A bill that will create a new regulator in the Kazakh betting market passed at the last minute by the country’s parliament, the Mazhilis, and looks to be on the verge of becoming a reality.
The legislation, which lays out the parliament’s attempt to introduce a new third-party regulator has faced opposition from the industry in recent months. Despite protests, the bill was agreed before the end of the parliamentary session on June 5, 2024.
The bill details that a new regulator, known as the “Unified Accounting System” (UAS), will control all money market operations, have the power to veto participants in the market, and take up to 1.5 percent of all betting transactions.
Should the Senate approve the draft law, it would go to the president for signing. Assuming the draft law is adopted in its current form, it would enter into force 60 calendar days after the date of its first official publication.
The Saga Continues
Following the adoption of the draft law, the regulator will serve as a de facto monopoly in the Kazakh betting market. This phenomenon is especially notorious in so-called strategic sectors such as betting and gambling, petroleum, telecommunication, and transport. President Kassym-Jomart Tokayev said so himself in June 2022 that his anti-corruption drive aimed to “revise legislation that has contributed to the concentration of the country’s economic resources in the hands of a narrow group of people and provided them with unnecessary preferences.”
Once signed into law, the government will be authorized to discharge the most significant regulatory responsibilities to an unknown entity that will be the new regulator. This includes performing as a referee and therefore possessing privileges in terms of resource allocation, production, and sales; at the same time, the regulator will determine market competition and pocket 1.5 percent of all profits.
The lack of regulatory scrutiny and debate surrounding the bill is alarming. More crucially, the hurry to force the bill meant due legal procedures were violated. Kazakh Vice Minister of Tourism and Sports Miras Tulebayev and Ruslan Arysbekovich Berdenov, member of the committee of finance and budget of the Mazhilis, who both voiced their support of the bill being expedited, were unable to answer which company will get the rights of the regulator, how they will be selected, and where the money will ultimately go.
History has shown us that once intermediary companies take on government responsibilities like this new regulator will, it will be very hard for private firms to set foot in the industry, leading to unfair treatment. The supply of betting services will be kidnapped by a select few companies.
The Alphabet Soup Thickens
The draft law, “Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Gambling, Lotteries and Lottery Activities” has been in and out of the Mazhilis since January 2020.
As discussed in a previous article, the delay in adopting the legislation initially was due to corruption concerns. The former vice minister of culture was fired for accepting a bribe from pro-regulator lobbyists.
Due to its unpopularity and controversial history, the formal name of the regulator was changed in the latest iteration of the law. Formerly known as the “Betting Account Centre” (BAC), the regulator has now been renamed UAS. The UAS holds the same functions as the BAC.
History Repeating Itself?
What we can learn from these decisions as the current saga continues to play out is that people are likely to cast doubt on the overall legitimacy of Tokayev’s anti-corruption reforms and restrain further support in light of these developments. Corruption is a chronic disease in developing countries, particularly former centrally planned economy countries like Kazakhstan, because of the extensive and centralized government power to intervene in the competition process and feeble institutional guards to secure transparency and integrity.
We are already seeing signs of protest against this new bill from the industry. Indeed the Association of Bookmakers of Kazakhstan is suing Deputy Berdenov for introducing the regulator at the last minute. Also, a press conference in Kazakhstan was held last week by the National Association of Fintech and Payment Processing Companies in Kazakhstan. Irina Davidenko, the association spokesperson said “The proposed legislation would be a step backwards for Kazakhstan, harming competition in the country’s vital payments sector and signaling to the outside world that necessary business reform is being driven by shadowy interests, rather than what’s right for industries and consumers.”
This new regulator will have a chilling effect on the betting sector and Kazakhstan as a whole. Despite the anti-corruption rhetoric in Kazakhstan, a powerful lobbying force representing the interest of an unknown private company has succeeded in getting the bill through to the Senate. If this bill becomes law, the new regulator will seek to grab monopoly rents and worsen the disparity of income distribution; and finally, facilitate corruption. All these sins are powerful dragging forces toward the monopoly trap, or even a formidable reversion of the development process Kazakhstan has so diligently built up.