by the authors, the

inefficiency and high riskiness of the

combination of banks and lottery activities, as

well as its economic disadvantage for the state, is

proved by the authors. The main risk from the

combination of these types of activities is that the

bank can use the money attracted from the

population not for their direct purpose, in

particular: to use funds from the banking activity

Анотація

У статті проводиться аналіз моделі абсолютної

державної монополії на гральний бізнес на

прикладі ідеї Уряду України організувати

лотерею на базі державних банків. Об’єктом

дослідження є процес оцінки ризиків та

економічних вигод від залучення державних

банків до організації та проведення лотерей.

Методичним інструментом дослідження були

загальнонаукові та спеціальні методи

дослідження (системно-структурні,

формально-логічні (догматичні), економічні,

порівняльні, соціологічні, статистичні). Період

дослідження обрано з 2014 по 2021 рік. На

основі проведеного авторами дослідження

доведено неефективність та високу

ризикованість поєднання банківської та

лотерейної діяльності, а також її економічну

невигідність для держави. Основний ризик від

поєднання цих видів діяльності полягає в тому,

що банк може використовувати залучені від

населення гроші не за прямим призначенням,

зокрема: на використання коштів від

136

Doctor of Science in Law, Professor, Vice-rector for scientific and pedagogical work, Taras Shevchenko National University of

Kyiv, Kyiv, Ukraine.

137

Doctor of Science in Law, Professor, Rector of the National Academy of the Security Service of Ukraine, Kyiv, Ukraine.

138

Doctor of Science in Law, Professor, Professor of Criminal Procedure and Criminalistics Department, Educational and Scientific

Institute of Law, Taras Shevchenko National University of Kyiv, Kyiv, Ukraine.

139

Ph.D (Law), Associate Professor, Associate Professor of Criminal Procedure and Criminalistics Department, Educational and

Scientific Institute of Law, Taras Shevchenko National University of Kyiv, Kyiv, Ukraine.

140

Doctor of Science in Law, Professor, Professor of the Department of Law Enforcement and Anti-Corruption Activities, Educational

and Scientific Institute of Law, Interregional Academy of Personnel Management, Kyiv, Ukraine.

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and the needs of the organization of lotteries or

payouts, or to use funds of the prize money to

goals other than payouts. In addition, the

combination of these activities leads to an

increase the number of crimes in the banking

sector.

Key words: gambling, lotteries, state monopoly,

banking activities, evidence, crimes in gambling

sphere, fraud.

банківської діяльності та на потреби організації

лотерей чи виплат, або використовувати кошти

призових коштів на цілі, відмінні від виплат

виграшів. Крім того, поєднання цих видів

діяльності призводить до збільшення кількості

злочинів у банківській сфері.

Ключові слова: азартні ігри, лотереї, державна

монополія, банківська діяльність, докази,

злочини в сфері грального бізнесу, шахрайство.

Introduction

There are three main models of public gambling

management in the world: a total ban on

gambling (Afghanistan, Pakistan, Saudi Arabia,

Iran, Bahrain, Azerbaijan, Iceland, Brazil,

Indonesia, Thailand, Algeria, Libya, Sudan,

Central Africa and others); free gambling market

(Ukraine until 2009, Malta, Gibraltar, Monaco),

state monopoly on gambling (all European

countries). State monopoly on the organization

and conduct of gambling is existed in various

forms: absolute state monopoly, state monopoly

of a private company, oligopoly, limiting the

maximum number of gambling establishments,

limiting the permitted types of gambling, etc.

Absolute state monopoly provides that the

organizer of gambling is one or more state-

owned companies; private organizers are not

allowed to work in the state.

In Ukraine, several times in bills or bylaws

proposed to organize gambling and lottery

markets on the principle of absolute state

monopoly. In May 2017, the Ministry of Finance

of Ukraine published for discussion a new draft

for licensing conditions for the conduct of

economic activities for the issue and holding of

lotteries. The proposal to change the state policy

in the regulation of lottery activities,

redistributing the market in favor of state-owned

banks is new for Ukraine. Today, the license for

the issue and holding of instant lotteries in

Ukraine has the State Oschadbank, but has not

conducted its own lotteries since 2007, its share

in the lottery market until 2007 was also

insignificant and did not significantly affect both

the market and its banking activities.

