The Legalisation of the Betting Field in Russia: Specifics, Trends, and Prospects

 The legitimation of the betting business in Russia is one of the most discussed topics of recent times. Legal changes from December 2020 led to market restructuring and the creation of an entirely new regulation system of the entertainment field.

Industry experts agreed to express their opinion on the new law and its influence on the country's sports market, as well as expectable prospects:

• Ekaterina Bogatova — senior lawyer, a specialist in international law, working in the field of gambling business legalisation, financial and cryptocurrency activities;
• Artem Savelyev — e-sports manager at the betting company BetBoom;
• Roman Kozhevnikov — marketing director of the bookmaker firm MelBet.

The Legitimation of the Bookmaker Market: Legal Nuances

Ekaterina Bogatova expressed her opinion about the changes in legislation, the intricacies of legalisation of bookmaker companies and the specifics of entering the local market.

According to the expert, Russia is one of the fairly young markets. The regulation of the betting business began here only in 2009. Therefore, the legal framework has not yet been fully stabilised. That is why it does not give operators such opportunities for work, which are offered by more "experienced" foreign offshore territories.

The state took the path of maximum control of the gambling industry. It established rather strict requirements for entering the domestic market. During the entire period of the local regulator’s operation, only 34 licences were issued.

At first glance, this tendency is not promising. However, the expert believes that this approach gives the state some benefits, for example:

1. The consistency. Work in the online segment was only allowed until the full stabilisation of the land-based industry.
2. The support for domestic business. Only local operators can obtain licences, offshore companies are not allowed to work in the internal gaming market.
3. Unified control system. All bets, including online wagers, are recorded by the state monitoring system. It guarantees the transparency of financial flows and the obligation of prize payments.
4. Security guarantees. All local operators are required to publish information about their licences and other legal documentation on the main pages of their official websites. The presence of a permission document guarantees the absence of any risks for players and founders of bookmaker projects.
5. Control of visits. Only registered customers who have passed verification in the Centre for Taking Interactive Bets can take part in games. It means that access to betting services for underage users is closed.

The Basic Requirements for Launching a Sportsbook Site in Russia

According to Ekaterina Bogatova, the reason for the limited number of operators is not only a strict government regulation program but also significant financial requirements for new market participants.

On the part of the state, the established norms are quite understandable because the authorities must receive guarantees of the honesty of an entrepreneur's intentions, be able to assess his or her solvency and competitiveness.

For novice bookmakers, these requirements seem too stringent. Therefore, various sublicensing programs are actively practised on the Russian sports market today:

• franchises;
• White Label agreements;
• affiliate programs;
• work as a sales representative of the parent brand, etc.

The expert notes:

Actually, Russia is far from the strictest control standards. The state issues rather affordable licences. The fact is that entrepreneurs with experience in working with offshore licences are used to broader privileges. Nevertheless, this trend is noticeably declining.

For example, one of the most popular gambling jurisdictions, Curacao, is actively working on tightening conditions for non-residents and creating a new government regulator.

The Nuances of Successful Licensing Procedure

Ekaterina Bogatova outlined the main nuances of registering bookmaker projects within the legal framework of Russia in her report:

1. The analysis of orientation to a specific market. Before starting work, an operator should study the specifics of the market carefully and analyse the feasibility of working in the selected segment. The bookmaker should be well versed in the preferences of the audience and respond to changes in consumers’ requests promptly.
2. The preparation of documents. On the recommendation of the expert, it is worthwhile to organise a legal department in advance or turn to subject-matter experts. Independent collection and preparation of statutory documentation can provoke many difficulties for novice entrepreneurs and cause a delay in entering the market.
3. The procedure for resolving disputes. A bookmaker should prepare the statutory documentation and a program for resolving disputes with users in advance, following the international rules of responsible gambling. All aspects of solving legal and financial issues must be clearly structured and spelt out in the internal rules and policies of a sportsbook website.
4. Mandatory participation in funding programs. An operator must be ready to participate in the state sports funding program. The tax is obligatory for all local bookmaker companies operating in the legal segment.
5. Financial control. All transactions within a gaming platform must be carried out exclusively in the state currency (ruble). Bets and payments are controlled at the state level. Foreign monetary units are automatically converted to local currency. Payments in cryptocurrency are prohibited.

E-Sports as a Promising Trend in the Development of the Russian Sports Market

According to Artem Savelyev, the e-sports market is one of the most prospective betting areas not only in Russia but throughout the world today.

This is evidenced not only by the steady growth in the audience but also by such factors as the increase in the interest of bookmaker projects’ owners themselves and the improvement of training quality for cyber competition participants. The expert's report began with the announcement of Team Spirit’s victory at the Dota 2 World Championship.

Today, computer games provide the state with a much greater inflow into the budget than film distribution. According to data from 2019, the revenue of the movie industry was $800 million. The video game market was valued at $1.843 billion.

