Why was “domestic darling” Parimatch shut down by Ukraine’s gambling sanctions?

Ukraine provided a major shock this week by imposing 50-year sanctions on corporate bookmakers that practically dissolved the country’s online gambling industry overnight.

The biggest surprise, however, was that Ukraine’s largest bookmaker, Parimatch, was among the companies sanctioned, despite employing nearly 2,000 Ukrainians and contributing millions of dollars to the country’s ongoing war efforts against its Russian aggressors.

Nevertheless, the decision was imposed by Ukraine’s National Security and Defence Council (NSDC) before being presented to the public by President Volodymyr Zelenskyy on 11 March.

Zelenskyy said the sanctions would shut down schemes worth billions that had drained funds from Ukraine and were instead being used to finance Russian war initiatives.

So why did Parimatch, which has contributed more than €8m to the Ukrainian state budget and a further €10m in aid and warfare support, also get banished by the government?

A tale of revenge

Several credible sources have suggested that 1xBet, the global online gambling giant of Russian origin, may have influenced the decision to have Parimatch included in the list of bookmakers expelled from the market.

The two companies are fierce CIS-region competitors, and this rivalry extends to Ukraine.

An estimated 25% of Ukrainian adults have gambled with Parimatch, while iGaming NEXT understands that approximately 5% of 1xBet’s global profit is derived from Ukraine.

Both companies were licensed to offer online gambling services to Ukrainians in the early days of the country’s regulated market, which became legal in July 2020.

But the harmonious environment didn’t last long.

Following Russia’s invasion of Ukraine, the government cancelled the operating licence of 1xBet in September 2022, reportedly under intense lobbying pressure from Parimatch and other operators.

That summer, Parimatch participated in a “black” mass media campaign to get 1xBet stripped of its licence, according to sources, despite 1xBet’s insistence that it was a Cypriot company headquartered in Limassol with no military allegiance to either Russia or Ukraine.

“The situation was presented in a way to the President that was very unfavourable to Parimatch.”

“There was a lot of shit-storming from one side to the other,” said one executive who worked in public relations at the time.

One Ukrainian betting consultant told iGaming NEXT that Parimatch felt threatened by 1xBet despite the fact the former boasted 50% of online sports betting market share in Ukraine.

“I think Parimatch was a little bit scared of 1xBet because they are a very strong operator,” the consultant said. “It is not ethical to make a war with your competitors, because they can always do something in response,” he warned.

Eventually, 1xBet was hounded out of Ukraine and Parimatch had strengthened its grip on the market, although the story does not end there.

According to open-source intelligence outlet Molfar, 1xBet managed to evade its enforced exile by re-entering the licensed market as a shell company via the PointLoto brand.

Tensions escalated on this discovery and the battle of the bookmakers began to heat up, despite the suggestion that revenge is a dish best served cold.

In a statement provided to Forbes Ukraine, Parimatch denied any corporate conflict with rival operators in the market, insisting that competition drives development.

Fast forward to the present day and allegations continue to mount that 1xBet-linked lobbyists succeeded in persuading the government to sanction all bookmakers.

But how did they convince the NSDC to include domestic darling Parimatch?

Fight or flutter

“The situation was presented in a way to the President that was very unfavourable to Parimatch,” says our consultant on the condition of anonymity.

Forbes reports that Zelenskyy was easily sold on the idea of the sanctions because his troops are losing billions of hryvnia on gambling every month, lining the pockets of Russian companies in the process.

“This idea has gotten into the head of Zelenskyy and he was enraged with it,” says the consultant. The President said there would be “no way back” for the sanctioned bookmakers during a live television broadcast in the days following the announcement.

Parimatch CEO Maksym Liashko told Forbes that no law enforcement agencies had been in touch with an explanation, or with a request for information to verify their allegations.

“Put it this way, I am sure Parimatch didn’t get smaller during the war.”

Parimatch has since sent an appeal and explanation to the President and the National Security Council, but the outlook is less than optimistic.

Boris Davydenko, the Forbes journalist behind much of the excellent reporting on the developing situation with Ukraine’s bookmakers, said in a personal Facebook post: “Maybe the authorities have good reasons to take Parimatch out of the game, but then society has to see them.”

In a comment on the post, one user said they had seen Ukrainian soldiers climb up trees to gain access to better wi-fi before playing online casino games on their mobile phones.

