Sunday, April 14, 2024

Legalized but not completely formed. Igor Zotko on the Ukrainian Gambling Industry and the Work of PIN-UP Ukraine During the War

Gambling became legal in Ukraine just recently, with the adoption of the relevant law in 2020. At the beginning of 2021, the Commission for Regulation on Gambling and Lotteries (CRGL), the state regulator of the gambling market, issued the first licenses to companies that wanted to conduct business openly. Getting the industry out of the shadows was a big step forward for the market, but it did not solve all the related problems. In addition, the war has been a serious challenge for the Ukrainian gambling business over the past 19 months.

Igor Zotko, owner of PIN-UP Ukraine (Ukr Game Technology LLC), a company operating in the field of legal gambling, spoke about the peculiarities of the Ukrainian and global gambling market, market innovations after legislative changes, as well as the company charity initiatives.

Information about PIN-UP Ukraine

PIN-UP Ukraine is a Ukrainian online casino that was one of the first in the country to receive an operating license. The license for organizing and conducting online casino gambling was issued to UKR GAME TECHNOLOGIES LLC by the Commission for Regulation of Gambling and Lotteries in 2021. The owner of PIN-UP Ukraine is Igor Zotko.

On the industry-related problems after its legalization

Could you tell us how the law that legalized the Ukrainian gambling market affected the industry?

The law of July 14, 2020, which defined the functioning conditions for the gambling market in Ukraine, solved the main problem – gambling has come out of the shadows and become more open to the public. This is a breakthrough after the ban was introduced in 2009. However, despite almost three years of legal work, the market is young and still not established, as legislative initiatives are still being implemented, new players keep appearing and growing, and taxation changes are on the way. I think this process will take quite long.

What problems does the market face now and what is needed to make it work?

First, it is necessary to put an end to legislative changes and ensure equal rules for all market players. Secondly, we need to reduce taxation levers that are currently insane and hinder market development – the offline segment has the most difficult situation. Thirdly, banks should treat the gambling business the same way as all other businesses. Several banks are not ready to work with the gambling business in terms of acquiring. Some banks prohibit paying out winnings to players more than twice a day. Even though winnings are taxed, this also hinders development.

What should be done to solve the market problems?

To overcome the problems, it is necessary, first, for all incompetent people and pseudo-experts to stop commenting on the market in a toxic manner, the only regulator of the industry is CRGL, which, in turn, is under the Ministry of Digital Transformation. Secondly, it is necessary to clearly distinguish gambling from the lottery business, for example, this can be achieved by equalizing the cost of licenses and taxes, or by clarifying the law. Thirdly, it is imperative to close the possibility of operating in the grey market, which currently accounts for 40-45% – this must be done rigorously and irrevocably. No licensed product can compete when almost half of the market is in the shadows and pays players large bonuses, tax-free winnings, and other perks. The market’s urgent need is for two-way communication with the regulator. The regulator should highlight market issues, directly communicate state requirements, and reach a consensus. The main thing in this process is the desire of the state and the regulator. I am confident that the market is ready for it and needs such communication.

To what extent is the situation in the Ukrainian gambling industry in line with global market trends?

“In the global context, the Ukrainian market demonstrates courage, activity, and prospects.”

The legalization of the market in Ukraine covered betting, casinos, poker, and lotteries at once, so this is a confident step forward. No other country and the gambling market exists in almost all civilized countries, has taken such a bold step. The United States is moving from state to state in legalization, and there is progress in Europe, Brazil has been trying to move forward for 5 years, but shadow schemes have been operating there all this time. Ukraine has successfully overcome the first step on the way to a healthy, competitive and, most importantly, transparent market.

On business in the gambling industry

How did you start working in the industry?

When I was a student, I made my first bet on a sports game and lost money. After that, I realized that I either had to stop playing or organize something similar myself. Who would have thought that a random thought would materialize almost 20 years later? In 2008, I started working in e-commerce. I delved into the topic of the gambling business that requires payment processing, different types of casinos, and lotteries, and also came to realize the philosophy of players, their motivation and their goal in the game. Then I worked for a gambling company, where I reinforced my knowledge with practice. Later, I became the head of a FinTech company. And when the gambling market was legalized, it turned out that there were few participants and there was room for new players if you didn’t think long. At that time, I knew the owner of the PIN-UP brand and recommended a non-core investor to choose this brand for development in Ukraine. And in 2022, I received an offer to officially lead the project, which I later acquired.

What is gambling for you?

It is a way to have fun. Some people go to the gym, some go to the movies or fishing, and some play in casinos. These are evenings with friends – easy and relaxed, without an unhealthy desire to win all the money in the world. Anyone who thinks that this is an opportunity to make money or get rich easily is mistaken. I am sure that this type of recreation should be presented to society exactly in this way.

