Brazil misses World Cup games. What is India’s stake?

Brazil misses World Cup games.  What is India’s stake?

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The most nail-biting bet in the gambling world right now is Brazil: Will new president 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 largest gaming nation in terms of number of machines, behind the United States.

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

We catch the Melbourne native – over Zoom – in India. An Australian in the upper echelon of global gambling is no surprise: the nation with less than half a percent of the world’s population has 20% of its slots. But what is Storm doing in a country where only three of 29 states allow casinos, and most of the real market – historically betting on cricket matches – is underground?

Storm is there to inject some “Made in India” into the certification authorities insist on before letting consumers near a slot machine or online game. That is what drives the test market, apart from the checks casino operators carry out for internal control. “There is nothing worse than players losing confidence in a market,” says Storm. Of 474 regulated gambling jurisdictions, around 120 have unique requirements. Taxes make it a high-stakes sport. “No one is more addicted to gambling than governments,” he adds.

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Yet only a handful of jurisdictions have their own laboratories; most rely on the likes of BMM and US-based GLI, which sometimes require 100 submissions before approving a product. It is work that requires people and expertise that has brought Storm to India. It helps that Aristocrat Leisure Ltd., another Australian firm and creator of big hits like Queen of the Nile, is nearby in the same New Delhi suburb where Storm has opened its 14th facility worldwide. In the long term, he wants to hire between 500 and 1,000 employees in India to serve the global market from there.

It seems the manufacturer and the check are after the same thing: a slice of India’s 5 million-strong outsourcing talent pool. The computer code that runs the game must be scrutinized for elements of predictability that hide behind a promise of randomness. The win rates must be analyzed to ensure that the outcomes are not rigged. Things were simpler in the old days, when one-armed bandits sat in a casino hall or the local pub. Being online presents its own challenges, because that’s when the operators are assessed like any financial institution that works with money and data.

Hackers hunt games just as they try to exploit any vulnerability to get into the databases of a financial institution. Online casinos have long been targets, although many attacks go unreported. From banks to oil pipelines, victims keeping an incident secret is a knee-jerk reaction due to embarrassment or risk of damaged reputation. For gambling sites, the threat is even more serious. Gamblers want to know they are playing a fair game, and any hint that something is amiss can make them go elsewhere. So the sites keep breaches at bay.

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While physical machines and online casinos undergo strict controls on how they operate internally, a major weakness lies in the lack of network security standards. The software and hardware may be secure and work fairly, but that doesn’t mean malicious actors are prevented from getting in and causing problems.

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

Countries have a deep-seated cultural response to games of chance. Lee Kuan Yew, the founder of modern Singapore, was opposed to casinos because his father was a troubled old man. But in the 2000s, the Asian financial center decided to allow two integrated resorts to renew its nightlife – and add a whole lot of treasures to its kitty. Brazil’s outgoing president Jair Bolsanoro kept cold feet on the pending regulation of sports betting because he did not want to lose the evangelical vote. Lula is not a fan of gambling. But having promised a fiscally responsible government, he may be unwilling to lose budgetary resources that look like they are free, even though they usually have significant social costs. Betting websites think a law is coming: They are the main sponsors of Brazil’s top division football team.

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Eventually, India will also find that resistance is counterproductive. It is ridiculous to give up revenue from cricket, the national craze, to mafia-dominated illegal gambling. 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 checking them.

More from Bloomberg Opinion:

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

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

• Cybersecurity needs its own Sarbanes-Oxley: Tim Culpan

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

Andy Mukherjee is a Bloomberg Opinion columnist covering industrials and financial services in Asia. Previously, he has 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 are available at bloomberg.com/opinion

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