The history of
lottery in Russia
The Russian lotteries saw one of the most recent and dynamic changes during the 20th century. After the collapse of the Soviet Union, more than 300 private lotteries sprung up in Russia. Because of lack of regulation, these were initially run by mobs and the lotteries were highly prevalent to fraud. The enormous profits made by these lottery companies caught the attention of the Russian state that was in need of money at the time. After that, the state took over the lotteries. The game of lotteries was then regulated and operated by the State Lottery of Russia in the year 1764. This is where the origin of the lotteries can be traced back to as well. It was governed by members of the state until the year 1914. During the period between the origin of the lotteries and 1914, the biggest beneficiaries of the Russian Lotteries were the Russian military. Because the lotteries were being operated by the state, the first importance and investment were given to the state military. The boom and success of this lottery led to the establishment of the Sports lottery in the year 1940. The sports lottery became the benchmark for the design of the Russian lotteries that exists today. People were allowed to choose their own numbers as opposed to investing in tickets that had that had pre-printed numbers. The Russian lotteries today have gained popularity around the world. Among the lotteries that have gained popularity are games like the GosLoto.
The journey of the lottery and gambling bans
Around the end of 1927, the people’s commissar presented a report about gambling and the gambling business in Russia during the time with an aim to convey the risks of gambling. It was stated that irrespective of the limited number of gambling houses, it was still a major risk for the citizens. This report was approved which led to a ban on opening any gambling houses in worker districts. On May 8th, 1928, the USSR SPC announced the resolution to close down immediately all gaming houses, facilities for card games, roulette, lotto and any other kind of gambling. This was done as part of the new development of the penal policy that was at the time being shaped by the Soviet state. This new penal policy provided an overall reinforcement of criminal sanctions in the country and modified the state’s penitentiary policy. Soon after this announcement, lotteries were also banned. On the 6th of June, 1928, the Workers-Peasants’ Government of RSFSR issued a resolution on banning the draw of Liquors in Lotteries.
The changes in legalizing lotteries finally came when on January 1st, 1930, the USSR SPC issued the resolution on the procedure of issuing permits for lottery arrangement and later on August 31st, 1932, announced another resolution on the regulation of the lottery business.
The first slot machines that appeared in Russia were legal and were installed in 1988 in hotels that were part of the USSR State Committee of Foreign Tourism. It was set up as part of the All-Russian Business External Trade Union (VHVO) that was developing new kinds of services that can be provided to foreign tourists. Private operations had zero access to the gambling operations. Although there were an eagerness and interest that was generated by the installations and operations of the slot machines, the authorities allowed access to the machines only within state structures as an experiment. There was also a legal reminded that this was a business that private organizations cannot enter into. On the 29th of December 1988, the council of ministers in USSR announced another resolution for this and stressed that cooperatives do not have the entitlement to perform and/or offer any type of gambling operations. This resolution was– “On the Regulation of Certain Activities of Cooperatives According to the Law on Cooperation in the USSR”.
On August 23rd, 1989, the Soviet government finally lifted its ban on gambling and opened the first gambling house in Moscow and later the first casino at the Savoy Hotel. Poker soon gained a lot of popularity when people began being interested in the Western culture and games. Players would meet in private flats to play poker. There was even an attempt to hold poker tournaments. This did not catch on.
Lottery and gambling today
Gambling has been banned in Russia since the year 2009 in all states. It is legal in only five regional subject areas. Among the exceptions are zones in the Altai, Krasnodar, Kaliningrad, and Primorsky regions. Today, the Russian Lottery is run by a private enterprise named Orgot that was formed and established in the year 2003 by the state-owned bank Gazprimbank. Orgot is one of the members of the European Lotteries Association and the games by Orgot are fully authorized and approved by the Russian Federation Government. Orgot is a private organization that was formed to provide funding for Sports and Health by offering exciting lottery games for interested players from all over the world. The main games offered by Orgot as part of the Russian Lottery are the GosLoto 6/45 and GosLoto t7/49. The technology used for GosLoto by Orgot is known as Intralot which is a company based in Greece. This technology is said to be popular in nearly 53 countries in the world.
