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

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Brazil is the gambling world’s most nail-biting mercenary right now: Will President-elect Luiz Inacio Lula da Silva end the country’s decades-long ban on gambling? If it does, Brazil could overtake Italy as the world’s second-largest betting nation behind the US by number of machines.

Or so Martin Storm, chief executive of BMM TestLabs told us. BMM and its competitor Gaming Laboratories International, or GLI, test 80% of gambling products worldwide, helping to keep the industry on the straight and narrow. But Storm isn’t talking to us from Sao Paulo or Rio de Janeiro, which lost nearly 3 billion reais ($560 million) for not enforcing sports-betting laws for this year’s FIFA World Cup.

We catch the Melbourne native – over zoom – in India. It’s no surprise that Australia is at the top of global gambling: a country with less than half a percent of the world’s population has 20% of its slot machines. But what does Storm do in a country where only three of 29 states allow casinos, and where most of the real market — betting on cricket matches, historically?

Storm is there to add a bit of “Made in India” to the certification regulators insist upon before allowing consumers near a slot machine or online game. Apart from the tests carried out by casino operators for internal controls, that is what drives the testing market. “There’s nothing worse than players losing confidence in the market,” Storm says. Of the 474 regulated gambling jurisdictions, approximately 120 have unique requirements. Taxes make it a high-end sport. “No one is more addicted to gambling than governments,” he adds.

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However, only a handful of jurisdictions have their own labs; Most rely on BMM and US-based GLI, which sometimes require 100 submissions before a product is approved. It was people, talent and sheer action that took India by storm. It is in the same New Delhi suburb where Storm has opened its 14th facility worldwide, helping fellow Australian firm Aristocrat Leisure Ltd, creator of smash hits such as Queen of the Nile. He wants to hire 500 to 1,000 employees in India to serve the global market.

The maker and the checker seem to be after the same thing: a portion of India’s 5 million people-strong outsourcing capabilities. The computer code running the game should be scrutinized for elements of unpredictability hidden behind the random promise. Success rates should be analyzed to ensure that results are not manipulated. Things were simpler in the old days, when one-armed bandits sat in a casino, hall or local pub. Being online brings its own set of challenges, and operators are judged just like any financial institution that handles money and data.

Gaming is just as vulnerable as hackers trying to exploit any vulnerability to gain access to a financial institution’s databases. Online casinos have long been targeted, but many attacks go unreported. From banks to oil pipelines, it’s a knee-jerk reaction for victims to keep an incident secret out of shame or risk of reputational damage. For gambling websites, that threat is even more severe. Gamblers want to know they are playing a fair game, and signs that something is amiss will lead them elsewhere. So sites keep violations silent.

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While physical machines and online casinos are subject to strict scrutiny for how they operate internally, a major drawback is the lack of network security standards. Software and hardware can be secure and work reasonably well, but that doesn’t mean malicious actors are prevented from getting in and causing trouble.

In 2019, a hacking group targeted betting companies in Southeast Asia, Europe and the Middle East, according to teams from Taipei-based security firms Talent-Jump Technologies Inc. and Trend Micro Inc. Databases and source code. Researchers assumed the motive was cyber espionage. With access to the underlying code, a savvy group could, in theory, decipher the algorithm of win-loss calculations and develop strategies to beat the casino or sell that information on the darkweb.

Countries have a deep cultural response to games of chance. Lee Kuan Yew, the founding father of modern Singapore, was opposed to casinos because his father was a problem gambler. But in the 2000s, the Asian financial center decided to let two integrated resorts jazz up its nightlife — and add a lot of taxes to its kitty. Brazil’s outgoing president, Jair Bolsonaro, has grown cold feet about pending sports-betting regulation because he doesn’t want to lose the evangelical vote. Lula is not a fan of gambling. But by promising a fiscally responsible government, he is loathe to lose budgetary resources that seem free even if they usually come with significant social costs. Betting websites seem to rule: They are the top sponsors of Brazil’s top division soccer teams.

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Eventually, India too will realize that resistance is counterproductive. It is ludicrous that revenue from the national passion, cricket, is given away to mafia-dominated illegal betting. A well-regulated domestic gambling industry, mostly virtual, would allow the country to offer more innovative solutions to the world. In making games and testing them.

More from Bloomberg Commentary:

• Gambling Global Coming-Out Party in Qatar: Lionel Laurent

• Don’t bet money on World Cup winner: Eduardo Porter

• Cybersecurity needs its own Sarbanes-Oxley: Tim Culpan

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

Andy Mukherjee is a Bloomberg opinion columnist covering industrial companies and financial services in Asia. Previously, worked for Reuters, The Straits Times and Bloomberg News.

Tim Culpan is a Bloomberg opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.

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

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