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 Luiz Inacio Lula da Silva overturn the country’s decades-old ban on gambling? If he does, Brazil could overtake Italy to become the world’s second-largest number of betting machines after 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 gaming 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 stand to lose an estimated 3 billion reais ($560 million) because they didn’t pass a sports betting law before this year’s FIFA World Cup.

We catch the Melbourne native – via Zoom – in India. It’s no surprise that an Australian has reached the heights of global gambling: a nation with less than half a percent of the world’s population has 20% of slot machines. But what is Storm doing in a country where only three of 29 states allow casinos and where much of the real market – historically betting on cricket matches – is underground?

The storm is there to add a bit of ‘Made in India’ to the certification regulators require before allowing consumers to play slots or play online. This is what drives the testing market, apart from the internal control checks carried out by casino operators. “There’s nothing worse than players losing confidence in the market,” says Storm. Of the 474 regulated gaming jurisdictions, about 120 have unique requirements. Taxes make it a big 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 GLI, which sometimes require 100 applications before a product is approved. It was the manpower and skill-intensive work that brought Storm to India. It helps that Aristocrat Leisure Ltd., a fellow Australian company and creator of blockbuster hits like Queen of the Nile, is nearby, in the same suburb of New Delhi where Storm has opened her 14th venture worldwide. Ultimately, he wants to hire 500 to 1,000 workers in India to serve the global market from there.

The manufacturer and the tester seem to be aiming for the same thing: the outsourcing talent of India’s 5 million people. The computer code that runs the game must be scrutinized for elements of predictability that lie beneath the promise of randomness. Win rates must be analyzed to ensure results are not falsified. Back in the day, things were simpler when one-armed thugs would hang out in the casino hall or local pub. Being online presents its own challenges, as operators are then viewed as any financial institution that deals with money and data.

Hackers prey on games in the same way that they exploit any vulnerability to gain access to a financial institution’s databases. 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 out of embarrassment or the risk of a damaged reputation. For gambling sites, this threat is even greater. Gamblers want to know that they are playing a fair game, and any hint that something is amiss can cause them to steer elsewhere. So the website hides the violations.

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

in 2019 The hacking group 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. Instead of stealing money, digital thieves took the database and source code. The purpose, investigators hypothesized, was cyber espionage. With access to the underlying code, a savvy group could theoretically understand the algorithms for calculating wins and losses, develop strategies to beat casinos, or simply sell this information on the dark web.

Countries have a deep cultural response 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 boost their nightlife and add a lot of fees to their kitty. Brazil’s outgoing president, Jair Bolsonaro, has cooled off on pending sports betting regulation because he didn’t want to lose the evangelical vote. Lula is not a fan of gambling. But after promising a fiscally responsible government, he may be loathe to lose budget resources that appear to be free, even though they often come at high social costs. Betting sites believe that the law is coming: they are the most important sponsors of football teams in Brazil’s top division.

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

More from Bloomberg Opinion:

• Gambling Global Coming Out Party in Qatar: Lionel Laurent

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

• Cybersecurity Needs Its Own Sarbanes-Oxley: Tim Culpan

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

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

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

For more stories like this, visit bloomberg.com/opinion

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