The Cabinet of Ministers of Ukraine and the

Ministry of Finance of Ukraine insist on granting

such a right to state banks, motivating their

decision by the necessity of organizing a

competitive lottery market and increasing

revenues to the budget to 2 billion hryvnias. The

National Bank of Ukraine strongly opposed this,

basing its decision on the fact that lottery activity

is risky for banks, and therefore can cause

damage to the banking system. The

Antimonopoly Committee of Ukraine supported

the position of the National Bank of Ukraine.

Such discussions between government bodies,

experts, market participants and academics have

been going on for almost two years now.

Due to the lack of a single government approach

to the formation of state policy in this area, the

presence of opposing positions and arguments of

the parties, the problem of the necessity of

conducting complex research and risk

assessment of attraction of state banks of Ukraine

to lottery activity, as well as economic analysis

of projected results of implementation such

innovations for state banks and for the state.

Theoretical framework

The history of lotteries as a financial instrument

of accumulation and distribution of money is

very long. Thomas Gataker in his book The

Nature and Uses of Lotteries gave the first

systematic exposition of a modern view of

lotteries, not just as a form of gambling, but as a

fair method of division (Gataker, 2013,

р. 172-175).

D. O. Getmantsev in his monograph examines

the general issues of legal regulation of contracts

on games, concepts and types of lotteries, the

main principles of regulation of the lottery

market in Ukraine and foreign countries

(Getmantsev, 2008, р. 40). S. G. Osyka devoted

his work to the study of issues of legal regulation

of gambling and lottery activity in individual

states and at the interstate level (Osyka, 2011,

р. 343). These works are very valuable, the

general theoretical positions set forth by the

authors underlining the research, but since the

writing of works in virtually all foreign countries,

the state policy on regulation of the lottery

market and legislation has changed, which

stipulates the need for further scientific research.

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V. M. Dorohykh in the candidate’s thesis

investigates the issues of administrative and legal

regulation of gambling business in Ukraine

(Dorohykh, 2004, р. 19), however, in 2009

gambling business is prohibited, in connection

with which the state policy in this area has

changed.

M. O. Lyskov in his doctor’s thesis investigates

the issues of public administration of the lottery

sphere, focusing on public administration means

(Lyskov, 2017, р. 272).

Thus, scientists in Ukraine have devoted little

attention to the issues of legal regulation of

gambling and lottery business. Most of the

modern research is devoted to the fight against

illegal gambling and to the problems of

investigation in the criminal proceedings against

gambling (which has been prohibited in Ukraine

since 2009).

For example, N. O. Petrychko examines the

criminal law and criminological problems of

illegal gambling (Petrychko, 2010, р. 73). She

focuses on the need to select victims of this

crime, because gambling creates gambling

addiction, which manifests itself in

uncontrollable and often repeating episodes of

the game. R. O. Pinyaga devoted his candidate’s

thesis to the crimes related to gambling (Pinyaga,

2015, р. 21). In this work, the author emphasizes

that gambling is a risky activity that is always

associated with financial fraud, including in

banks and money laundering from this crime. M.

A. Pohoretskyi and Z. M. Toporetska consider

the peculiarities of the investigation of the

gambling business (Pohoretskyi, & Toporetska,

2015, р. 250). In this monography the authors

cite modern ways of disguising gambling

business for lottery activity, as well as paying

attention to the peculiarities of legalization of

criminal proceeds from gambling business using

the banking system. V. V. Vysotska considers the

issue of criminal-legal analysis of the crime of

occupation by gambling business (Vysotska,

2016, р. 172).

There are very little scientific works on the

problem of holding lotteries by banks in the

world, while maintaining a common proper it is

forbidden hold lotteries by banks. In separate

publications proposed to the banks to conduct

promotional draws for bank customers instead of

lotteries. For example, creating a deposit

program «save to win» with a prize draw allowed

banks to more actively involve the population in

accumulating funds in the banking system.

