Mikhail Zborovsky: Responsible gaming is essential for the future of online gambling.

Mikhail Zborovskiy, an expert in online gambling with a decade of experience and the owner of the Cosmobet brand, discusses how legislative changes impact the market, as well as the trends and challenges facing the industry.

— In June of this year, you launched your first project in the online gambling sector. Why, despite the uncertain situation regarding legislative changes and the war, did you decide to start this project?

– We submitted our application for a license back in January. At that time, the online gambling market was quite different from what it is now. Additionally, new opportunities began to emerge. Recent events have drastically changed the situation, including a powerful information campaign aimed at discrediting the market.

Whenever a public discussion occurs, it’s valuable to listen to both sides. Unfortunately, the gambling market has not had the opportunity to be heard.

— What exactly do you mean by the information campaign?

— I am referring to a campaign that has generated an extremely strong public response regarding gambling addiction among military personnel and the negative influence of the gambling market on society. Unfortunately, there are no comprehensive studies on the gambling market and player profiles in Ukraine, so any statements regarding specific figures I consider populist, as they lack confirmation.

Before deciding to open an online casino, I researched whether the problem mentioned in Ukraine exists globally. I found the regulation and the history of the gambling market in the UK to be appealing. The market there has been operating for a long time, and consequently, the regulation works well. According to the British charity (Alcohol Change UK), there are 602,391 individuals in the UK who are dependent on alcohol.

The total population is 67.33 million. This means that 0.9% of the total population has an alcohol dependency. Regarding gambling addiction, the UK Gambling Commission established in 2022 that only 0.2% of the entire population has gambling addiction issues.

According to our regulator, gambling addiction problems account for only 0.1% of the total population. At the same time, statistical data, even without the war in Ukraine, have not been regularly updated, and now it’s a challenging task. However, even social surveys with a small sample of people aged 18+ show poor statistics. For instance, at the end of 2023, among 2015 individuals, 77% regularly consume alcohol. This indicates that a significant problem remains unaddressed.

I also want to highlight that people, in general, have many dependencies: excessive gaming, shopping addiction, or social media addiction. But these are well-integrated into modern culture and are often more socially acceptable than gambling, even though their consequences can be quite severe. Yet, for some reason, the gambling business in our country is viewed as the greatest evil.

The main goal of our activities is to change this perception. To help people understand that a casino is just as much of an entertainment option as any other. Changing this perception can only happen through responsible gaming and a clear distinction between the legal and illegal markets. Therefore, in response to your first question about why I chose this business, I can name two reasons.

First, I am an industry expert. Second, I genuinely want to contribute to changing society's attitude toward the gambling business. Now is the right time for this. If there are no legal players with this goal, there will be illegal ones. They will only exacerbate the market's problems.

Market Issues

— Why is everyone in this market on their own?

— It all depends on the worldview of the company and the people representing it. I also study the experiences of different countries in the context of why some countries are successful and others are not. I found the reason to be the insufficient level of social capital development, which can be described by the level of trust in society.

This reduces transaction costs for conducting deals. If there is trust in society and one participant trusts another, they can easily agree on the terms of the deal. Currently, it is crucial to have a strong lobby that can effectively represent the interests of Ukraine's gambling industry in the informational and regulatory fields.

— Is it difficult to launch your online casino in Ukraine today? What investments are needed for this?

— Launching an online casino in Ukraine is not an easy task. One of the first steps is to undergo serious compliance checks, including verification by the bank and the regulator. Compliance involves a thorough examination of history, sources of funds, and the absence of links to the aggressor country. This process takes a lot of time due to numerous requirements, including document preparation, providing additional data, and waiting for responses to requests, which prolongs the procedure.

– How long does this take?

– It varies. For us, it took several months. We submitted our application in January and received the license in March. The fee for the first year of the license must be paid no later than ten working days from the day the applicant receives notification from the authorized body about the decision to issue the license.

Next, we need to go through the bank's compliance checks to be able to accept payments. This also takes a certain amount of time because the KYC (Know Your Customer) procedures of banks differ somewhat from the requirements of our regulator, and they must also undergo full compliance. For us, this took about 2.5 months. Additionally, technical work on setting up the platform also consumes time.

In total, it took 5.5 months from document submission to project launch.

Plans and Prospects

- Is online gambling the only area of your interest? What were you doing before launching your project?

— I have over 10 years of managerial and leadership experience in the IT sector, specifically working on the development and launch of projects from scratch and adapting existing products in the gambling market in countries across Asia, Latin America, Malta, and Curacao. Therefore, having familiarized myself with leading European practices, I can say that there are players in the Ukrainian market who are quite competitive in some aspects, while in others, they are not. Particularly regarding the approach to responsible gaming.

In general, when it comes to responsible gaming, illegal players do not care about it at all, and the illegal market constitutes 50-70% of the entire gambling market in our country. On these platforms, there is a tendency to maximize profit from clients immediately. And this is not about client safety.

Legal players, on the other hand, are those who plan to build their business for the long term. This is about transparency and responsibility. If you have a long-term strategy, you are interested in having the player return to your platform. And this is only possible if the client has a positive experience with your product, which can be achieved through responsible gaming, protecting the client from negative consequences, and ensuring the safety of their data. Therefore, it is very important to differentiate between the principles of operation of legal and illegal players, and for licensees to care about their business reputation and the market as a whole by implementing transparency in business practices and principles of responsible gaming.

- Do you have partners in this project? Are you attracting investors?

— I am the sole beneficiary of the company. After launching the project, we have already started generating certain revenue, allowing us to continue operations. Despite this, additional investments will primarily be directed towards our technological solutions. We have commissioned the development of platforms tailored to our requirements.

— How many people are currently working on the project?

— We are still hiring new employees, so the total number of people involved in the project is dynamic. But overall, it is around 34 people.

- What is the profitability in this market?

— In the spring, we expected that the return on investment would take a few months. Due to certain legislative changes, we see that profitability is stretching out a bit, and in my estimates, it will take up to a year. This, of course, assumes there are no additional changes that would restrict our operational activities. We are in favor of more solutions aimed at implementing responsible gaming practices.

— What exactly do you mean?

- We need to find a balance. Furthermore, the issue of taxation in the industry is still unresolved. The timelines are set, but their interpretation remains unclear. The Tax Code does not clearly specify what constitutes the taxable object of a particular tax, creating opportunities for varying interpretations.

About Competition in the Field

- Is there competition in this sector?

— Six months ago, competition was fierce, primarily due to significant investments in marketing. Now, after marketing investments have gained an uncertain status, any spending on promotion has become extremely challenging.

These aspects (advertising and taxation), in my opinion, need to be addressed as soon as possible for the market to develop and formulate strategies for the next 3-5 years. Unclear and unstable regulation is the main stop