Legal basis for organisation, operation and government regulation of lotteries in the Russian Federation

The major law that establishes the legal basis for organisation, operation and government regulation of lotteries in the Russian Federation is “Law on Lotteries” (138-FZ, dated November 17 2003).

Law defines the types and purposes of lotteries, procedures for controlling the organisation and operation of lotteries and liabilities of persons as well as companies for running and operating of lotteries.

Concerning the requirements in this Law that commercial companies involved in organisation of lotteries should comply with are follows:   

Lottery Organiser should be a legal entity located within the Russian Federation that has obtained a permission to run such lottery. Lottery Organiser may conduct a lottery independently or may authorise a Lottery Operator to do so.

Lottery Operator should be a legal entity, duly incorporated under Russian law, which is located in the Russian Federation and which is authorized to operate a lottery under contract with a Lottery Organizer. The Lottery Operator runs the lottery in the name of the Lottery Organizer. The Lottery Operator further must possess the necessary equipment to operate a lottery.

As of now the technical regulations for lottery equipment have not been adopted. As a result, the equipment has not to be registered and, in turn, related activities are not regulated by public bodies.

There are certain rules in this Law as well on prize fund allocation matter.    The prize fund of the lottery is not part of the property of the founder or lottery operator and cannot be used for any other purposes than pay-off of the prizes to the winners of the lottery. Proceeds from lottery sales should be split and with not less than 50% and not more then 80% of them going to the prize fund.

All lotteries that sell on the territory of the Russian Federation, no matter what type, size or regional status, should all be registered. All Russian lotteries should be registered by the Federal Tax Service. Regional and municipal lotteries should be registered in accordance with the regional legislation.

There is a difference in process of registration of normal lotteries and sweepstakes. Registration of sweepstakes is more easy and it take place in form of notification rather then registration by the Federal Tax Service.

The following documents should be presented to Federal Tax Service in order to register the right to conduct the all Russian lottery:

• Application for lottery registration;
• Description of the lottery concept and conditions;
• The financial performance standards of lottery revenue distribution;
• Make-up lottery ticket;
• Rules of identification of lottery ticket in the process of pay-out;
• Technical and economic assessment of lottery organisation process with indication of sources of financing and revenue prediction;
• Description and technical characteristics of lottery equipment;
• Copies of company-applicant Charters documents, certified by notary;
• Accounting balance-sheet with the latest closing date;
• Certificate of No Outstanding Tax Liability;
• Description of procedure for recording of sold and unsold lottery tickets;
• Description of procedure for return, safekeeping, destruction or using in other draws of unsold lottery tickets;
• Description of procedure for withdrawal of unsold lottery tickets;
• Description of procedure for safekeeping of unclaimed prises and procedure of its claiming after expiration of prize claim expiry date.

The Federal Tax Service has two months following submission of the application to decide whether to issue the permit. The permit can be issued for a maximum period of five years.

If the lottery permit is issued the information about lottery will be placed in the Lottery Register, containing information on all lotteries operated within the Russian Federation.

The following documents should be presented to Federal or Local Tax Service in order to notify them on current sweepstakes draw:

• Notification on organisation of sweepstakes draw;
• Description of the sweepstakes concept and conditions;
• Description of way of informing participants of sweepstakes about sweepstakes terms and conditions;
• Description of characteristics or features of goods (services) which allow to establish relation of such goods (services) with current sweepstakes.
• Description of way of concluding agreement between organisers of sweepstakes and  its participants;
• Description of way of informing participants of sweepstakes on early termination of sweepstakes draw;
• Copies of company-applicant Charters documents, certified by notary;
• Description of procedure for safekeeping of unclaimed prises and procedure of its claiming after expiration of prize claim expiry date.

Notification on organisation of sweepstakes should be sent to the Federal or Local Tax Service not less then twenty days before holding a sweepstakes draw. Federal or Local Tax Service has a right within fifteen days from reception of notification to suspend organisation of sweepstakes in case notification is not submitted according to existing rules. The period of currying out of sweepstakes should not to exceed time of one year.

Other related legislation. A new Law with purpose to restrict illegal gambling was adopted later in July 27, 2010 and came in force on August 6 2010 in form of amendments into Federal law “On Lotteries”.

The Law provides that use of mechanical or electronic equipment and other technical devices may not be used for the purposes of identifying prizes of any sweepstakes. Sweepstakes rules may not include conditions, according to which entrants of sweepstakes should use mechanical or electronic equipment in order to indicate and/or acquire a prize.

However that the restriction regarding usage of mechanic and electronic equipment applies only to identification and acquisition of prizes. Therefore such equipment could be used for identification of winners. But it is not allowed to use a special lottery equipment while holding a sweepstakes draw.

The Law also provides for the requirements on reporting and audit of lotteries and sweepstakes promoters. Non-governmental lottery promoters and operators of state and municipal lotteries shall publish annual report on holding a lottery and results of an annual audit in the media and/or on the Internet no later than on the 1st of July of the year following the reporting period.

Electronic tickets. Electronic tickets system for participation in lotteries is not much developed in Russia. Only in May 2010 first Russian company Orgloto (operator of lottery Gosloto) started to sell electronic lottery tickets in Russia. After drawing if the ticket wins the owner will automatically get SMS with special code. Now the winner can get his money in the office of Gosloto and by QIWI, Novoplat and Lotter payment systems (terminals).

Besides that there is restrictive Government Decree № 920 of November 15, 2010 (came in force on December 2, 2010) “On affirmation list of goods (works, services) for which a paying agent and bank agent does not have the right to accept payment from individuals". This Decree prohibits payment systems (terminals) to accept payment from individuals for participation in non-state lotteries. It is widely considered that such decision was made in the interests of 12 state lotteries in support of Sochi Olympic Games.

 May 26, 2011