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

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The hottest bet in the gambling world right now is Brazil: Will President-elect Luiz Inacio Lula da Silva end the country’s decades-long ban on games of chance? If he does, Brazil could overtake Italy to become the world’s second-biggest betting country by number of cars behind the United States.

Martin Storm, CEO of BMM Testlabs told us. BMM and its rival Gaming Laboratories International, or GLI, test more than 80 percent 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, as they stand to lose around 3 billion rials ($560 million) by failing to pass sports betting laws in time for this year’s World Cup.

We catch the Melbourne native – via Zoom – in India. An Australian at the top of global gambling is no surprise: a country with less than half a percent of the world’s population owns 20 percent of its gaming machines. But what’s Storm doing in a country where only three of 29 states allow casinos, and most of the real market — betting on cricket matches, historically — is underground?

Storm exists to inject a bit of “Made in India” into the certifications that regulators insist upon before allowing consumers to go near a slot machine or an online game. This is what drives the testing market, apart from the checks that casino operators do for internal controls. “There’s nothing worse than players losing confidence in the market,” Storm says. Of the 474 regulated gambling jurisdictions, about 120 have unique requirements. Taxes make it a popular 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 laboratories. Most rely on US-based BMM and GLI, which sometimes require 100 submissions before a product is approved. It is people and skill intensive work that has taken India by storm. It helps that Aristocrat Leisure Ltd., a fellow Australian company and creator of hits like Queen of the Nile, is in the same New Delhi suburb where Storm has opened its 14th center worldwide. He wants to eventually hire between 500 and 1,000 employees in India to serve the global market from there.

It seems the maker and checker are looking for one thing: a slice of India’s 5 million-strong outsourcing talent pool. The computer code that runs the game must be checked for predictable elements hidden behind the promise of randomness. Win rates should be analyzed to ensure that results are not rigged. Back in the old days, things were simpler when one-armed bandits would hang out at the local casino or pub. Being online brings its own challenges, because that’s when operators are evaluated like any financial institution that deals with money and data.

Hackers trap the game just as they seek to exploit any vulnerability to break into a financial institution’s databases. Online casinos have long been targeted, although many attacks go unreported. From banks to oil pipelines, keeping an incident secret by victims is a knee-jerk reaction out of embarrassment or risk of reputational damage. For gambling websites, this threat is even more severe. Gamblers want to know they’re playing fair, and any hint that something is wrong can cause them to go elsewhere. So sites keep violations secret.

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While physical machines and online casinos undergo rigorous checks on how they work internally, a major weakness lies in the lack of network security standards. Software and hardware may be secure and functioning properly, but that doesn’t mean they can prevent malicious agents from getting in and causing problems.

According to the Taipei-based teams at security firm Talent-Jump Technologies Inc. and Trend Micro Inc. In 2019, a group of hackers targeted betting companies in Southeast Asia, as well as Europe and the Middle East. The database and source code researchers assumed were intended for cyber espionage. With access to the underlying code, a smart group could, in theory, understand the win-loss calculation algorithms, develop strategies to beat the casino, or simply sell that information on the dark web.

Countries have a deep cultural reaction to games of chance. Lee Kuan Yew, the founder of modern Singapore, was opposed to casinos because his father was a problem gambler. But in the 2000s, the Asian financial hub decided to allow the two integrated resorts to jazz up their nightlife — and add hefty taxes to their kitty. Brazil’s outgoing president, Jair Bolsonaro, balked at pending sports betting regulations because he didn’t want to lose the evangelical vote. Lola is not a fan of gambling. But with the promise of a fiscally responsible government, it may be loathe to lose budgetary resources that appear to be free, even though they usually entail significant social costs. Betting websites think the law is on the way: they are prominent sponsors of Brazil’s top soccer teams.

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Eventually, India too will realize that resistance backfires. It is ridiculous to hand over the revenue from cricket, the national obsession, to mafia-dominated illegal betting. A well-regulated domestic gambling industry, which will most likely be virtual, will allow the country to offer more innovative solutions to the world. Both in making games and in reviewing them.

More from Bloomberg Opinion:

• World Gambling Festival in Qatar: Lionel Laurent

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

• Cybersecurity needs its own Sarbanes-Oxley: Tim Calpen

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 and financial services companies in Asia. He previously worked for Reuters, The Straits Times and Bloomberg News.

Tim Culpen is a Bloomberg Opinion columnist covering technology in Asia. He was previously a technology reporter for Bloomberg.

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

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