The role of Rudogo and CRAIL in budget losses from gambling

The topic of the gambling business during the war acquired particular relevance, because hundreds of millions and even billions of hryvnia are in circulation in this area. The legalization of the gambling business opens up significant potential for replenishing the state budget, but how effectively is this opportunity being realized?

It is estimated that the shadow gambling market in Ukraine amounts to UAH 10–15 billion per month, but only a small part of these funds goes to the state budget. The salaries of the KRAIL managers who control this area are growing rapidly - in 2023 they amounted to more than UAH 1 million. At the same time, the opacity of declarations of commission members and suspicions of connections with dubious gambling operators raise the question: why does such a profitable industry remain uncontrolled and public funds unaccounted for?

The Commission for the Regulation of Gambling and Lotteries (CRAIL) was created as a tool to control the gambling market in Ukraine after the legalization of this business in 2020. Its main mission was to regulate, supervise and protect players from the negative consequences of gambling, as well as to ensure revenue for the state budget. But as a body that should ensure transparency, honesty and social responsibility in this industry, CRAIL has proven to be a problematic structure, shrouded in corruption scandals, opaque actions and conflicts of interest.

In particular, the Parimatch company recently very quickly received a license, which at that time was under sanctions from the President of Ukraine, and this raised suspicions of a corruption component. The Joker Telegram channel drew attention to this. Therefore, the editors of StopCor decided to figure out how effectively the Commission really works and whether it benefits the Ukrainian budget.

Revenue to the budget and management salaries

One of the tasks of KRAIL was to ensure revenue to the budget through fees from the issuance of licenses and taxes from the gambling business. During the period from 2021 to 2023, the budget of Ukraine received significant amounts from the activities of gambling business operators. In 2023, the gambling business brought UAH 10.4 billion in taxes to the Ukrainian budget, which significantly exceeds revenues in previous years: in 2022 it was about UAH 730 million, and in 2021 even less, about UAH 200 million. However, according to experts, from 10 to 15 billion UAH per month are in the shadows, outside of state control. The lack of a system to combat tax evasion in the gambling sector creates favorable conditions for illegal operations, and the state treasury loses significant revenue.

In addition, KRAIL has a very high level of salaries for its management. Thus, the head of the commission, Ivan Rudoy, ​​received a total income of 1.399 million UAH in 2023 (after taxes - 1.126 million UAH, which is 93.8 thousand UAH per month). His salary includes salary (371.1 thousand UAH), bonuses for work intensity (270.9 thousand UAH), bonuses for performing particularly important work (270.9 thousand UAH), bonus for length of service (89. 5 thousand UAH) and other payments, including bonuses, financial assistance and vacation pay

Commission members also have high salaries. Kristina Dutka earned 1.7 million UAH

Anna Sdobnova received 1.6 million UAH.

Elena Vodolazhko, who worked until October 2023, received UAH 1.6 million. The salary includes salary, bonuses for work intensity and performance of important work, as well as monetary and material assistance. Executive salaries are a concern because of their size, especially given the challenges the commission has faced.

Alexey Botezat - according to journalists, 440 thousand UAH for three months of work.

It was not possible to find Botezat’s declaration on the NAPC website

It is worth noting that for some reason the official declarations of Ivan Rudoy and Alexei Botezat are not available on the NAPC website. Although, according to the Law of Ukraine “On the Prevention of Corruption”, persons holding a responsible or particularly responsible position (in particular, civil servants) must submit annual electronic declarations on their property status, income, expenses and financial obligations. Perhaps civil servants and members of the commission are thus hiding their property status and probable enrichment?

The editors of StopKor asked the NACP about this, but did not receive any specifics in response. The letter contains uninformative references to the Laws of Ukraine and does not contain actual information on the reasons for the absence of declarations on the site.

Insufficient control over illegal businesses

According to the tasks of KRAIL, the commission was supposed to fight the illegal gambling market, but the lack of proper control led to the fact that most of the market remains outside the legal field. Difficulties in identifying illegal gambling establishments, a lack of coordination between government agencies and imperfect tax laws complicate this fight. Law enforcement officers often cannot determine whether an establishment is legal, and the organizers of the gambling business shift responsibility onto each other.

“State lotteries are not gambling. No one will be able to determine whether this is a state lottery or whether this establishment is running a legal business,” assured Natalya Kalinovskaya, representative of the economic protection department of the National Police of Ukraine.

In addition, poor taxation and outdated tax regulations allow illegal institutions to flourish. Taxes applicable to the gambling business often do not correspond to modern realities, which complicates the fight against illegal operations. In fact, the gambling market is taxed at the rates and model established with the adoption of the Tax Code of Ukraine in 2010, when gambling was banned in our state for a year and a half. This was reported by Doctor of Law, Associate Professor Zoryana Toporetskaya.

It would be advisable to coordinate actions with the police, the Ministry of Finance and other authorities to effectively combat illegal business, but this process remains unorganized. The lack of clear rules, limited resources and coordination leads to each body transferring responsibility to others. As a result, the shadow market prospers, while the state remains without proper control and loses potential budget revenues.

Responsible gaming: insufficient protection of players from gambling addiction

CRAIL must protect players from gambling addiction, ensuring social responsibility and preventing gambling addiction. However, many initiatives in this area remain only on paper. The situation is especially critical for military personnel, who are exposed to high stress during war and become vulnerable to gambling.

