Brazil Misses Out on World-Cup Betting. What’s India’s Wager?

Suspension

The most pressing bet in the gambling world right now is Brazil: Will President-elect Luiz Inacio Lula da Silva end the country’s decades-old ban on games of chance? If he does, Brazil could overtake Italy to become the second largest betting country in the world in terms of the number of machines, after the United States.

Or so Martin Storm, CEO of BMM Testlabs, told us. BMM and its rival Gaming Laboratories International, or GLI, test more than 80% of gambling products worldwide, helping to keep the industry on the straight and narrow. But the Storm isn’t speaking to us from Sao Paulo or Rio de Janeiro, which are losing an estimated R$3 billion ($560 million) for not enacting a sports betting law in time for this year’s FIFA World Cup.

We capture a Melbourne citizen – Over Zoom – in India. The Aussie is in the top echelons of global gambling and it’s no surprise: the nation with less than half the world’s population has 20% of its slot machines. But what is the Storm doing in a country where only three out of 29 countries allow casinos, and most of the real market – betting on cricket matches, historically – is underground?

Storm is there to inject a little “Made in India” into the certification regulators insist on before they allow consumers near a slot machine or online game. This is what drives the testing market, apart from the checks that casino operators carry out for internal control. “There is nothing worse than players losing confidence in the market,” says Storm. Of the 474 regulated gambling jurisdictions, around 120 countries have unique requirements. The taxes make it a high-risk sport. “No one is more addicted to gambling than governments,” he adds.

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However, only a few jurisdictions have their own laboratories; Most rely on the likes of BMM and GLI in the US, which sometimes require 100 submissions before a product can be approved. It is a people- and skill-intensive business that has taken India by storm. It helps that Aristocrat Leisure Ltd, a fellow Australian company and maker of such great hits as Queen of the Nile, is located nearby in the same New Delhi suburb where Storm opened its 14th facility worldwide. He eventually wants to hire between 500 and 1,000 employees in India to serve the global market from there.

The maker and the auditor seem to be following the same thing: a slice of India’s 5 million outsourcing talent. The computer code running the game must be examined for elements of predictability that hide behind the promise of randomness. Win rates must be analyzed to ensure results are not falsified. Things were much simpler in the old days, when armed bandits sat in the hall of a local casino or tavern. Being online brings its own challenges, and that’s when operators are valued like any financial institution that handles money and data.

Hackers prey on games just as they would exploit any vulnerability to access a financial institution’s databases. Online casinos have always been targeted, although many attacks go unreported. From banks to oil pipelines, having the victims covertly covert the accident is a quick reaction caused by embarrassment or risk of reputational damage. For gambling websites, this threat is much more serious. Gamers want to know they’re playing a fair game, and any hint that something might be wrong could lead them to head elsewhere. So the sites keep breaches under wraps.

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While physical machines and online casinos undergo rigorous checks to see how they operate internally, a major weakness lies in the lack of network security standards. Software and hardware may be safe and operate fairly, but that doesn’t mean that malicious actors can’t get in and cause problems.

In 2019, a hacking group targeted betting companies in Southeast Asia as well as Europe and the Middle East, according to the Taipei-based teams at Talent Jump Technologies and Trend Micro Inc. Instead of stealing the money, the digital thieves took over the databases and source code. The researchers assumed the purpose was cyber espionage. With access to the underlying code, the smart group could, in theory, understand algorithms for profit and loss calculations, develop strategies to beat the casino, or simply sell that information on the dark web.

Countries have a deeply rooted cultural response to games of chance. Lee Kuan Yew, the founding father of modern Singapore, was an opponent of casinos because his father was a problem gambler. But in the 2000s, the Asian financial hub decided to let two full-fledged resorts spice up the nightlife—and add a whole lot of tax to my kitty. Outgoing Brazilian President Jair Bolsanuro became cool about the pending sports betting regulation because he didn’t want to lose the evangelical vote. Lola is not a fan of gambling. But having been promised a fiscally responsible government, he may be reluctant to lose budget resources that appear to be free, even though they usually come with great social costs. Betting sites believe the law will come: they are the leading sponsors of Brazilian football teams.

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In the end, India will also discover that resistance is counterproductive. It is absurd to give away the proceeds of cricket, the patriotic madness, to illegal betting dominated by the Mafia. A well-organized domestic gambling industry, which is more likely to be virtual, will allow the country to offer the world more innovative solutions. Whether in making games, check them out.

More from Bloomberg Opinion:

• The next global gambling party in Qatar: Lionel Laurent

• For the World Cup winner, don’t bet the money: Eduardo Porter

• Cybersecurity needs its own Sarbanes-Oxley: Tim Colban

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andy Mukherjee is a columnist for Bloomberg Opinion covering industrial and financial services companies in Asia. He previously worked for Reuters, Straits Times and Bloomberg News.

Tim Colban is a columnist for Bloomberg Opinion covering technology in Asia. Previously, he was a technology correspondent for Bloomberg News.

More stories like this are available at bloomberg.com/opinion

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