History of the GosLoto, the most popular game in the Russian Lotteries
As stated, GosLoto is the most popular lottery game that is played today. The first draw that took place of these games was for the GosLoto 7/49 on the 10th of September 2005. The first game had a massive jackpot because of which it gained immense interest among players. This game continues to produce among the largest and most massive lottery jackpots in the Russian games. GosLoto is a pan-Russian game and is played all over Russia. The games went online from April 2010. In September 2012, The Lotter allowed people from all over the world to participate in the Russian Lotteries. The Russian Lotteries became an integral part of the extensive range of lottery games offered by The Lotter. As of today, people play the Russian Lotteries both online and on-site in the country.
The legalities of the Russian Lotteries
According to the Russian Gambling Law, gambling is defined as a risk-based agreement on winning entered into by two or more parties among themselves or with a gambling operator according to the rules set by the gambling operator. The law emphasizes the risk element of gambling stating that most games are purely games of chances and do not have proper rules and regulations that can protect consumers. The law also specifically recognizes totalizator bookmaking activities that are usually subject to laid-back regulations compared to the other types of gambling.
The Gambling Law also talks about the rules and regulations associated with remote gambling “using data and telecommunication networks (including the internet) or means of communication (including mobile communications)”.
Lotteries are not considered to be part of gambling according to the definition of the Russian Gambling Law and therefore are regulated independently. The Lotteries Law defines a lottery as “a game conducted pursuant to an agreement in which one party (the operator) holds a draw for the prize pool of the lottery and the other party (the participant) is entitled to receive the winnings if deemed the winner in accordance with the terms of the lottery. ” The Russian law also recognizes legal concepts such as – “public promise for a prize, public competition, and promotional event”. These have to be games of skill, business promotions with prize draw and similar contests. However, none of the games held can be such that they trigger the gambling and lottery regulations. It is said that there is no proper guidance or regulation and the statutory language with regard to each of the types of games is still obscure and vague. It is advisable for companies that are dealing with or considering operating any of the gambling or lottery games should be careful to avoid anything in their operations that may be characterized as illegal or a risk factor. They should also ensure that the initial bet places or the purchase of lottery tickets have a non-risk based criteria for determining winners. These lottery games should have a lack of objective and should not have judges to determine winners.
Before 2009, derivatives were considered to be a form of gambling because it deprived the parties engaged to derivative transactions of any legal means of enforcing their agreements in Russia. Because of this reason, any claim/s that arises out of the operation of or participation in gambling was not considered to be a part of the Russian Law. As of 2009, this has changed and derivatives are being regulated by the Russian Securities Market and Law and are not considered to be a part of gambling any longer.
Details of the Russian Gambling Policy
The Russian public policy has in the last few decades molded to reflect conservative values. This, in turn, promotes a more restrictive approach towards gambling and the regulation of gambling. Gambling was legalized in 1st July 2009 in Russia in specifically designated territories. These are termed “Gambling Zones”. There are totally five of these zones and they are all located in remote regions, especially regions that are underdeveloped. This restriction to gambling zones does not apply to bookmaking and totalizator betting. Both of these and allowed within as well as outside the gambling zones. They are also allowed online. The Lotteries Law states that lotteries must be authorized and operated by the state and are conducted nationwide. Lotteries and Gambling both have a license and permits that the operators must procure before operating in any of the gambling activities and/or sale of lottery tickets. It is mandatory for bookmaking and lottery organizers to make payments to both the sports federation and the federal treasury for important social purposes. While the profits from the lotteries must be shared, the losses that may occur from participating in gambling and lottery is not insured. Although poker was considered as a game of skill for a short period of time and there were tournaments conducted for it, as per the new policy of 2009, poker is treated as a form of gambling.
