Russia's Duma Passes Gambling Bill, Outlaws Online Poker & Online Gambling

Russia's lower house of parliament, the State Duma, passed a bill Dec 20, in its third and final reading, to create four gambling zones in the country, outlaw online gambling and online poker, and set the minimum gambling age of 18 years.

The purpose of the bill is to restrict the uncontrolled spread of gambling outlets throughout Russia.

All that remains for the bill to become law is the Federation Council's support and the signature of President Vladimir Putin, which is considered a given since he originally submitted the bill.

After July 1, 2009, any gaming facility operating outside of the four approved gambling zones will be banned.

The State began to take back control of gambling when President Vladimir Putin ordered lawmakers and the Cabinet to put an end to the mushrooming gaming machines and gaming halls after a televised interview with Russian citizens in September 2005.

He then submitted a new bill on gambling to the State Duma on October 6 asking for four gaming zones. The Duma approved the bill in its first reading, but the bill did not specify the location of the zones.

The location of the gambling zones was the most controversial part of the bill.

The Duma's Economic Policy, Entrepreneurship and Tourism Committee defined the location of the zones when the bill was formally presented and approved on December 15 for its second reading.

The zones are in relatively unpopulated areas on the periphery of Russia: the Altai Territory (southwest Siberia), Primorye (Far East), the Kaliningrad Region (Russia"s exclave on the Baltic Sea), and on the border of the Rostov Region and the Krasnodar Territory in the south of the country.

Duma Deputy Alexander Lebedev of United Russia said that the committee took into account which regions would attract the most foreign tourists and the distance of regions from Moscow, since legislators did not want gambling businesses near Moscow.

No gambling in Moscow would be a drastic change - closing high-profile nightspots like the Golden Palace and the numerous slot machine parlors tucked everywhere from metro stations, to beneath underpasses, to ground floors of many apartment buildings.

Yet Moscow is already well on its way to no gambling, having already removed 70% of gaming facilities from the city since the beginning of this year, according to Iosif Ordzhonikidze, the chairman of the Moscow administration's commission on gambling business, in remarks he made Wednesday.

Regarding the location of the four gaming zones, industry experts called Primorsk a good choice for casinos but voiced doubts about the other gambling zones.

"The Chinese will gamble in the Primorsk region, where the casinos are already living off the Chinese," said Samoil Binder, deputy managing director of the Association for the Development of the Gaming Business. "But you've got to be kidding yourself if you think you'll find someone to sink US$ 100 million to US$ 1 billion in some hypothetical hope that some day people would want to come gamble there."

Yevgeny Kovtun, a spokesman for the Gaming Business Association, more or less agreed with Binder. "With the exception of the Primorsk region, the locations of the other zones don't make any economic sense." Moscow's gambling class would rather fly to Riga or Kiev, capital cities where casinos are established, Binder said.

Overall, the new zones will benefit the four regions. But to develop a regulated gambling industry would take some time, said Alexei Titkov, senior analyst at the Institute for Regional Policy. One problem Titkov identified is that Russians are less mobile than Europeans and Americans.

Also, Russia's tourism infrastructure is undeveloped, Titkov said. For many, traversing a vast and poorly paved country is either too inconvenient or too expensive, he said, adding that illegal gambling dens were likely to sprout after the ban took effect.

Titkov also said local residents in the relatively conservative Altai, Rostov and Krasnodar regions may have some qualms about living near casinos, which the Orthodox Church and others have called immoral.

Besides location, another key provision in the gambling bill is the amount of assets gambling establishment owners are required to have. Not only must the company be Russian, but it must have not less than 600 million rubles of assets (about 22.4 million US dollars or 11 million pounds) as of June 1, 2007.

The bill also envisions two types of zones where gambling will be permitted.

The first type of gambling zone is in residential areas. These can be established on land allocated for urban and rural development. The federal government, in coordination with local authorities, will issue five-year permits which will allow each organizer to set up one gambling facility per permit.

The second type of gambling zone is on parcels of land belonging to federal or municipal authorities, but not allocated for urban or rural development. These plots will be leased to the owners of gambling businesses by the Russian government.

The bill also bans gambling establishments from locating in apartment buildings, street kiosks, childcare centers, educational or healthcare institutions, railway terminals, airports, seaports, public transport, passenger lounges and waiting areas, sports facilities, state and government agencies, or religious organizations.

All gambling businesses that fail to meet the requirements proposed in the bill will be shut down after July 1, 2007. Any that meet the requirements will be allowed to operate without special permits until January 1, 2009, when the new law comes into effect.

After July 1, 2009, only gaming facilities operating in the four approved gambling zones will be permitted.

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