Georgia’s booming, little regulated gambling industry doubled in size during 2018

Georgia’s booming, little regulated gambling industry doubled in size during 2018
Business built up in Georgia's gambling capital of Batumi served as a springboard to developing profitable online gambling operations.
By Iulian Ernst in Bucharest October 11, 2019

Gross revenues generated by Georgia’s gambling industry hit Georgian lari (GEL) 13.8bn (€5bn, and equivalent to one third of the country’s GDP) in 2018, more than double the sum recorded the year before, according to Business Media and BusinessPress. The publications cited data from national statistics office Geostat. Independent estimates put actual turnover at GEL20bn, given that the companies involved in the sector are subject to mild supervision.

The gambling industry’s turnover in Georgia has increased almost 200-fold in the past 10 years.

Most generated profits are sent to offshore companies that operate casino and other betting and gaming enterprises in Georgia.

Most brick and mortar casinos operating in the small nation are located in Batumi, known as “The Las Vegas of the Black Sea”, and half an hour from the border with populous Turkey. That fact points to how Georgia’s gambling industry evolved: it started with casinos dedicated to Muslim customers in neighbouring countries who lack such attractions at home. They served as a platform for promoting online operations, creating loyal customers.

Loose advertising regulations in Georgia then made it possible for a broad expansion of online casinos throughout the country. The high poverty rates in the nation have also helped drive the spread of gambling, with negative social effects.

A large part of Georgia’s gambling industry is accounted for by online operations. The country’s most visited websites are Adjara (a portal for gambling sites and sports news), adjarabet.com and crystalbet.com. The trio are among the 10 global websites most visited by Georgians (they show up in the rankings besides websites such as youtube.com and facebook.com).

Illegal revenues

Georgia’s ruling party Georgian Dream has avoided regulating the gambling industry and the opposition accuses the party leadership of deriving illegal revenues from the owners of betting businesses in exchange for the lack of regulation.

“All these problems are familiar to the authorities, but they are not moving forward. Such inaction is the result of lobbying, which is done at a higher level than that of members of parliament and is directed at the entourage of [Bidzina] Ivanishvili [the billionaire oligarch and ex-PM who heads Georgian Dream]. One of the main lobbyists of the gambling business is Ucha Mamatsashvili. That [lobbying] is what gives this business a guarantee [to remain unregulated,” said Levan Gogichaishvili MP, the initiator of a draft law on gambling.

At such a magnitude, the gambling industry in Georgia poses multiple threats ranging from money laundering and other financial crimes to exchange rate volatility.

The gambling sector is undoubtedly always at risk of money laundering, as noted in a US State Department report on Georgia.

The International Monetary Fund has also taken an interest in Georgia's gambling industry turnover. It did so lately with a technical assistance report.

An IMF mission stressed the need for improving the coverage of transactions related to gambling that have shown such a rising trend in recent years, with increasing activity generated by non-residents. A meeting was held with the president of the Georgia Gaming Development Association (GGDA) in which it was agreed that Geostat would prepare a list of questions to be included in existing surveys to capture the value of bets by non-residents and their winnings. Geostat was to be asked to discuss the matter with the administrators of a few of the biggest casinos to assess the possibility of reporting such data.

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