Law of Ukraine
“On State Lotteries in Ukraine”
Date of entry into force:
October 6, 2012
The Law establishes the main principles for state regulation of the lottery sphere in Ukraine, in order to create favorable conditions for developing the lottery market based on the principles of state monopoly on the issue and hosting of lotteries, providing for the needs of the state budget, and defending the rights and lawful interests of the citizens.
Article 1 of the Law provides definitions of terms used in it. For example, a lottery is a mass game, irrespective of its name, with terms that entail a prize (winning) fund draw between the players, where the victory is based on chance, and the territory of its hosting (distribution) exceeds the boundaries of one building (structure), regardless of the means of accepting payment for participation.
According to Article 3 of the Law, the principle of state monopolies for hosting lotteries means that it is forbidden to found and host any lotteries on the territory of Ukraine, except state lotteries, hosted by lottery operators that acquired the right to host them according to the procedure established by the Law. The principle of equal terms of participation in a state lottery entails that the chances of winning the state lottery prize are equally distributed between players that made equal bets; and the prize draw mechanism is based on chance and does not depend on the will of the state lottery operator, players, or other persons.
Article 4 of the Law forbids the following in Ukraine:
- organizing, advertising or distributing lotteries that do not have the state lottery status;
- distributing lotteries organized outside of Ukraine, which includes their promotional materials; and participating in such lotteries;
- organizing and hosting games with participation of persons located outside of the game premises, if the game does not have the state lottery status;
- organizing and hosting games with an accumulated (joint) grand prize, if the places for accepting payment of participation are located outside of one premises, and the game does not have the state lottery status.
The requirements to issue and hosting of state lotteries are determined by the central executive authority that provides for creation of state financial policy, and the policy in the sphere of issue and hosting of lotteries according to the licensing legislation. The state lottery operator must ensure that the prize (winning) fund of the lottery is at least 50% of the income received from bets. A lottery acquires the state lottery status after its terms, approved by the state lottery operator, are published. State lottery operators cannot host state lotteries jointly with other entities, except for other state lottery operators. The number and types of state lotteries that can be hosted by state lottery operators are not limited. State lotteries are distributed throughout the entire territory of Ukraine; distributing them does not require special permits. State lotteries are hosted for an indefinite period of time, without limitation on the maximum number of draws. The term of a state lottery can be limited by the state lottery operator (Article 5 of the Law).
According to Article 6 of the Law, legal entities registered on the territory of Ukraine and satisfying the requirements of the Law can be state lottery operators. A state lottery operator provides for work aimed at hosting state lotteries throughout the territory of Ukraine. A state lottery operator must have permanent separate divisions in each population center of Ukraine with population over 500,000, and state lottery distribution points in each population center with population over 5,000, but at least 5,000 distribution points in total. The electronic betting system of a state lottery operator must include at least 5,000 working terminals of the electronic betting system, belonging to the state lottery operator on the right of property. The state lottery distribution network of a state lottery operator must include at least 5,000 state lottery distribution points. Exclusive directions of activity of state lottery operators are:
- designing and approving the terms of state lottery hosting (state lottery issue);
- creating appropriate conditions for state lottery players;
- creating a network for accepting bets and giving out prizes;
- importing lottery tickets and blank ticket forms to the customs territory of Ukraine without procuring special permits (licenses);
- hosting state lotteries;
- determining the winners of state lotteries according to the terms of hosting state lotteries;
- carrying out other functions required to host state lotteries.
State lottery hosting is an exclusive type of business activity of a state lottery operator. This restriction does not apply to state banks. The equity of a state lottery operator cannot be lower than the amount of equity established by the National Bank of Ukraine for banks. It is forbidden to use funds from unconfirmed sources to create equity of state lottery operators.
Organization of state lotteries is regulated by Article 7 of the Law.
Article 8 of the Law establishes that a state lottery operator can be deprived of the state lottery operator status in cases when:
- a draw-based lottery operator does not host more than 3 consecutive draws during the period determined in the state lottery hosting terms, except for cases when such delay is caused by force-majeure circumstances;
- a state lottery operator systematically (more often than 3 times annually) violates the terms of paying deductions to the State Budget of Ukraine in the amount of the tax rate determined by the Tax Code of Ukraine;
- a lottery operator delays payout of prizes to the lottery winner for over 6 months, without objective reasons.
A state lottery operator is deprived of its status through cancellation of its license, according to the procedure envisaged by the licensing legislation.
Distribution of state lotteries is regulated by Article 9 of the Law.
Article 10 of the Law envisages that a natural person over the age of 18, which paid the bet (bets) to the state lottery distributor independently and voluntarily, can be a player in a state lottery.
According to Article 12 of the Law, payout of prizes is done at the expense of the prize (winning) fund accumulated by the state lottery operator. Payout of monetary prizes of state lotteries is done exclusively in the national currency of Ukraine. Drawing of prizes expressed in foreign currency or international payment units is forbidden. This rule does not apply to state lotteries distributed entirely outside the territory of Ukraine. Payout of prizes of state lotteries is done according to the timeframes and procedures determined by the state lottery terms. Payout of prizes is carried out through cash offices of state lottery operators (their separate divisions or authorized persons), and in cases provided for by the state lottery terms, through state lottery distributors, in cash or, at the discretion of the winner, via transfer to the winner’s account, at the expense of the prize amount. The winner’s demand for the prize can be presented for payment in the timeframe determined by the state lottery terms. If a lottery ticket (or another proof of the right to receive the prize) is not presented for payment during the time specified in the state lottery terms, the prize amount allocated to such ticket is included in the lottery residual fund. The procedure and purposes of using the lottery residual fund are determined by the license terms.
The authorized body of state supervision (control) over lotteries in Ukraine is the central executive authority that implements state financial policy, and the policy in the sphere of issue and hosting of lotteries. The central executive authority that implements state financial policy, and the policy in the sphere of issue and hosting of lotteries carries out supervision (control) through scheduled and unscheduled inspections of lottery operators (Article 13 of the Law). Scheduled inspections of state lottery operators are held no more frequently than once per 24 months. Unscheduled inspections of state lottery operators are held exclusively for the following reasons:
- a state lottery operator fails to submit reporting to the central executive authority that implements state financial policy, and the policy in the sphere of issue and hosting of lotteries in the established term, if the Law requires such reporting to be provided;
- the reports submitted by a state lottery operator are found to contain untrue data, and the state lottery operator fails to provide explanations and documentary support of such data in response to a mandatory written query of the central executive authority that implements state financial policy, and the policy in the sphere of issue and hosting of lotteries, within 30 working days of receiving the query;
- a state lottery operator submits a complaint, according to the procedure established in the terms of license, stating that the officials of the central executive authority that implements state financial policy, and the policy in the sphere of issue and hosting of lotteries violated the legislation during a scheduled or unscheduled inspection; and demands complete or partial cancellation of the results of the respective inspection;
- it is necessary to verify information received from a player, unless a state lottery operator provides explanations and documentary support for them in response to a mandatory written query of the central executive authority that implements state financial policy, and the policy in the sphere of issue and hosting of lotteries, within 30 working days of receiving the query.
The Law also introduces appropriate amendments to the Economic Code of Ukraine, the Budget Code of Ukraine, and the Laws of Ukraine “On Insurance” and “On Amendment of Certain Legislative Acts of Ukraine on Restriction of State Regulation of Economic Activity”.