Is Georgia Doing Enough to Grow its Gambling Industry?

Georgia is not a large country, yet its gambling industry holds its own among the bigger resorts of the world. Nestled in the Caucasus Mountains, this former Soviet state is home to 3.7 million people, one third of whom reside in the capital Tbilisi. The country’s first casino was constructed there in 1920, although games had been played in Georgia since the previous century.

It wasn’t until the early 1990s that the industry really took off, but since then, it’s largely plateaued in comparison with other countries. Let’s delve into the detail of Georgia’s gambling market, and consider how it could reap the benefits of today’s industry.

Gambling in Georgia: a recent history

The state of Georgia’s economy towards the end of the twentieth century was not a healthy one. Many Georgians were unemployed and looking to emigrate to somewhere with more job potential. Those who stayed turned to gambling as a way to try and make some money. As the demand began to outweigh supply, the casinos stepped up their operations. This created an avalanche of new employment opportunities – everything from working on the casino floor or in the restaurants and bars, to programmers and developers in head office, and those responsible for marketing and advertising.

These casinos developed their own training courses to bring new workers up to speed quickly – and they offered the best salaries and highest job security around. The casinos became desirable places to work and began to support a large section of the population.

While native Georgians were still spending time in the casinos, they were not the only players. Georgia is bordered by Russia to the north and Turkey, Armenia and Azerbaijan to the south. Gambling is banned in all of these countries – except for in Russia, where it’s legal in four specific locations. This hasn’t stopped their citizens wanting to play though, and when Georgia negotiated a visa-free travel deal with Turkey and Azerbaijan it opened up the possibility for them to play in Georgia.

Gambling tourism has been huge for Georgia, however it has brought with it some other problems – largely due to the industry being unregulated. Problem gambling quickly became an issue, particularly among younger people. In the past few years, the Government has been battling to draw up new rules and regulations which would limit the exposure to under 25s and help to make it harder for people to deposit large amounts of money at casinos.

The huge growth of online gambling – worth more than $70 billion worldwide – has forced Georgia to look at modernising its gambling laws. Georgia initially toyed with the idea of banning all online gambling, however recently they have moved more towards regulation instead.

Many Georgia-based online casinos are accessed by citizens of other countries. For example, the country’s most-visited online casino registers around 4.5 million unique logins each month. With the population of Georgia only being 3.7 million, it’s easy to see how much foreign money flows into the country as gambling revenue. Banning online gambling all together would be a costly mistake – however, increasing the tax on profits seems like a very effective way of capitalising on it.

What could Georgia learn from other markets?

Georgia could take lessons from the UK’s gambling market if it wants to grow online casinos

Georgia could take lessons from the UK’s gambling market if it wants to grow online casinos

This is just one approach it could take. Let’s look at what else Georgia could learn from other gambling markets, where alternative rules and regulations are in force.

UK

It’s a similar solution to the one used by the Government in the UK. The gambling industry there is thriving, bringing in revenues to the tune of £15 billion, despite being heavily regulated. The market is controlled by the Gambling Commission, which grants licences to operators from across the world. However, it regularly fines or even bans online casinos which don’t meet its strict rules relating to identifying players and their sources of funds, anti-money laundering measures, and high technical standards.

This state of play has led to huge competition in the UK market, with various international operators vying for the millions of players out there. Online casinos are going further than ever to win over customers, making their games more engaging and their welcome bonuses and promotions more appealing. One good example might be the highly regarded 888 casino, which is considered a top-notch online casino in the UK.

UK-based casinos are also obliged to promote responsible gambling, presenting numerous self-exclusion options to users. ID checks, both online and at land-based casinos, are mandatory, with players having to prove that they are old enough to gamble. Systems are also in place to monitor activity and cut off betting opportunities if the player is judged to be spending recklessly. Responsible online operators have maximum deposit periods to safeguard their users and help reduce the risk of anyone gambling their way into debt.

While Georgia and the UK both tax the profits companies make from gambling, there is a vast difference in the amounts. Georgia has recently doubled the tax its casinos pay from 5% to 10%, but the UK is already charging 15%, with an increase to 21% planned to happen later this year. This tax affects both online and land-based casinos wishing to market to UK citizens. The revenues from these taxes are ploughed back into the treasury and used to fund the education, transport and emergency services budgets – and every penny counts when it comes to investing in Georgia’s challenging economy.

Russia

Russia’s ‘gaming zones’ model is a halfway-house compromise between prohibition and a free market

Alternatively, Georgia might choose to look across its northern border, to Russia. However, this might be considered a step back – as it wouldn’t necessarily have a positive economic impact.

Here, there are four regions where gambling is legal – Altai Krai, Krasnodar Krai, Kaliningrad Oblast and Primorsky Krai – alongside national state lotteries and sportsbooks. This enables the Kremlin to effectively manage the industry while still benefiting from the economic gains of gambling tourism.

This state of play is relatively new in Russia, where gambling was prohibited under Soviet rule. When the ban was lifted in 1989, casinos began to spring up everywhere – by 2002, there were over 50 in Moscow alone. Concerned about the links between gambling and organised crime, Vladimir Putin decided to change the law to the current state of play in 2009 – representing something of a halfway-house compromise.

When it comes to online gambling, Russia’s position is very clear: it’s completely banned. Playing casino games online has been outlawed since April 2017.

Ukraine

Georgia’s lawmakers might also look for inspiration across the Black Sea, to Ukraine, which is rumoured to be considering bringing in Russian-style gaming zones. However, these will be much more geared towards gambling tourism than Russia’s, restricted to entertainment complexes, cruise ships and hotels within them.

Currently though, gambling is illegal in Ukraine – with the exception of poker, which it classes as a national sport. According to recent research, the current ban has meant it’s missed out on more than $1.5 billion per year. This would have brought in around $300 million in tax revenue.

Summary

Georgia may seem like an unlikely place for a thriving gambling culture, but the country has fully embraced the industry as a major contributor to its economy. While the casinos provide stable employment for the citizens, they also rake in a large amount of foreign income.

Tbilisi has become a popular destination for businessmen in the oil industry and its casinos provide opportunities for them to relax after work or celebrate after concluding important business deals. The increase in tax is such a small amount that it should have very little effect on the casino’s profits, while providing a boost to the Government’s budget.

When they have finished drafting the new laws to put in place protection for vulnerable young gamblers, Georgia will have put in place all the pillars needed to ensure a successful and sustainable gambling industry that is able to compete with the rest of the world.