The Russian cyber field in figures:

• 20% — annual growth dynamics of the area;
• 18–34 years — the age core of the audience (66% of users making bets);
• 15 million people — total active audience;
• $93.3 million — forecasted market value for 2022;
• over 600 rubles — the average bill for gaming transactions in the e-sports field.

The Specifics of the Russian E-Sports Market

Based on his own successful experience in the e-sports industry, Artem Savelyev advises novice operators to pay attention to the following aspects:

The Interaction with Streaming Platforms

The expert strongly recommends looking for potential partners and advertising agents to promote betting services on various streaming platforms. It can be YouTube or any other service.

Twitch is a good solution too. The platform stands out from its analogues thanks to its wider opportunities for creating trusting and comfortable conditions for communication with the target audience. It allows users to make advertising inserts more natural and monitor the reaction of viewers in real-time.

Investing in Events

Artem Savelyev believes that sponsoring specific sports teams is less profitable for an operator than supporting tournaments.

Sponsorship of cyber teams today should be considered as a way of forming a brand’s image or an opportunity for indirect advertising.

Funding specific projects (events) is a more efficient way to encourage a user to perform a specific action at a particular moment. When interacting with several teams at once, a bookmaker company receives a greater audience outreach than in the case of working with only one representative (participant) of the tournament.

The Focus on Specific Disciplines

The international e-sports direction offers a fairly wide range of disciplines. However, the expert identified two main events that provide maximum online traffic for the Russian market:

• Counter Strike (75% of the total bets);
• Dota 2 (25% of deposits in the Russian e-sport segment).

This disposition was caused by the history of the industry’s formation. Russian-speaking users were familiar with these games even before the massive popularisation of e-sports.

The Change of Audience Preferences

Novice Russian bookmaker projects are rather cautious about the e-sports direction and continue to focus on traditional athletic disciplines. The specialist especially noted this point in his report. He said that the operators' suspicions are groundless:

Firstly, the state is extremely interested in the development of the field. Therefore, market representatives can count on some benefits and relaxations of the rules.

Secondly, even after the renewal of sporting events after the COVID restrictions, operators will not see significant audience outflow. As of October 2021, e-sports tournaments continue to be included in the list of the highest-rated events, falling behind only football competitions.

The Profile of a Legal Russian Bookmaker Project

Roman Kozhevnikov described the characteristics of a lawful and safe sportsbook start-up.

Consider the key points of his report:

1. Brand positioning. Each owner of a bookmaker project must convey his or her clients that sports betting is exclusively a leisure option, not a way to earn money.
2. Official website. A betting company operating in the Russian market must have a web resource registered in the .ru domain zone.
3. The placement of documentation on a site. An operator is obliged to provide users with open information about the licence, bank guarantees, the rules of responsible gambling, etc.
4. Insurance guarantees. The state obliged bookmakers to have a bank guarantee of 500 million rubles or more. Even if the company stops working, insurance will be paid to users.
5. Financial control. All wagers must be registered in the Centre for Taking Interactive Bets and taxed. This is a guarantee of the state’s support in case of controversial issues.
6. Feedback from the audience. A bookmaker website owner should encourage users to express their opinion on the quality of the products provided. Real reviews affect the formation of a brand’s image and allow an entrepreneur to work on the improvement of his or her services’ quality more effectively.

The Opportunities of the Sportsbook Field in Russia

The novelty of the domestic market, constant changes in audience preferences and the influence of global external factors (for example, the mass cancellation of sports events due to the 2019-2020 pandemic) make it difficult to define specific prospects of the market.

The most significant trends today are as follows:

• continuation of the state program to tighten the industry’s regulation rules;
• rapid transition of bookmaker projects to the online segment;
• shifting the attention of operators and users from traditional athletic disciplines to e-sports;
• large-scale growth of the mobile market and the instant betting segment.

Although the government pursues a policy of strict state control of the gambling market, it provides local entrepreneurs with a well-developed and secure legal structure with good growth opportunities.

In general, the reviewed market has a fairly high potential. According to experts, the only industry that has minimal popularity and an insufficiently effective structure for promoting and attracting target audiences is the horse racing sweepstakes area.

The Main Things about the Russian Sports Betting Market and its Prospects

The Russian sportsbook market is one of the most up-and-coming areas for investment. The state program is well-structured. It provides entrepreneurs with maximum opportunities for growth and safe work.

• The Russian market is represented only by local firms. An operator must have a legal status issued domestically. The sale of services and products by offshore brands is prohibited.
• Since 2020, the lawful online segment has been actively developing. Bookmakers can accept any bets in digital format today. The only limitation is working only with the Russian ruble and a ban on cryptocurrency transactions.
• One of the most striking trends is the intensive development of e-sports. According to statistics, the annual growth rate of the industry is 20%. Experts forecast that the volume of the e-sports segment in Russia will reach $93.3 million by 2022.

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