Unsolved aspects of the general problem. The

analysis of the above-mentioned works testified

that in scientific researches general issues of

choice of models of regulation of the lottery and

gambling market in different countries were

covered. The considerable attention of scientists

is devoted to questions of criminal struggle

against illegal gambling. Problems of

organization of gambling by state companies and

the issue and holding of lotteries by state banks

in the scientific literature have not yet been

investigated, which, together with the

intensification of discussions in the state on this

issue, has led to the need for in-depth study.

The aim of the article is the study and

assessment of absolute state monopoly on

gambling on the base of assessment the state idea

to involve Ukrainian state-owned banks in

organization and conduction lotteries on the basis

of studying foreign experience in organizing the

lottery market, conducting own empirical studies,

as well as own calculations of the effectiveness

of such activities for banks and economic

benefits to the state.

The object of the study is the process of

assessing the risks and economic benefits of

involving state-owned banks to the organization

and conduct of lotteries.

The subject matter of the study is the

requirements to lotteries in the current legislation

of Ukraine; factors, causes of the risk

combination of lottery and banking activities;

economic indicators of the activity of state banks

of Ukraine; activity of banks of foreign countries,

which carry out lottery activity.

Methodology

In scientific research were used general scientific

and special methods of research (system-

structural, formal-logical (dogmatic),

comparative, sociological, statistical). Methods

of generalization and logical analysis were used

to distinguish and group risk factors of the

combination of lottery and banking activities.

Using the sociological method of research, the

authors conducted a survey of practicing bank

employees and clients of banks, which revealed

that lack of awareness of bank employees with

the specifics of lottery activity, as well as a

decrease in customer confidence in the bank in

the event of a combination of a bank lottery and

banking activity. Economic methods were used

in assessing the value of organizing lottery

business, assessing the economic performance of

banks. Statistical methods were used in the study

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of the statistical information of the National Bank

of Ukraine regarding the main indicators of

banks' activity.

Results and discussion

Foreign experience in organizing and

conducting gambling

The absolute state monopoly on the organization

of the gambling business is to allow gambling

exclusively for one company, which is wholly or

partly state-owned, exists in France, Austria and

Denmark. France is the sole operator of

Francaise des Jeux for the state-owned casino, 72%

of which is state-owned, Denmark is the state-

owned Danske Spil A / S, 80% of which is state-

owned, 10% of the Danish Sports Federation and

10% of the Gymnastics and Sports Association,

and 70% in Austria Casinos Austria AG, owned

by the state (Pohoretskyi, & Toporetska, 2014, p.

73).

In most countries, state monopoly means

allowing socially harmful activities within a

strict framework that will minimize such harm to

individual members of society (Agrawal, &

Trandel, 2019). Instead, the compensator of this

school is the financing of various spheres of

public life through contributions from the

gambling business for good deeds (Cheng, & Ma,

2018, p. 235).

Lotteries in most European countries are a form

of gambling, and therefore are organized on the

principles of state monopoly. Lottery activity in

the world is one of the financial instruments of

the state on voluntary accumulation and

redistribution of funds from the population for

social purposes. Finance has a monetary form of

expression, since financial relations are not

possible without the movement of money.

Money is the material bearer of financial

relations, and their amount in circulation (money

supply) affects the efficiency of the functioning

of the financial system (Pohoretskyi, Vakulyk, &

Serhieieva, 2015, р. 134). In fact, the lottery is an

additional voluntary method (along with taxes)

involving the money from the population, their

redistribution in the game, and the transfer to the

budget (deductions from the operator of gross

game income) to finance them at the expense of

"good deeds" - culture, sports, cinematography,

treatment of complex illnesses, etc continues

(Getmantsev, 2008, р. 42).

In accordance with paragraph 2 of Part 1 of Art.

