A Reset for Ukraine’s Lottery Sector

A Reset for Ukraine's Lottery Sector

After more than a decade without a formal licensing framework, Ukraine's lottery sector has reached a turning point. All three companies currently active in the market – M.S.L. LLC, Ukrainian National Lottery (UNL), and PJSC Patriot – have reportedly applied for new licences under a tender launched by the national gambling regulator, PlayCity. The application process, announced in early December, closed on December 29 and marks the first coordinated attempt to regulate lotteries since previous licences expired in 2013 and 2014.

For years, lotteries in Ukraine have occupied an unusual position within the country's broader gambling landscape. While other verticals were brought back under regulatory oversight in 2020, lotteries were left without a dedicated regulatory framework. Operators continued to function, but without updated licences or clearly defined oversight mechanisms. The new tender does not merely introduce administrative order; it closes a regulatory gap that has existed through several phases of gambling reform.

Despite the formal reopening of the licensing process, the tender outcome is not expected to reshape the market in the short term. According to Interfax-Ukraine, PlayCity head Hennadiy Novikov has confirmed that no new operators are likely to enter at this stage. Legislative constraints limit eligibility to companies that already meet extensive operational and infrastructural requirements, effectively restricting participation to the three incumbents. Only three licences are expected to be issued, maintaining the sector's existing balance.

The structure of the licences themselves reflects the provisional nature of the current approach. Rather than the ten-year terms commonly associated with lottery concessions, the new licences will be valid for the duration of martial law plus one additional year, with an overall limit of three years. This shortened timeframe signals that regulators view the tender as a transitional measure rather than a final settlement of how the lottery market should function.

Eligibility conditions help explain why the tender is closed to wider competition. Applicants must demonstrate a nationwide presence, including active subdivisions in every city with more than 500,000 residents and distribution points in all localities with more than 5,000 residents. In numerical terms, this translates into at least 5,000 points of sale across the country. Operators must also hold a .UA domain name, maintain an electronic betting acceptance system, and operate no fewer than 5,000 electronic betting terminals. Beyond infrastructure, applicants must demonstrate at least 3 years of cumulative experience running state lotteries. These criteria form a high threshold that few external candidates could realistically meet within the current legal framework.

While the tender preserves continuity, PlayCity's leadership has been open about the need for change. Novikov has stated that he views the existing limitations as temporary and believes the market should eventually be opened to broader competition. The short duration of the licences is intended to give lawmakers and regulators time to reconsider how the lottery sector is structured and supervised.

In comments to Interfax-Ukraine, Novikov suggested that the Ministry of Digital Transformation and parliament could use the coming years to draft revised rules and relaunch the licensing process under updated conditions. Such changes could include attracting international operators, should legislators decide that broader participation would benefit the market. He has also indicated that, in his personal view, access should not be limited solely to companies with previous lottery operations or to entities with state ties, although he acknowledged that final decisions will depend on political consensus.

Beyond market access, Novikov has raised concerns about how lottery operations are currently monitored. At present, operators submit reports to the State Treasury Service, but these reports do not cover all product categories, notably excluding instant lotteries. The reporting process itself, as described by Novikov, relies on manual access rather than integrated oversight systems. In practice, this means that regulatory visibility into day-to-day operations remains limited.

According to his account, some operators have addressed reporting obligations by granting Treasury officials access to their systems, allowing reports to be generated once per day. While this satisfies formal requirements, it does little to support continuous supervision or detailed analysis. Novikov has argued that a modern lottery framework requires more systematic reporting tools that reflect the scale and complexity of current operations.

Advertising regulation is another area identified as requiring attention. Novikov noted that existing operators have so far exercised restraint in their promotional activity. However, he warned that future changes to licensing conditions could alter competitive dynamics, potentially increasing pressure in this area. Strengthening advertising rules and clarifying sanctions in advance would help prevent disputes once a revised framework is introduced.

In its current form, the tender represents a careful balancing act. On one hand, it restores legal clarity to a sector that has operated without updated licences for years. On the other hand, it deliberately avoids structural change during a period of broader national uncertainty. By granting short-term licences to existing operators, Ukrainian authorities can stabilise the lottery market while leaving room for deeper reform.