On business in the financial industry

You are also the owner of the financial company Yediniy Prostir, tell us how your businesses cooperate

To put it briefly, they don’t. These are separate activities that have me as the owner – the only thing in common. Yediniy Prostir is the first independent project that I started from scratch about four years ago, compared to the casino which I acquired earlier this year.

There was a scandal related to the Yediniy Prostir regarding the commission in the state app «Diia», one of the theses is why these functions cannot be performed by a state bank.

I wouldnʼt call it a scandal, because to avoid asking such a question, it is enough to delve into the operational activities. First, the financial company guarantees uninterrupted payment processing because it cooperates with several banks, including state-owned ones. This protects the system from failures, which cannot be guaranteed by a single bank, even a state-owned one. Secondly, regarding the price of services, Yediniy Prostir won the tender for these services, and our offer was the most favourable for the customer. You also need to understand that none of the government agencies pays the financial company, all earnings come only from administrative fees.

There were also questions about the commission, stating that the company earns millions on fees from charitable projects

I can call this disinformation. Currently, we have four types of payments in Diia, which are made by Yediniy Prostir. These are the army of drones, military bonds, the Presidentʼs initiative United24, and administrative payments to the state. Yediniy Prostir does not charge any fee for charitable initiatives, only for administrative services, but these are the lowest rates on the market – 1.5%, of which almost the entire amount goes to cover the cost of the service. So far, Yediniy Prostir has earned about 2 million hryvnias in cooperation with Diia over the past year, not the tens or hundreds of millions that someone has invented. To be clear, these funds are not enough to cover the company’s operating expenses.

But then how does the company make money?

You should understand that there are no free services in the financial market – any transfer of an individual without a fee is covered by the bank payment system or company they serve. For Yedynyi Prostir, cooperation with Diia has never been about profit; it is an image project where the company invests rather than earns. To be able to do all this, there are regular commercial projects, where the company earns on fees and invests in its development and improvement of services for the state.

I am already used to information attacks on my businesses, where Yedynyi Prostir is profiting from charity or I am allegedly the owner of a Russian PIN-UP casino. Perhaps someone thinks that in this way they can close one of these companies to their advantage, which is very doubtful for me because regulatory authorities have no questions for my companies.

On PIN-UPʼs work during the war and the company charity initiatives

How did your company PIN-UP Ukraine work at the beginning of the Great War?

Like most Ukrainians, we were shocked by the outbreak of a full-scale war. Our number one priority then was to protect our employees, especially those in the cities where the offensive began. We evacuated them to the central and western regions, guaranteed them stable salaries, and made one-time payments to some of them. In addition, we delivered power banks and EcoFlow charging stations to our employees.

If we talk about business, then, of course, sales have dropped tremendously. Gaming is entertainment, and what kind of entertainment can we talk about during a war? It was only in the late summer of 2022 that the figures began to grow.

How is the company operating now?

Compared to the beginning of the war, our work has stabilized. In addition, we have become very active in helping the army. Some of our employees have been taken to the frontline – the company continues to pay their salaries and provide financial and moral support. They form requests for the units they serve in, and the company fully or partially closes them.

Could you tell us about the charity initiatives of PIN-UP Ukraine?

From the very first weeks, our employees started volunteering, buying necessary items and sending humanitarian aid to the regions most affected by the war, where there was no food or water. In addition, we received specific requests from the soldiers we knew personally and their units, and we also met those needs.

At first, we were helping chaotically, then Marina Ilina, the owner of the international brand PIN-UP, created the PIN-UP Foundation, a charity that helps socially vulnerable Ukrainians and those affected by the war, and we started cooperating with it. We financially help the Foundation to implement the LINE-UP humanitarian project, which provides emergency assistance to Ukrainians in frontline settlements. Volunteers travel to remote de-occupied areas, where there are often no shops, and help the locals with everything they need. In addition, the Foundation participates in the restoration of cultural monuments and purchased a generator for the Kharkiv subway to ensure its operation.

In total, PIN-UP has donated UAH 134.8 million to charity.

I also personally finance part of the costs of the ASKOLD Training Centre for mobilized soldiers, which provides training and education based on the methods of the Ukrainian army’s combat experience and NATO standards. More than 17 thousand people have already passed through the centre. The centre exists thanks to donors and needs material resources, which is very important now.

Claire James
Claire Jameshttp://www.firedigitaluk.com
Claire is an accounts manager at Fire Digital UK, an online publishing and content marketing company based in the North West.

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