1 of the Law of Ukraine No. 5204-VI "On State

Lotteries in Ukraine" from September 6, 2012, a

lottery is understood as a mass game, regardless

of its name, the conditions of which it is planned

to draw a prize (winning) fund among its players

and the victory in which has a random character,

the territory of conducting (distribution) which

extends beyond the limits of one building

(structure), regardless of the way of making

money for participating in such a game. The said

law allows state banks to carry out activities for

the issue and holding of lotteries. In addition to

Art. 47 of the Law of Ukraine No. 2121-III "On

Banks and Banking Activities" from December 7,

2000 stipulates that the bank is also entitled to

carry out activities for the issue, distribution and

holding of lotteries.

The authors carried out a research study on the

examination of employees of state-owned and

state-owned banks (During the study, the authors

interviewed 200 respondents (80 employees and

120 clients of state-owned banks of Ukraine LLC

by shares "State Savings Bank of Ukraine" and

LLC by shares "State Export-Import Bank") for

specially designed questionnaires.), which

showed that 86% of bank employees did not have

the experience of organizing, conducting or

distributing lotteries and never worked in the

lottery sector, 14% of bank employees

distributed (sold lottery tickets and paid winnings)

lottery, working in Limited Liability Company

by shares "State Savings Bank of Ukraine" or

lottery operators, but have no experience in

organizing or conducting lotteries.

The survey of clients of state banks showed that

only 15% of customers play in the lottery, while

69% of the clients have a negative attitude to

giving the right to state banks to conduct lotteries,

16% failed to identify and 15% supported such

an initiative (Parra, 2018, р. 30). During the

questioning and interviewing of clients of banks,

it was found out that the main reason for such a

negative attitude is the fear that the funds of

clients of banks (deposits) will be used for

lotteries, which will make it difficult for them to

return depositors.

In order to identify the risks of combining lottery

and banking, foreign experience should be

explored to enable banks to organize and conduct

lotteries.

In any country in Europe, the bank, and even

more so the state, does not carry out activities for

the issue and holding of lotteries. This position of

the states can be understood, since this activity is

essentially not banking. In addition, there are

high risks of using someone else's funds for other

purposes: using funds from the prize pool

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(players’ funds) to cover bank losses or using the

bank's funds to cover losses from lotteries

(depositors’ funds). Moreover, the conduct of

lottery activities because of high financial risks

jeopardizes the bank as a whole, and given that

such a right is granted to a state bank (system-

forming), this poses a threat to the national

economic security of Ukraine. There are also

high IT risks when integrating lottery and

banking software that can be expressed in the

vulnerability of electronic banking systems to

external unauthorized interference with their

work (Pinyaga, 2015, р. 7).

In the USA at the federal level there is a direct

prohibition of banks to engage in lottery

activities. So in Art. 9 (a) of the Federal Reserve,

the US has a direct prohibition on participating in

lotteries or other rates for banks (Blair, 2012,

p. 11).

In Uzbekistan, the right to hold lotteries was

granted to Narodnyi Bank under the 2009 license,

with the Ministry of Finance of the Republic of

Uzbekistan (51%) and the Central Bank of the

Republic of Uzbekistan (49%). At the same time,

employees of this bank have recently been

prosecuted for the compulsory sale of lottery

tickets. The Ministry of Justice reported that,

along with the payment of wages, scholarships,

and pensions through the bank, the clients were

forcibly forced to buy lottery tickets.

In Brazil, the lottery Mega Sena, Quina and

Loteca (formerly Loteria Esportiva) are held by

the federal bank Caixa Econômica Federal since

1961. At the same time, in 2014 there was an

attempt to bank robbery in the amount of 31

million dollars by involving a head of one of the

bank branches, which helped open an account for

the transfer of a prize to the lottery. Then these

funds were transferred to many other accounts.

In Japan, the exclusive right to conduct a lottery

is Mizuho Bank. Lottery is allowed for sale for

the population only within Japan. The bank

began to hold lotteries in 1945 after the war,

when the country was destroyed, needed help.

The population of Japan is very disciplined and

responsible came to this process and actively

played a lottery for the support and

reconstruction of the country. Lottery Takarakuji

(luck) is still held by the bank. In Japan, the only

example in the world is the successful conduct of

lottery activity by the bank. This is primarily due

to the history of lottery and culture, mentality and

discipline of the Japanese. In addition, Mizuho

Bank has no competitors on the territory of the

country, and therefore its activity as a single

market entity cannot be fail.

