Russia urged to eliminate private lotteries in Ministry proposal

Lotteries are widely being used as a cover for covert gambling activity, and the government’s “uncontrolled issuance” of licenses to conduct them has generated little in revenue, the ministry in Moscow said in an e-mailed statement. Many draws are also “extremely non-transparent” in distributing revenue to the social causes they were registered to benefit, according to the statement.

Russia has banned most gambling, outlawing casinos and slot-machine parlors in 2009, and established four far-flung zones across the country for development as gambling areas. While there are no official data for the volume of the lottery business in Russia, it may be worth at least us$ 400 million to us$ 500 million a year, the ministry said, citing analysts.
“In our opinion, Russia’s legislation must be overhauled in the shortest possible time,” the ministry said in the statement.

Russia’s tax service has issued 4,000 licenses to conduct lotteries since 2005, Vedomosti reported. First Deputy Prime Minister Igor Shuvalov ordered the Finance and Economy Ministries last month to draft legislation that would only permit nationwide lotteries approved by the government, the newspaper reported.

The Economy Ministry estimated that the budget may earn as much as us$ 324 million a year in additional revenue, Vedomosti said, citing an unidentified government official.

The federal government now oversees three lotteries, one run by the Finance Ministry, one by the Sports Ministry, and a third by the Defense Ministry’s construction agency, according to the Economy Ministry proposals.

The proposal to ban all lotteries except those at a federal level came from the Ministry of Economic Development. According to their calculations the annual federal budget revenues from lotteries could increase from 1 billion to 10 billion roubles, which is around 30 million dollars.

The decision is being made to protect consumers. The current lottery business is opaque, according to the sources in the government cited by Vedomosti daily.

The biggest win in the history of Russian lotteries was 100 million roubles, which is about us$ 3 million. That’s much less than the jackpots in the US, where last week a couple from Missouri shared the second largest lottery win in the country’s history – a us$ 587.5 million Powerball jackpot. Market watchers say fewer and bigger state-run lotteries may boost Russian jackpots.

“About 7% of Russian citizens always play the lottery. This number could rise if the guarantor of justice will always be the state. Consolidation of funds under 2 or 3 lotteries will significantly increase their jackpot because they will collect more money and the opportunity to win would drop significantly, which means the money will be stored for longer. The funds collected will stay longer on bank accounts making a profit,” Darya Pitchugina, analyst at Investcafe told RT.

At the moment Russia’s lottery business is mainly private. The Federal Tax Service has issued 4,000 licenses since 2005. There are only three federal state lotteries held by the Government.

It’s not the first time Russia has reformed gambling, where it has been prohibited since 2009. Now casinos can only be opened in four remote areas. The Ministry of Internal Affairs regularly reports the closure of underground casinos, including in the center of Moscow.