How can I refuse the summons of my uncle? I am sure that no good will come of this game of dice, but I have no choice. I stake the incomparable daughter of Drupada. In the seven worlds, she has no equal in beauty or virtue. The princess of Panchala will be my stake in this round”, said Yudhishthira famously in the Mahabharata (Passage 2.57-2.64).
Wagering is as old as civilization. Pagan rituals involved casting small objects to tell the future. Odd and even outcomes foretold sorrow or joy. This “passive” participation turned into active “stakes” with sacrifices. In Greek mythology, Zeus, Poseidon and Hades cast lots to claim parts of the universe. The Chinese civilizations have many stories about gambling related to cricket (the insect) and cock fights.
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Societies have had a rocky relationship with gambling over the centuries —on occasion accepting it as part of human tendency and prohibiting it at other times. Today, some countries permit a regulated form of betting while many prohibit it. In the US, gambling is legal under Federal law and states are free to allow it. Nevada and New Jersey (Atlantic City only) permit legal gambling with specific rules. Macau and Singapore are gambling-friendly islands.
With so much sport and hype in India over the last few months, consider a very specific question—is it time to legalize sports betting in India?
Gambling is illegal in India. It is covered under the Public Gaming Act (incorporated in 1867, a date symptomatic of the agelessness of gambling). However, two major developments since then require the law to be completely overhauled. One is the advent of online betting and the other is the evolution of a mega satta (over-the-counter betting) market particularly for the Indian Premier League (IPL). While no credible estimates are available, one figure puts the satta market for the 2010 IPL at around Rs200 billion. Sikkim and Goa have enacted state laws that permit some form of gambling. Sikkim is the only state that plans to offer online gaming licences. It last year issued eight provisional licences. Though the names have not been made public, the winners are presumably all Indian, since foreign direct investment is not permitted in the gaming sector in India. It is not clear whether any of the licensees plans to offer sports betting.
The fundamental policy question is whether the benefits of legalized sports gambling outweigh the cost to society. Gambling may be considered a recreational outlet, similar to other entertainment and leisure products and services. “Purchase” of gambling is in many ways the same as that of a movie ticket. In this sense, gambling offers legitimate entertainment particularly for the risk seekers in society. On the other hand, gambling addiction can affect a segment of society. Despite the widespread footprint of illegal gambling in India, research on this subject is non-existent. In the US, the UK and Canada studies show that 0.5% or so of the adult population is either “pathological” or “problem” gamblers. A 1995 Australian study estimated the social costs of gambling to be considerably less than the social benefits. One common misconception is that crime increases where (legal) gambling facilities are located. Empirical evidence from these countries suggests the opposite.
So what are the implications for India? History here has been tolerant, indeed accepting, of gambling. Yet the paternalistic nation-state since our independence has continually attempted to outlaw the most historically commonplace of things—prostitution, drinking and gambling—with a rather poor record.
I propose that we legalize sports betting in India. With gambling already so widespread, it is better for it to be in the open. I suggest we define this as the “lawful placement of a wager or bet on the outcome of a future uncertain event in sports”. The term “sports” should be defined specifically —to include sports where fairness rules are enforced clearly and with zero tolerance. Sports where fights between animals (cock-fighting), rigged outcomes (wrestling), and significant personal injury (boxing) can occur should be excluded. We have the opportunity to leapfrog many of the mistakes made in other countries that have legalized sports wagering. It should only be allowed online not on store-fronts. There should be transparent regulation and a high standard of capital adequacy for the book makers. A percentage of the revenues should be set aside specifically to assist with problem gamblers. By my estimate, government coffers will be better off to the tune of Rs50-100 billion each year as a result. A part of the revenue should be allocated to enforcing fair competition and ensuring clean sport.
Will it happen? I am not willing to bet.
P.S.: “I favor allowing online gambling, given the weak arguments against it, the common human desire to gamble, and also that addictive aspects of gambling are greatly exaggerated”: Nobel laureate Gary Becker.
Narayan Ramachandran is an investor and entrepreneur based in Bangalore. He writes on the interaction between society, government and markets. Comments are welcome at firstname.lastname@example.org