Assessment of the ability of state banks of

Ukraine to conduct lottery activities

On May 05, 2017, on the website of the Ministry

of Finance of Ukraine, a draft the resolution of

the Cabinet of Ministers of Ukraine "On approval

of licensing conditions for conducting economic

activities for the issue and holding of lotteries

and the establishment of fees for the issuance of

a license for conducting economic activities for

the issue and holding of lotteries" was published

for discussion. The document received quite a

few comments from the state authorities, which

should be agreed upon, as well as criticisms from

the people's deputies of Ukraine, representatives

of the expert environment and the market.

For example, in the Report of the Antimonopoly

Committee of Ukraine (hereinafter - AMCU)

approved by the Committee on 22.02.2018 a

number of comments on the right of state-owned

banks to hold lotteries were expressed. The

AMCU notes in the report: "Banking activity is

distinct both from lottery and from activities in

any other gambling or additive goods market due

to its legal nature and essence. The business

model, marketing policy, service standards, etc.

on the two markets have significant differences,

which excludes the conclusion that the

experience of the subject in the banking sector is

a guarantee of the latter's ability to work

effectively in the market for the issue and holding

of lotteries. Taking into account the said

combination, a combination of one banking and

lottery business will require more resources and

efforts to maintain an adequate level of stability

and solvency, as well as to maintain a positive

reputation and trust from the public, which is a

prerequisite for effective work on the banking

market". Today there are four state-owned banks

in Ukraine. Oschadbank and Ukreximbank were

state-owned from the beginning. Ukrgasbank

became state-owned as a result of the capital

increase. And PrivatBank became state-owned in

December 2016 as a result of nationalization and

capitalization in order to avoid a systemic threat

to the country's economy and minimize losses to

the state. Today there are two state-owned banks

in Ukraine (created by the state and are 100%

owned by it): LLC by shares "State Savings Bank

of Ukraine" and LLC by shares "State Export-

Import Bank".

Thereinafter, banks need significant economic

resources to organize their lottery activities. We

will conduct a study of the financial capacity of

state-owned banks to organize lotteries (for

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example, LLC "Oschadbank" and LLC

"Ukreximbank").

LLC by shares "State Savings Bank of Ukraine"

has a license for conducting business activities

for the issue and holding of instant lotteries,

however, since 2007, it does not carry out its own

lotteries, but carries out only the distribution of

lotteries organized by other operators of lotteries.

In addition, in order to resume activities on the

issue and holding of lotteries, the bank must

comply with the requirements of the current Law

of Ukraine No. 5204-VI "On State Lotteries in

Ukraine" from September 6, 2012 to the lottery

operators.

LLC by shares "State Export-Import Bank" has

never carried out lottery activity, therefore, it

does not have qualified personnel for the

organization of such activities, necessary

software, technical support for lottery terminals

and does not have the appropriate minimum

number of separate units and distribution points.

According to the financial statements published

on the website of the National Bank of Ukraine,

as well as LLC by shares "Oschadbank" and LLC

by shares "Ukreximbank", these banks, carrying

out exclusively banking activities, as a rule,

worked with large losses or small profits, which

cannot yet close large losses of the past years.

Table 1.

Financial result of state banks (according to the National Bank of Ukraine)

Year

Limited liability company by shares "Oschadbank"

Limited liability company by

shares "Ukreximbank"

2021

+ 1,1 bln UAH

+ 2,1 bln UAH

2020

+ 2,7 bln UAH

-5,59 bln UAH

2019

+ 255,1 mln UAH

+ 65,8 mln UAH

2018

+ 132 mln UAH

+ 805 mln UAH

2017

+ 559 mln UAH

+ 765 mln UAH

2016

+ 464 mln UAH

- 977 mln UAH

2015

-12,3 bln UAH

- 14 bln UAH

2014

- 8,6 bln UAH

- 11,2 bln UAH

Source: Official website the National Bank of Ukraine (2014-2021).