Gaming companies often target this group with advertising, using the symbols of the Ukrainian Armed Forces and disguising their activities as charity in favor of the army. Such character whitening not only harms the military, but also undermines national security, as some in the military may spend their allowance on gambling, putting themselves and their comrades into debt and putting themselves and their comrades in danger. This is stated in the text of the petition to Vladimir Zelensky to limit the operation of online casinos, which collected 26,040 signatures in just half a day. The author of the petition is a soldier of the 59th brigade Pavel Petrichenko.

In turn, the chairman of KRAIL, Ivan Rudoy, ​​believes that the problem of gambling addiction among the military requires changes to the legislation. He proposes to give commanders of military units the right to submit proposals to CRAIL to include individual military personnel in the register of persons who have limited access to gambling establishments. However, this requires additional legislative changes. He also notes that the current register of gambling addicts does not provide information about the professional activities of individuals.

Of course, KRAIL maintains a Register of Gamblers, which includes persons who have limited access to gambling establishments. However, this registry does not include the field of online gambling, which allows addicted players to continue gambling online without restrictions. Online casinos remain the biggest source of gambling addiction, and the situation is only getting worse due to the lack of an effective CRAIL policy regarding online gaming.

Critics say that CRAIL is not doing enough to create a system for responsible gambling and help for addicted gamblers. Even after the introduction of self-restraint mechanisms for gamblers suffering from gambling addiction, about 25% of the adult population of Ukraine still faces gambling addiction. The situation is aggravated by the lack of a clear strategy for supporting players and treating addiction, which is a serious social problem.

Gambling business licensing

The idea of ​​legalizing the gambling business was to introduce transparent and clear licensing procedures for subjects of this market. However, CRAIL has found itself at the center of numerous allegations of corruption and lack of transparency in the issuance of licenses. Instead of a fair and controlled market, there is a suspicion that many licensing processes are controlled manually, which opens the door to corrupt schemes. Minister of Digital Transformation Mikhail Fedorov publicly stated the risks arising from the non-transparent work of KRAIL. To minimize the human factor, it was proposed to automate the process of issuing licenses through an online monitoring IT system. This system could have made it possible to track interactions between operators and the state, but it was never launched.

Chairman of KRAIL Ivan Rudoy explained that the commission does not independently develop an online monitoring product, but only works on the regulatory framework. Due to the full-scale invasion, funding for the system was redirected to other needs in the country, but he said the project remains a priority for future implementation.

Corruption scandals in CRAIL: opacity and suspicion

The activities of KRAIL have been repeatedly overshadowed by corruption scandals. The head of CRAIL, Ivan Rudoy, ​​found himself at the center of a scandal when, during the war, he issued licenses to the company Parimatch, which at that time was under sanctions from the President of Ukraine due to suspicious actions and possible ties with Russia. This happened five days later, which raises suspicions of corruption and violation of the law. In fact, Parimatch bypassed the sanctions and continued its activities under other brands, and Rudoy’s decision further highlighted the problem of the opacity of CRAIL’s work.

Earlier, StopCor journalists discovered disguised “Russian traces” in the activities of the VBet company and its interests. And VBET Ukraine LLC appears on the website of the Commission for Regulation of Gambling and Lotteries in the list of operators to which CRAIL has issued a license.

FavBet is also suspected of having ties to the Russian market, including for continuing to operate in Russia even after the outbreak of hostilities in Ukraine. The company is also involved in schemes to sell its franchise in the Russian Federation, which allows it to continue making money from the gambling business in the aggressor country.

Adding to the scandals around KRAIL was the case when Ivan Rudoy was accused by the NAPC of failure to report a conflict of interest when making decisions on disciplinary proceedings against the head of the KRAIL apparatus. Based on these charges, administrative proceedings were initiated against Rudoy, ​​and he was entered into the Unified State Register of Persons Who Committed Corruption Offenses.

In addition, the NACP drew up a report against Ivan Rudoy and Denis Shmygal for illegally disclosing information about a whistleblower of corruption. He appealed in court the protocol of the National Agency of Ukraine for the Prevention of Corruption (NACP). The agency reported that Szmigal reviewed the corruption report from a whistleblower, namely an employee of the Gaming and Lotteries Regulatory Commission, and instructed the appropriate officials to develop such a report. But among these officials was the chairman of KRAIL, Ivan Rudoy, ​​whose illegal actions were reported.

Another case of corruption concerns a member of KRAIL, who demanded a bribe in the amount of 90 thousand dollars for issuing licenses and permits for gambling activities in the Chernihiv and Zaporozhye regions. The official was exposed during the transfer of a bribe and was dismissed from his position. Such cases not only undermine the commission’s reputation, but also raise doubts about the integrity of the entire gambling licensing process in Ukraine.

Bottom line: reform or liquidation?

Since the beginning of its activities, CRAIL has faced corruption, opacity and weak controls in the gambling market. The commission failed to cope with the main challenges - to create transparent conditions for licensing, ensure effective control over illegal businesses and protect players from gambling addiction. Scandals surrounding the leadership of the commission and the lack of strategic vision have caused serious criticism from society, politicians and experts.

Against this background, there are calls for the complete elimination of CRAIL and the creation of a new system for regulating the gambling market, where all licensing processes will be automated and transparent. This would reduce corruption risks and increase the efficiency of government control. However, the question remains open: will the reform become a new stage in transparent control over the gambling market, or will the situation repeat itself again, but under a different name and new faces?