The legal protections that are in place with regard to gambling and lotteries in Russia are ones that deal with enforcing payout of the winnings. Despite the strict and stringent laws on gambling, it has proved to be a problem that continues to haunt the Russians, people. Because gambling is permitted in only five zones that are remote areas (and even in the zones there is limited access to many legal gambling venues), Russian people have been documented to opt for remote or online gambling. This is unsafe because most of the online casino sites have been blocked by the Russian internet service providers in accordance with the regulations set by the Russian authorities. It has been discussed and speculated in media and during events that parts of the gambling regulations could be liberalized. And that doing this would be advantageous for the Russian states as they may become beneficiaries of the profits made by the gambling industry. But the attitude towards the idea of gambling has not changed and it does not look like it will change any time soon. This is also reflected in the draft laws that have been put forward with regard to this issue.
Control of the gambling industry
The Gambling industry is run and operated by private companies in Russia. These companies have to be originated in the nation. Foreign companies are not allowed to regulate the Lotteries. All of the private operators must obtain a license for nationwide operation and totalizator or bookmaking shop and/or obtain permits to operate in a particularly specific gambling zone. The process for obtaining a license and the requirements to be eligible to be an operator are cumbersome and strict. This makes it easier to control the number of organizations that are involved in the operations of gambling and lottery games. This also makes regulations of the few companies that manage to get licenses easier.
Yet another change came of the Russian lotteries in the year 2014. From this year, all the lotteries in Russia are organized by only two authorities – either the Minister of Finance based on the decision of the government or the Ministry of Sports. The ministry that is responsible holds a tender and selects one private company that will act as the actual operator of the lotteries and all relevant processes with regard to the lotteries.
As mentioned, Gambling is allowed in only five zones that are treated as zones designated for gambling by the government. The law states that there can only be five of these zones and they must be located in the regions that are listed in the Gambling law. The state authority is responsible for each of the gambling zones and is in charge of handling them and issue permits for operations as they see fit. The current gambling zones among the regions mentioned above are the following – 1. Azov-City (Krasnodar region). 2. Sibirskaya Moneta (Altai region), 3. Primorye (Primorskiy region), 4. Yantarnaya (Kaliningrad region) and 5. Krasnaya Polyana (Krasnodar region, Sochi).
All of the zones are at the moment active and each of the zones has a minimum of one gambling venue that is open and legally functional. But even these are said to be not that developed. The gambling venue set up in Azov-City is considered to be one of the best-developed gambling zones. But because there is a gambling venue that has opened in Sochi and there is an unidentified gambling zone in Crimea, the Azov-City gambling venue is scheduled to be closed as of 1st January 2019. This announcement was made abruptly shocking the operators and the gambling investors. The current successful casinos are trying all they can and lobbying for the Azov-City zone’s preservation. It is to be noted that the according to the announcement, the operators who received permits before the 23rd of July 2014 will be able to continue operating in Azov-City pending its closure. The reason for this exception is unclear.
The law that had mandated that the Azov-City zone must be closed down has also stated that a gambling zone cannot be closed down before it has at least completed 10 years of operations since its inceptions. However, this clause has not provided any source of comfort to the operators of gambling and lotteries because once a gambling zone completes 10 years, it may be shut down at any time. There is no provision that states that authorities must alert the operators before announcing the closure. This means that the zones that have completed 10 years can be shut down at on short notice without preparing the current and to-be operators in the gambling regions. Once again, this does not apply for Bookmaking shops and totalizators who have the legal authority to operate nationwide as long as they have the license issued by the Federal Tax Service. Similarly, the state lotteries also have the authorization to operate nationwide and with special permission from an international treaty of the Russian Federation, even operate both in Russian states and in countries across the world.
For the buyers to know
Offshore Gambling and Foreign players
Only Russian organizations can acquire licenses and permits that are required to act as gambling operators. Therefore, it is illegal for organizations and operators who are not from Russia to offer gambling services to Russian citizens. This law is limited to only offshore organizations. Companies that are owned by foreign entities but are based in Russia can obtain a license and/or permit to become gambling and lottery operators. There is nothing in the law that prohibits this. Russian authorities do not have control over off-shore companies and find it difficult to regulate the operations of an off-shore company that is only present in the country via its social media account or its gambling website. In order to retain control over legal and illegal gambling, Russia maintains a registry for websites that are banned from operating in Russia called the “prohibited websites register”. These websites may not just be limited to gambling websites but may also extend to advertising sites and e-money sites that allows payments to offshore gambling operators. Russian internet service providers have to ensure that they block access to the websites listed in the register. Similarly, internet service providers also have to make sure that all prohibited content as stated by the nation is removed.