In addition, in 2014 LLC by shares

"Oschadbank" received funds for state

capitalization in the amount of UAH 11.6 billion,

in 2016 it was UAH 4.96 billion, in 2017 it was

UAH 5.4 billion more. In LLC by shares

"Ukreximbank" in 2014 was capitalized at UAH

5 billion, in 2016 it was UAH 9.3 billion, in 2017

it was UAH 4.7 billion more. Pre-capitalization

was carried out through the issuance of domestic

government bonds. Thus, in 2014-2017, the state

expended 22 billion UAH at the expense of

increasing the state debt for the capitalization of

LLC by shares "Oschadbank", and 19 billion

UAH for the pre-capitalization of LLC by shares

“Ukreximbank”. In 2018, the question of bank

capitalization was also considered in 2018. In

2020, the National Bank of Ukraine again

recapitalized "Ukreximbank" in the amount of

UAH 6.84 billion. due to domestic government

bonds.

The difficult situation in state-owned banks is

due to a significant percentage of non-

performing loans, as well as serious problems

that have accumulated in previous years due to

crime in the banking sector and the inability to

return bank assets seized by criminals as a result

of such criminal activity, which is associated

with the difficulty of detecting and proving such

crimes (Pohoretskyi, Serhieieva, & Toporetska,

2019, р. 40).

Calculate the bank's basic expenses necessary for

the start of the activities for the issue and holding

of lotteries, using the method of assessing the

value of "bottom-up" (Huang, & Wen, 2018,

p. 355) and evaluating the cost elements of their

economic content: labor, material (materials and

raw materials), costs for the purchase, lease,

equipment leasing and production facilities,

subcontract (costs for part of the work of external

organizations), other costs (administrative fees,

license fees, transport, warehousing costs,

advertising, etc.).

To operators of state lotteries, the Law of

Ukraine No. 5204-VI "On State Lotteries in

Ukraine" from September 6, 2012 has set certain

higher requirements. Some of them do not apply

to state-owned banks. However, a number of

requirements of the bank, if desired to organize

and conduct lotteries, must comply. In particular,

according to Art. 6 of the said Law among the

main requirements is provided:

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− the operator of state lotteries must have

permanently operating separate units in each

populated area of Ukraine with a population

of more than 500 thousand people, as well as

points of distribution of state lotteries in

each settlement with a population of more

than 5 thousand people, but not less than 5

thousand distribution points;

− the electronic system of acceptance of rates

of the operator of state lotteries should

include not less than 5 thousand working

terminals of the electronic system of

acceptance of rates belonging to the operator

of state lotteries on the right of ownership;

− the network of distribution of state lotteries

of the operator of state lotteries must be not

less than 5 thousand points of distribution of

state lotteries;

− the operator of state lotteries is obliged to

insure the risk of non-payment to prize-

winning players in the event of his

insolvency and / or bankruptcy in the

amount of the prize (winning) fund paid by

the operator of state lotteries during the

previous calendar year;

− operator of state lotteries ensure observance

of financial-economic, technological and

organizational norms established by

licensing conditions;

− the business entity at the time of application

with the application for obtaining a license

must confirm its compliance with the

requirements provided for by this Law to

lotteries operators, as well as observance of

other norms established by licensing

conditions;

− the head of the operator of state lotteries,

persons who perform the duties of the head

of the operator of state lotteries in the

absence of him, as well as officials

responsible for the technological process in

conducting state lotteries, must meet the

requirements for education, professional

experience and business reputation

determined licensed terms.

The Draft Resolution of the Cabinet of Ministers

of Ukraine regulates the fixed cost of the license

in the amount of 100 thousand costs of living

adjustment for an able-bodied person (from

01.01.2018 - 1921 UAH), that is, the fixed fee for

the issuance of a license amounts to 192.1 million

hryvnias. The project also includes an annual

non-fixed fee for a license: 100 costs of living

adjustment for an able-bodied person (192,100

UAH) annually for each distribution point in

which the drawing of drawings of unlimited

lotteries is carried out at the terminals of the

electronic system of acceptance of bids, and 10

costs of living adjustment (UAH 19,200) for a

point of distribution of lotto or 110 costs of living

adjustment (UAH 211,310) if both of the above

types of lotteries are distributed in the clause.