“I am sure this is true,” says an anonymous source. “When a society has problems, they tend to gamble more and more and more.

He adds: “Put it this way, I am sure that Parimatch didn’t get smaller during the war.”

Money talks

For Western Europeans, it might be tempting to cast 1xBet as Russia and Parimatch as Ukraine in a bookmaker role play.

It is nowhere near that simple. From the start of the war, 1xBet also came through with donations for the Ukrainian government.

Some sources have even suggested that 1xBet’s contributions to the country’s war relief fund actually far outweighed those of Parimatch, which may at least go some way to explaining the former’s persuasive power with parliamentarians.

“Of course the government understood this was a Russian-based company in the past,” an anonymous source told iGaming NEXT. “But the money decides everything.”

Parimatch has also made sizeable donations to the war effort and contributed taxes and licence payments of nearly €11m in 2023, gaining favourable press coverage in the process.

This figure might have fallen some way short of government expectations, however, which launched an investigation into gambling industry tax avoidance last September.

The investigation discovered, among other factors, that gambling firms used crypto as a tool to withdraw funds to foreign accounts in a bid to escape the attention of the tax authorities.

Several high-profile bookmakers were also understood to have played an active role in Ukraine’s offshore market, using additional Curacao-licensed entities to attract players.

A source on 1xBet: “Of course the government understood this was a Russian-based company in the past. But money decides everything.”

This has been described as a “classic model” for Ukrainian operators by one source in the market, even for brands like Parimatch that already possess a regulated licence.

The same source has alleged that Parimatch’s donation paled in comparison to its overall turnover, which they went on to describe as “something crazy”.

“When you make $1000 but you donate $1, you can say ‘I am a very good person’, but it was still very small,” they added.

Parimatch did not immediately respond to an iGaming NEXT request for comment.

The sanctions imposed against Parimatch Ukraine are not related to the Parimatch worldwide brand or international service company PMI, which works with the Parimatch franchise.

Its B2B brand recently rebranded from Parimatch to GR8 Tech, while its charity arm, Parimatch Foundation, is now called the Katerina Biloruska Foundation.

GR8 Tech confirmed it has suspended its client partnership with Parimatch Ukraine until the situation is resolved.

A dangerous precedent

Forbes reporter Davydenko said in his Facebook post that all entrepreneurs might consider themselves at risk of being kicked out of Ukraine after sanctions were imposed on Parimatch based on its “ambiguous reputation”.

He is one of a number of people concerned that NSDC sanctions have set a dangerous precedent for the Ukrainian business sector, potentially deterring start-ups and founders in the process.

“Ukrainian entrepreneurs and the owners of large businesses are in shock,” a source told iGaming NEXT on the condition of anonymity. “How could you put a company [Parimatch] on the list of sanctions that has built up its strength for 30 years while representing Ukraine on the global stage?

“It also provided jobs for 2,000 Ukrainian families and the amount of money it spent on the Ukrainian army was immense, so this is not a joke,” they added.

He went on to say it was a “bad signal” that Ukrainian businesses can be closed down for being tied to Russia. “Trust me, it is easy to tie anybody to Russia. Even if you visited once or twice in the past, that could be enough to cancel you.”

UGC chair Anton Kuchukhidze: “I am convinced that Parimatch will be able to convey to all state agencies that it is right.”

What does this all mean for the future of Ukraine’s regulated gambling sector? That is a question for another day, although the chairman of the Ukrainian Gambling Council (UGC) has said the country’s legal gambling sector is “being tested for strength and maturity”.

In a LinkedIn post, UGC head Anton Kuchukhidze said the inclusion of Parimatch in the government sanctions was a mistake.

“I hope that security and law enforcement agencies will pay attention to the information that will be submitted to them for consideration and will change their positions,” he wrote.

“I am convinced that Parimatch will be able to convey to all state agencies that it is right, because this brand took the principled pro-Ukrainian stance since the beginning of the large-scale invasion of Russia in Ukraine: Parimatch stopped the operation of the franchise on the territory of the Russian federation, and Ukrainian company Parimatch LLC began to systematically provide aid to all defence and security forces of Ukraine,” he added.

Kuchukhidze even touched on what he called the “tax inconsistencies” of gambling operators as set out above. In a message to the government, he wrote: “It would be better to act through the tax service or the court instead of taking the harshest measures.”