Although the country is strict about its citizens participating in international lotteries, it welcomes people from all across the world play its GosLoto games. Any person can play to win. However, the individual may have to travel to collect the winnings. The players must check with their country laws. The law is vague with regard to this and therefore it is highly advisable that the players consult an attorney before investing in the Russian lotteries.
Lottery ticket details
Payments for lottery tickets in Russia can be done while purchasing them online and on-site. For on-site purchases, buyers can buy tickets directly with cash or card. For purchasing lottery tickets online, both debit and credit card purchases are allowed. There are no details of payments that can be made via an e-wallet or payment application. However, buyers can confirm this information on the website that they are purchasing in. Although both debit and credit purchases are allowed, it is highly advisable that buyers do not purchase lottery tickets or participate in any gambling games by using their credit card. It exposes not only the player but also family members to financial risks. If the player has participated voluntarily in any of the lottery games, then the law cannot protect or help the player from any of the risks that may come with participation. Therefore, it is the responsibility of the players to avoid negligence and practice responsible gambling.
For Operators to know
Gambling and Lottery bans and the consequences of non-compliance
The Russian Advertising Law prohibits the advertising of any illegal services. It also prohibits advertising the services of a company that does not have the required license or permits to be operators of the gambling and lottery activities. Therefore, the responsibility lies also with the advertising agency to ensure that the company operating and advertising through them is licensed. Likewise, advertising for any of the services provided by an offshore gambling operator is considered to be illegal in Russia. It has been long considered and debated that the Russian authorities should try imposing sanctions on payment of operators and other service providers who facilitate payments to offshore accounts, especially to unlicensed gambling operators. It was also considered that Russian citizens could be penalized for participating in illegal gambling. Although many drafts of policies have been submitted with regard to is, there has been no final conclusion on what is to be done about this issue. The policies will have to be approved by the Russian parliament to come into operation.
There are clearly defined punishments for those who breach the gambling and lottery regulation. The punishments laid out for non-compliance in Russia is very serious and can leave a long-term scar for an individual. Therefore, it is very important that all aspiring companies, operators, and players be clearly aware of the consequences.
These are –
- Companies organizing gambling outside of a gambling zone: Fee of 700,000 to 1 million rubles and confiscation of equipment.
- Individuals organizing gambling outside of a gambling zone: Fee of 500,000 to 1.5 rubles or aggregate salary for three to five years, mandatory labor for 180 to 240 hours and various limitations of freedom of movement and travel for up to 4 years and incarceration for up to six years depending on the gravity of the crime.
- Officers organizing totalizator betting or a bookmaking shop without a relevant license: an Administrative fine of 2000 to 4000 rubles to 50,000 rubles
- Individuals organizing totalizator betting or a bookmaking shop without a relevant license: 2000 to 5000 rubles.
- Companies organizing totalizator betting or a bookmaking shop without a relevant license: 500,000 to 1 million rubles and confiscation of gambling equipment.
- Violations of gambling regulations by gambling operators: 300,000 to 1 million rubles and in most severe cases, cessation of all business activities for 90 days.
- Organizing a lottery that is not in accordance with the decision of the government: Fines of up to 300,000 rubles for companies. The fine for individuals is unclear. An attorney can provide more information.
- Violation of lottery specific regulations: Fines between 40,000 rubles and 250,000 rubles.
Taxation for operators
Gambling business is defined as “entrepreneurial activities involving the organization and conduct of games of chance through which organizations receive income in the form of winnings or charges (or both) for the conduct of games of chance.” Incomes and expenses incurred for gambling activities are not taken into account for the purposes of calculations of the corporate income tax. Games and services offered in an organization for games of chance are also exempt from Russian VAT. Companies that are involved in the gambling business are only subject to one type of tax – gambling tax. And this is a regional tax. The constituent entities of Russia set these taxes based on a ceiling limit provided by the income tax law of Russia.