Given that there must be at least 5000

distribution points in the lottery operator, this

amount may be quite large. Of course, the bank

may not carry out the specified types of lotteries

at all points, but limit themselves to classical

lotteries, which still do not bring the operator

large profits.

Let's assume that the lottery operator will install

only 20% (1000) points of distribution of

lotteries with visualization and lotteries. This is

the minimum number of distribution points that

must be set by the operator to have at least some

kind of profit from such activity. Then the cost of

purchasing licenses only will be 110 costs of

living adjustment (211 310 UAH) * 1000 points

= 211 310 000 UAH every year.

That is, the minimal expenses for the acquisition

of licenses in the first year of the bank's activity

will amount to 192,1 million UAH + 211,3

million UAH = 403.4 million UAH.

If we talk about the distribution of such lotteries

throughout the network operator (5000) points of

distribution), then the annual cost of such

licenses will be 110 costs of living adjustment for

an able-bodied person (211,310 UAH) * 5000 =

1,056 billion UAH. For comparison: the turnover

of the entire lottery market according to the data

of the Ministry of Finance of Ukraine, provided

at the request of the authors, in 2017 amounted to

1241.5 million UAH (in 2016 - 802.8 million

UAH., In 2015 - 1 407.7 million UAH).

Thus, the net profit of LLC by shares

"Oschadbank" for 2018 is not enough to acquire

a license, therefore, they must be obtained from

other sources (either from deposits of the

population, or to ask to be capitalized to the state).

However, it is profitable to give the bank more

than 400 million UAH for the right to conduct

lotteries, if he already has a free license, but has

not been using it since 2007. LLC by shares

"Ukreximbank" must give half of its annual

income for the last year only for the acquisition

of the right to conduct lotteries.

Let's evaluate the cost of organizing lotteries. Of

course, they cannot be accurately calculated, but

at least the bank as the lottery operator needs to:

open separate units in the cities of Ukraine and at

least 5,000 distribution points (renting premises,

purchasing equipment, furniture, employing at

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www.amazoniainvestiga.info ISSN 2322- 6307

least 5000 people, etc.); to establish electronic

bidding system (central server, special software,

information security programs, computer

equipment, etc.); to buy at least 5000 terminals of

the electronic system of acceptance of rates; To

hire a management that has experience in the

issue and holding of lotteries; print lottery tickets;

to make advertising of lottery activity, etc.

For example, as Peter Shetty, an investor in the

state lottery operator's Ukrainian National

Lottery, said he had invested in the development

of the company 70 million USD. Even on the

basis of the size of 70 million USD, this amount

is almost 2 billion hryvnias. However, today the

indicated amount may be much higher, as the

cost of computer equipment and software

changes, the rental cost increases, salaries for

employees, etc.

According to the calculations carried out by the

authors by the bottom-up method, the basic costs

of the bank were calculated, necessary for the

beginning of activities on the issue and holding

of lotteries, assessing the cost elements for their

economic content: labor, material (acquisition of

computer equipment, the creation of a central

electronic system, purchase of lottery terminals,

etc.), costs for the purchase, lease, leasing of

equipment and facilities, subcontract (costs for

part of work by external organizations), other

expenses (administrative costs and, royalties,

transportation, warehousing costs, advertising,

etc.) costs of the bank will be around 5 billion

USD. At the same time, the specified amount of

investment does not guarantee the success and

profitability of such a business.

Whether it is profitable for the state to give the

state banks the lotteries. To answer this question

should take into account the economic interest of

the state – receiving revenues for the state budget

of Ukraine. It is certainly not profitable, because

in this case it is unlikely that the budget revenues

from such activity, indeed, the budget will

receive from 400 million to 1.2 billion revenues

from a fee and a license for one entity, but in fact

the state will have to invest for the state Banks

acquire this right and further invest about 5

billion UAH in one pot to launch lotteries.

In case of violations in the organization of

lotteries, in particular, the presence of signs of

money laundering, tax evasion, manipulation of

the electronic system of betting, etc., may be

grounds for criminal proceedings, which will

require investigators (investigative) actions,

covert investigative (search) actions in order to

establish the circumstances that are subject to

proof in criminal proceedings.

