Controversial betting regulation set to be introduced in Kazakhstan attacking growing fintech industry

Controversial betting regulation set to be introduced in Kazakhstan attacking growing fintech industry
Fear of ludomania is being stoked in Kazakhstan as 80% of the market is illegal and offshore. New betting controls are being introduced to regulate the industry. / bne IntelliNews
By Adilbek Abdullov in Almaty June 5, 2024

The Kazakh government is currently working to push through legislation that will pass a third-party regulator and tech operator with sweeping powers over the betting industry in the country. The law, which is moving through Parliament as we speak, is framed as a public health law which will limit betting for those under 25 and civil servants.

Fear of ludomania is being stoked in Kazakhstan; religious groups and the government are decrying that 80% of the market is illegal and offshore. New betting controls are being introduced and seek to tighten control over the industry and tackle illegal betting operations.

Despite having been removed from previous iterations due to clear corruption from lawmakers, the new regulator and fintech operator – the Unified Accounting System – has been introduced back into the draft law at the last minute.

Kazakhstan’s attempts to legislate against ludomania have been ongoing since 2017, when betting shops were popping up on every high street. Resulting controls has pushed much of the betting industry underground; over 80% of current betting is thought to happen through shady operators and offshore accounts.

The new plans promise to tackle this. No one under 25 will be allowed to place bets, and civil servants caught doing so will be in contravention of the law. It is debatable to the extent that this actually cracks down on illegal gambling outfits, most of whom are located offshore. On the surface, this legislation attempts to make a great leap at public health reform and promises that these changes will solve the country’s issue with “problem gambling.”

However, regulatory attempts to date have been mired with corruption scandals, particularly around the dealings of this third-party regulator. Formerly known as the Betting Accounting Centre (BAC), it would not only regulate the gambling industry, but take a percentage of all transactions, and could determine market participants. All transactions would have to happen through the Regulator’s wallet, and they would charge an expected 1.5% for the service. Its overreach is open to abuse, say critics.

An original law, introduced in 2019, introduced the Regulator for the first time and was mired in corruption. In this instance, a public-private company joined forces to win the tender. Proving the BAC’s susceptibility to misuse, the legislation was thrown out a few years later in 2021 (and was due to be removed entirely) after a vice minister of Culture was dismissed for accepting a bribe from pro-BAC lobbyists. In 2022, two Kazakh deputy prime ministers, Serik Zhumangarin and Erulan Zhamaubaev, gave directives to the Ministry of Culture and Sport to exclude references to the BAC from future draft legislation.

In 2024, industry experts have been surprised to see the Regulator introduced once more, this time renamed as the Unified Accounting System (UAS) once again.

Unsurprisingly, the market is scared to discuss the perks and pitfalls of betting legislation openly. After raising concerns about the advanced overreach of the BAC in 2019, including shady profits and capacity for abuse, the owners of independent bookmaking company Olimp were arrested by the government as members of ‘organised crime syndicates.’

All public health reforms aside, the new Regulator threatens to cast a shadow over small, legitimate operators in the market, not only extracting a percentage of all transactions, but the ability to determine the players in the market. It threatens to choke the remaining 20% of legitimate gambling that Kazakhstan has left.

The government’s attempts to clamp down non-illegal betting are admirable, and much needed in Kazakhstan. Yet there is considerable confusion about the nature of this legislation, for good reason. The motivation and suspicion about who will profit from the Regulator remain unanswered. The elusive nature of this new regulator and how it is being quietly brought into the market, could be a foretaste of old Kazakhstan creeping back in.