Lottery operators are very lucky as here because they do not have to pay any gambling taxes. However, they are subject to other forms of tax. The activities conducted are subject to 20 percent of the corporate income tax (Since most/all lotteries are by private companies on authorization from the government). This tax is based on the sales proceeds from the distribution of lottery tickets after the payment made to the winners is deducted. These are also exempt from any VAT.
All of the above-mentioned details with regard to taxation is limited to companies and operators from Russia. The tax regime for companies that are not based in Russia but have authorization from the government is different. Similarly, there is a complete different situational analysis for offshore gambling service providers.
For Winners to know
Taxation for winners (in cash and in-kind)
Taxation for winners from gambling activities and lottery games is different in Russia. Russian tax residents who win from gambling activities (in the allowed regions) are required to pay 13 percent of the winnings as part of their personal income tax. Foreign residents who win by participating in any of the gambling activities (in the allowed regions with authorization to allow foreign players) are required to pay 30% of their winnings as part of the tax.
The tax on lotteries is slightly different as mentioned above. Unlike its neighboring lottery countries, Russia charges a small percentage of the lottery winnings as part of the tax. Winners are required to pay 13 percent of their winnings as part of their income tax. This must be declared and shown clearly during their tax submission. Winners should note that there are exceptions to this rule. There are many lottery companies that organize promotional lottery. If the lucky winner has won one of the promotional lotteries, then the tax that is to be payable as income tax falls between 13% and 35%. This tax policy is applicable to lottery wins that are both monetary and in kind. For lottery winnings won in kind, the tax charged by the income tax policy is 35% of the market value of the prize won. Another exception to this tax policy is that this is not subject to large winning amounts. For winners who have won prize monies and/or in-kind worth less than a sum of four thousand rubles do not have to pay any taxes. They can take home the entire winning prize. For example, if someone who is a Russian resident has had a lucky day and wins a car from a promotional game by a branded conglomerate such as Coca-Cola or Sprite, the tax return will have to be paid at the end of the current fiscal year’s tax submission (30th April). On the other hand, if the same care is won from a lottery draw (i.e. by purchasing lottery tickets), the amount of tax to be paid for the car won will only be 13% of the car’s market value and not 35%.
Expiration for the lottery tickets
All lottery tickets come with expiration dates. Sometimes the date of expiry of the ticket is from the date the numbers are drawn and sometimes, it is from the date of purchase of lottery tickets. The details for expiration dates for all the Russian lotteries may not be similar. For most lotteries such as GosLoto 5/36 and GosLoto 7/49 for example, winners are offered 180 days from the date of drawing to make a prize claim. And, the dates of expiration is usually printed on the back of the ticket. Even for the tickets bought online, the date of expiration of the tickets is shared. Very rarely, the expiration date may be different based on the websites and the operators of the games. It is best if the players double-check the date of an expiration with their service provider.
Claiming for the lotteries
Russia is one of the countries where income tax is applicable to lottery prizes. The tax to be paid on the winnings is 13 percent of the total sum that has been won. This is discussed more in detail below. Depending on the size of the prize, the prize money will either be credited to an online account or the money can be requested from a nearby authorized retail venue. For large sums that cannot be transferred easily, the process is explained in detail on the relevant lottery game websites. If the player is purchasing from a more universal lottery website, they should check the process for claiming there.
Winners should note that almost all lottery companies and websites allow winners to claim the lotteries anonymously on request. If the winner does not mention this specifically, basic information such as age and town or age and company may be shared with the print or digital media. Companies are usually keen to share stories of those who have won jackpots.
The legal age for purchasing lottery tickets
The legal age for purchasing lotteries in Russia is not specified clearly in the lotteries law
The Russian lotteries have come a long way from being an institution that was run for the armies during the early days. With all there is to know about the online lotteries in Russia, hopefully, the players will be able to participate in games in a more engaging and aware manner.
If you’d like to know more about legal implications and other aspects of online lottery, you should start at the homepage.