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  • Rule By Decree in Russia on Gambling

    Posted by Carl from Chicago on December 6th, 2009 (All posts by )

    From time to time Dan from Madison writes about gambling and the hypocrisy of the NFL in their actions on this topic. In particular, the NFL was upset about legal wagering on sports in Delaware, when today it pretty much is only officially legal in Nevada and a couple other states (also Oregon and Montana, per this article).

    Something strange happened in Russia this summer. Even though the economy was in a severe downturn and hundreds of thousands were employed in casinos throughout the country, the government (basically Putin) decreed that casinos were to be shut down on July 1, 2009. This article by the NY Times provides a good summary of the situation and its impact.

    The gambling industry says the ban will leave more than 400,000 people without work in Russia, at a time when it has been hard hit by the economic downturn: the World Bank predicts the economy will contract by 7.9 percent this year. The government has put the figure at 60,000 people, though industry analysts say that is absurdly low.
     
    After the law passed, federal officials and casino executives seemed certain that it would be watered down, which is apparently why neither the casinos nor the four regions did anything to prepare. “You know, in our country, the decisions are made by only one person,” said Samuil Binder, deputy executive director of the Russian Association for Gaming Business Development. He was referring to Mr. Putin.


    When I saw this article it seemed puzzling even by Russian standards – while the Russian government pretends to care about public vice (gambling), in reality it is not much more than a “gangster state”, with corruption being the rule, not the exception.

    I really didn’t think that they were going to go through with this seemingly absurd ruling, but apparently they did. I just started looking to see if they really did close the casinos down, and found this article in an online gambling web site.

    Officials in Moscow are stressing out with their concerns that the recent prohibition on casinos and gambling in Russia is being replaced by internet wagering and lottery machines. The total ban on gambling in Russia caused the loss of thousands of jobs in the country.
     
    In the capital 525 casinos and slot machine parlours where once busy and now about a third of those operations are selling instant lottery tickets, Moscow Deputy Mayor Sergei Baidakov said… The number of Internet cafes providing access to online gambling has tripled since July, in Moscow. Russia’s gambling industry was generating $3.6 billion and employed about 400,000 people. Baidakov said, “We are seriously concerned about the rise of surrogate technologies,” adding, “They are the by product of imperfect legislation.”

    A strange situation, indeed, that Russia of all places is trying to draw the line on what they determine to be ethical behavior. Maybe the NFL should put their next franchise in Moscow.

    Cross posted at LITGM

     

    6 Responses to “Rule By Decree in Russia on Gambling”

    1. Tatyana Says:

      Here’s a November’ interview the biggest figure in gambling business – Boris Belotserkovsky, touching on this question (among other things). He said, for instance, that he started folding down his business (manufacturing of casino & gaming machines) a year and a half ago: “Demand for my equipment started to fall 1/5 year ago because of the rumors of upcoming prohibition – rumors that proved to true, strangely for our country. … But gambling business did not disappear in Russia – and it will not disappear as long as people will want to fulfill their urge – it only became illegal. All that government did was to create gigantic black market for gambling. …In capital there is less illegal activity, due to closeness to “tzar’s eyes” but in provinces businesses do not close (as much as it could be expected at times of global economic crisis), sometimes they don’t even change their door sign – just continue as if no law was declared”

      He also said, that he believes that legal gambling business will return to Russia big time, and that he was approached with offers of participating in lottery business, which he declined. He might be interested in starting investing in video-lottery: a kind of combination of videogame automat with instant lottery/slot machine, that he has no competitors in. “It will depend on further legislative activity”.

      Lots more interesting things there.

    2. Jose Angel de Monterrey Says:

      We had a similar legislation here south of the border, the results these morally superior legislation were fascinating, those who had the money and means to gamble started flying to Las Vegas and New Orleans and Atlantic City to spend their precious money in casinos, hotels and shopping centers in those places..While clandestine unregulated and criminal gambling centers proliferated throughout the country, with the ensuing assassinations, kidnappings and blackmail proliferating in our cities under the corrupted negligent eyes of the police and the very politicians who crafted the anti-gambling legislation that was supposed to correct inappropriate citizen’s desires.
      Now we are going back, they are allowing formally, legally establish casinos that provide jobs and promote tourism to our country.

    3. Nicholas Says:

      Trying to change human nature is like trying to hold back the sea.

      “Sure as I know anything, I know this: In a year or maybe ten, perhaps even on this very ground, they’ll swing back to the belief that they can make people better; and I don’t hold to that.”

      – Captain Reynolds

    4. Carl from Chicago Says:

      Sorry Tatyana I clicked on your link and it was all greek to me :)

      But agreed of course that you can’t change human nature. Any idea why Putin went through with this hare-brained idea?

    5. Robert Schwartz Says:

      The first question is what was the State/Security Service cut on the legal gambling?

    6. Tatyana Says:

      Carl,
      the tone of the interview struck me as unusually frank, compared to customary Esopian language on television that I remember from 17 years ago. Still, not comfortable to the point that people in business would openly discuss Putin’s intervention: not only their treasure, but life and wellbeing of their families depend on keeping their mouths shut.

      So I can only speculate (and these musings are purely my own, not Mr. Belotserkovsky’s):
      it was mentioned in passing, when discussing lottery as possibility for the next business’ direction, that lottery acquired bad reputation in Russia, due to organizers living off the base capital (i.e. – theft). “When you play for years and never win anything, you become suspicious – where all the money is going to?”
      My understanding is that lottery is a state-controlled business; I can’t be sure, but I think private lottery is illegal there. So who are those scoundrels stealing from the state enterprise lotto for years and years and getting away with it?
      I guess this is one of the reasons Mr. Belotserkovsky declined the offer of investment into lottery. When you play with people so close to the throne, even on the same team, they have more leverage over you than you might be comfortable with.

      There was no explanation given to the reasons of the decree, just a small remark aside – “strangely for our country, the prohibition went through” – which suggests to me some sort of under the table dealings between interested groups.

      Oh, and I forgot in my first comment to disclose my source: I happen to regularly read the blog of Mr. Belotserkovsky’s wife Veronika, who is a publisher from Sankt Petersburg and lives with their children in the South of France; she writes mostly about culinary. Every once and a while, though, she posts bits related to her husband and their “oligarch” friends.