It would be economically advantageous for the

state to at least preserve the existing lottery

market with three operators of lotteries, carry out

reforms of the lottery industry in order to ensure

favorable conditions of work in the market,

investment attractiveness of the market. Then we

can talk about annual growth of market volumes

and deductions to the State Budget of Ukraine in

the amount of 25-30% (indicators of the most

successful years for lottery business). Today, in

spite of inconsistent state policy in regulation of

lottery activity, lack of necessary regulations,

delaying the process of issuing new licenses for

lotteries, inefficient tax policy, lack of effective

measures to combat gambling, and thus masking

gambling business in the form of lotteries, loss

the population's trust in lotteries, the lottery

market still brings the state 100-200 million

hryvnias’ revenues to the budget. With the

correct organization of the lottery market and a

stable state policy in this area, state revenues

could amount to more than 1 billion UAH each

year with a constant steady increase in income,

but these issues are not covered by the topic of

this article and will be disclosed by the authors in

further scientific research.

Table 2.

Indicators of the lottery market according to the Ministry of Finance

Year

Market turnover

(amount of

accepted rates),

UAH million

The amount of

deductions from

lotteries

Deductions from

the profit tax,

mln. UAH

Deduction of

military salary

from prizes, mln.

UAH

Total taxes,

mln. UAH

2013

9 069,5

321,0

47,6

368,6

2014

12 429,8

318,9

27,7

28,4

375,0

2015

1 407,7

26,4

103,6

12,2

142,2

2016

803,1

64,2

52,1

4,6

120,9

2017

1241,5

55,0

110,5

10,1

175,6

Source: Letters issued by the Ministry of Finance of Ukraine. No. 06010-04-2 / 35049 of 13.12.2017 and

No. 06010-10-13 / 9334 dated April 14, 2018, received upon the request of authors.

Volume 11 - Issue 54

/ June 2022

365

https:// www.amazoniainvestiga.info ISSN 2322 - 6307

On September 7, 2018, a Bill № 9067. "On

Amendments to the Law of Ukraine" On Banks

and Banking Activities" concerning the

specification of certain provisions on banking

supervision" was submitted to the Verkhovna

Rada of Ukraine, which provides for the

introduction of a ban on state lotteries for the

conduct of lotteries. The Verkhovna Rada of

Ukraine did not consider the draft.

Conclusions

Thus, a scientific study shows that Japan is the

only example of a successful state lottery in the

world, but this is due to the history, culture and

mentality of the country, and not to the activities

of the bank. In the United States there is a direct

ban on banks for lotteries. In no country in

Europe, the state bank does not hold lotteries.

This is due to the high riskiness of lottery activity

for banks, which manifests itself in the following

risks: the use of funds of depositors of banks not

for their intended purpose (for payment of

winnings); use of prize money funds to cover

losses of the bank; program risks in the

integration of lottery and banking software; risks

of protecting confidential information of the

bank, etc.

In case of permission from state banks in Ukraine

to carry out lotteries, instead of incomes, the

budget of the country will suffer additional losses

in the amount of more than 5 billion UAH for one

bank, which are necessary for the start of

activities for the issue and holding of lotteries by

the bank.

Therefore, in Ukraine it should be forbidden to

hold lotteries for state banks, instead, it is

foreseen the possibility of obtaining a license for

several subjects (not less than 3-5), who have

experience in the issue and holding of lotteries,

as well as the necessary financial and technical

basis for conducting them, which will preserve

the existing lottery market and ensure a steady

increase in budget revenues, but these issues are

not opposed to the object of the study of this

article and will be the subject of further scientific

research by the authors.

Therefore, the best model for Ukraine will be the

organization of the gambling market on the

principle of state monopoly, which would limit

the maximum number of licenses or the

maximum number of gambling establishments

that can operate in the country, but giving private

organizers the right to gamble. Some elements of

the state monopoly on gambling are already

provided for in the Law № 768-ІХ from July 14,

2020, On state regulation of activities related to

the organization and conduct of gambling.

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