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

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

Or so Martin Storm, CEO of BMM Testlabs tells us. BMM and its competitor Gaming Laboratories International, or GLI, test more than 80% of gambling products worldwide, helping to keep the industry moving forward. But the Storm isn’t talking to us from Sao Paulo or Rio de Janeiro, which stand to lose around 3 billion reais ($560 million) for not implementing sports betting laws in time for this year’s FIFA World Cup.

We catch the Melbourne native in India zooming in. An Australian at the top of global gambling comes as no surprise: a nation with less than half a percent of the world’s population has 20% of slot machines. But what is the Storm doing in a country where only three of 29 states allow casinos and where most of the real market — historically betting on cricket — is underground?

Storm is meant to put a little “Made in India” in the certification regulators before they allow consumers to a slot machine or online game. This is what drives the testing market, apart from internal control testing by casino operators. “There is nothing worse than players losing confidence in the market,” says Vätra. Of the 474 regulated gambling jurisdictions, approximately 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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However, only a few jurisdictions have their own laboratories; most rely on the likes of BMM and US-based GLI, which sometimes require 100 submissions before a product is approved. It is a human and skill intensive endeavor that has brought Storm to India. It helps that Aristocrat Leisure Ltd., the Australian counterpart and creator of smash hits like Queen of the Nile, is located nearby in the same New Delhi suburb where Storm has opened its 14th facility worldwide. He wants to hire 500 to 1,000 employees in India to serve the global market from there.

The maker and tester seem to be after the same thing: India’s 5 million-strong outsourcing talent pool. The computer code that runs the game must be scrutinized to see if elements of predictability lie behind the promise of randomness. The winning rates must be analyzed to ensure that the results are not rigged. Back in the day, things were simpler when one-armed bandits sat in the casino hall or local pub. Working online presents its own challenges, because that’s when operators are judged like any financial institution that deals with money and data.

Hackers prey on games just as they try to exploit any vulnerability to break into a financial institution’s databases. Online casinos have long been targets, although many attacks go unreported. From banks to oil pipelines, victims cover up an incident as a reaction out of embarrassment or reputational risk. For gambling sites, this threat is even more severe. Players want to know that they are playing a fair game, and any hint that something is amiss may cause them to go elsewhere. Thus, sites cover up violations.

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While physical facilities and online casinos are scrutinized to see how they work internally, a huge drawback is the lack of network security standards. Software and hardware may be secure and functioning fairly, but that doesn’t mean malicious actors can’t get in and cause problems.

In 2019, a group of hackers targeted betting companies in Southeast Asia, as well as Europe and the Middle East, according to Taipei-based security firm Talent-Jump Technologies Inc. and Trend Micro Inc. teams. Digital thieves did not steal money, but databases and source code. The goal of the researchers’ hypothesis was cyber espionage. By accessing the underlying code, a smart group could theoretically understand the algorithms to calculate win-losses, develop strategies to win the casino, or simply sell this information on the dark web.

Countries have a deep-rooted cultural reaction to gambling. Lee Kuan Yew, the founder of modern Singapore, opposed casinos because his father was a problem gambler. But in the 2000s, the Asian financial center decided to let two integrated resorts spice up its nightlife and add a lot of tax to its kitty. Brazil’s outgoing president, Jair Bolsonaro, has gone cold turkey on the upcoming regulation of sports betting because he didn’t want to lose the evangelical vote. Lula is not a fan of gambling. But having promised a fiscally responsible government, he may not want to lose budget funds that appear to be free, even though they usually come with significant social costs. Betting sites think the law is coming: they are the top sponsors of Brazil’s top league soccer teams.

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Eventually, India too will realize that resistance is counterproductive. It is ludicrous to give up revenue from cricket, a national craze, to mafia-dominated illegal betting. A well-regulated domestic gambling industry, which is likely to be virtual, will allow the country to offer more innovative solutions to the world. Both in making games and in testing them.

More from Bloomberg’s opinion:

• Gambling Global Release Party in Qatar: Lionel Laurent

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

• Cybersecurity Needs Its Own Sarbanes-Oxley: Tim Kulpan

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

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

Tim Kulpan is a reporter for Bloomberg Opinion covering technology in Asia. He was previously a technology reporter for Bloomberg News.

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