Stronger Lottery Regulations Needed as Grey Market Threat Grows Globally

The challenge of lotteries mimicking gambling is not unique to Ukraine—it’s a growing concern for regulators around the world, including in well-established markets like the United States. As lottery operators increasingly use modern technologies to bypass legal restrictions, many do so without proper licenses, avoiding taxes and operating outside regulatory oversight.

This loophole has fueled the expansion of the grey market, prompting governments to respond. In the United States—often seen as a benchmark for regulatory efficiency—several states are moving swiftly to shut down lottery-based gambling models. New Jersey is among the latest, with Governor Phil Murphy signing legislation that bans so-called "lottery-casino" platforms. These sites had exploited legal grey areas, offering virtual currencies like “sweep coins” that could be converted into real money, essentially functioning as unlicensed online casinos.

New Jersey’s ban marks the sixth of its kind in the U.S. this year, following similar actions in New York, Nevada, Connecticut, Montana, and Louisiana. California is also considering a bill that would tighten oversight. This growing state-level momentum underscores the need for broader regulatory clarity at the federal level.

Ukraine faces a similar challenge. The grey market continues to thrive due to the lack of clear, enforceable rules for lottery operators—especially in the online space. Unlike licensed gambling businesses, many lottery platforms in Ukraine operate without paying licensing fees or taxes, while offering unregulated games that resemble casino-style betting. This not only creates an uneven playing field for licensed operators but also leaves players unprotected.

The Ukrainian Gambling Council (UGC) has repeatedly called for legislative reforms to clearly define the boundaries of legal lottery activity. The goal is to eliminate ambiguity, protect consumers, and create a fair competitive environment. The Ministry of Digital Transformation has acknowledged that the current lottery sector operates without licensing conditions—meaning the state has no control or oversight, and responsible gambling safeguards are absent.

Encouragingly, the new national regulator, PlayCity, appears to recognize the need for reform. Streamlining lottery legislation could close off one of the largest loopholes enabling the grey market in Ukraine.

However, the issue is not only about taxation or legal compliance—it’s about market integrity. When one part of the industry operates in a legal vacuum while others face strict regulation, distortions arise that damage the entire ecosystem. Legitimate operators are undercut, consumers are exposed to risks, and the state loses out on valuable revenue.

To ensure sustainable industry growth and fair competition, stricter regulation of lottery operations—especially online—must be a top priority. The international trend toward closing these loopholes offers a clear path forward. Ukraine would be wise to follow it.