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We All Gamble. Make It Legal

This is the first piece in a four-part series on Victimless Crimes.

Many years ago on a magical summer evening in London, India won its first big cricketing trophy. That World Cup campaign was a fairy tale that turned into reality. India had won just one World Cup match, against East Africa, in the two prior editions of the tournament.

When the 1983 World Cup started, every bookie in England was prepared to offer asking price for an India win. Even when India got to the final, with a 1-1 scoreline in its two league matches against defending champions West Indies (1, 2), the odds on India winning were as high as 40-1.

I remember that final: ball by ball, catch by catch, lbw by lbw. Indeed, I remember the semis versus England just as well, for that match was also telecast on Doordarshan. Those were the only two games telecast in India, for Doordarshan, like everyone else, assumed there was no point in telecasting India’s humiliation. (I know people who didn’t watch either match for fear of jinxing the team. )

I recall bits of the radio commentary from Tunbridge Wells (a match famously not telecast at all due to a strike) when Kapil Dev crafted a miracle. For that matter, I remember commentary from the very first match of ’83, when a journeyman called Yashpal Sharma gave India a fighting chance and a bunch of dibbly-dobbly medium pacers out-bowled the fabled Windies quicks.

My memories are happy but still tinged with a certain regret. There I was, prepared to support my team to the hilt and to bet whatever I could afford to as an impecunious student. I couldn’t do it because of some ridiculous law that made it illegal for Indians to bet on cricket. Apart from being illegal, betting abroad involved immense pain. It meant transferring cash out via Hawala, getting a trusted contact in the UK to lay on the bet, and finally collecting winnings through convoluted means.

The Bombay bookies (it was Bombay then) were offering all of 8-1 a priori. The Calcutta bookies (it was Calcutta then)  sliced that to 7-1. They wanted a minimum stake of Rs 1000 (approximately GBP 50, and worth the equivalent of about Rs 10,000 in 2017 cash). I assume they all must have laid off the bets in Hawala with the English bookies. If they did, even allowing for hafta and transaction costs, the Indian bookies must have made a packet, just arbitraging the monstrous differential.

The Gambling Ban

Those regrets about not being able to support my team remain because those ridiculous laws remain. Every time the IPL comes around, or any other sporting event about which I consider myself mildly knowledgeable and interested, I wish that I could wager modest sums, legally, without complications. For that matter, I’d like to bet on elections and sundry other events. But of course, as a law-abiding Indian citizen, I can’t.

Mind you, I can bet on horses. (I do, every so often.) I can buy lottery tickets. (I don’t because lotteries are absurd.) I can bet on the price movements of umpteen commodities and currencies and stocks on the derivatives markets. I buy life insurance – which means making bets that I decidedly don’t want to win!

So the proscription of certain types of gambling while allowing others is illogical and inconsistent. It gets worse since there are state-level variations. In certain Indian states, I could go to the casino (though most casino games are for mugs, like lotteries). In other Indian states, it could arguably be illegal for an accounting firm to even audit the books of a legal, registered bookmaker. Under some statutes, it is illegal to even make an income from the “profits of gambling,” a broad injunction which could make it illegal to even offer paid advice for say, website design, to a bookie.

Gambling is a good example of what is known as a victimless crime. The participants are consenting adults; they want to do it. In most crimes there is a criminal who inflicts harm upon a victim and the rationale for the proscription is clear-cut. But who is the victim of this offence? It is the gambler, who is twice punished if (s)he loses money and is then jailed or fined.

But gambling offends people, who believe (wrongly) that they personally don’t gamble, and so, these offended non-gamblers make laws proscribing it.

The reality is, everybody gambles when they make any investment decision whatsoever. If you stash your money under the pillow, you are betting banks will go bankrupt, and that there will not be a fire or demonetisation. If you put your money in the bank, you’re betting that the interest earned will exceed inflation. If you buy land, you’re betting real estate values will rise.

If you bet on sporting events, you could lose your money, which you have every right to dispose of. What’s more, if you were allowed to gamble legally, the winnings (yours or that of your counter-parties) could be taxed, earning revenue for the government.

There are multiple reasons why legalising and taxing sports betting makes sense. Some are listed below.

Higher revenues

Right now, a lot of money is spent attempting to prevent illegal betting. Instead, assume that bookies and agents were registered and allowed to run sports betting in 100% legit fashion. There are many decent models for this – England or Australia, for example. Assuming the same rates of short-term capital gains taxes as imposed on lotteries and horse races, the Sarkar could take home roughly a third of whatever was bet on sports.

Lakhs of crores are bet illegally on sports events. The Delhi police once estimated, several years ago, that big cricket matches (one-day internationals) generated Rs 10,000 crore each in betting. That was pre-IPL. It would be more now. If these estimates are anywhere near correct, taxing gambling could mop up a far larger percent of black cash in circulation than nonsense like demonetisation.

Consider this: you’re allowed to bet on horses (a minority taste) and on lotteries (sheer idiocy if you do it). The average person is much more interested in cricket, football, hockey, badminton, tennis and even chess. Given the chance, the average person would be much more inclined to put their money on these events. What’s more, these are events where knowledge and study gives the gambler an edge.

Behaviourally speaking, most people would be willing to pay taxes to be allowed to bet legally. Look at lotteries. People buy tickets and pay taxes, rather than play satta (which involves betting on the same numbers). Look at the UK experience, where anybody who wishes to bet goes to the legal bookie. Look at the stockmarket.

Of course, this would mean depriving the Sarkar’s servants of a large source of under-table revenue. It would also starve illegal bookies (unless they went legit). But most people would consider both of those outcomes to be positive.

Less Crime

If gambling was legal, the country would be a lot cleaner. The ancillary crimes clustered around illegal gambling would not exist. No bribery of cops is required for a legal gambler. No goons are required to protect bookies, or to chase down people who don’t pay up.

Above all, no match-fixing is required. Legally registered bookies in England and Australia don’t fix events; they fix the odds instead. It’s easier (and quite legit) to manipulate odds for guaranteed profits. Eventually the legal bookies tend to drive the illegal ones out of business. It’s even happened in India – state lotteries wiped out much of the satta racket.

A Broader, Deeper Market

A legal gambling marketplace would make the whole process more fun intellectually, apart from generating more revenues.

Right now, the gambling market is opaque with few spread contracts. How many seats will the BJP win in the 2019 elections? How many sixes will be struck in this IPL? The bookie can compute a likely range for such events. So can you. If you think the bookie’s wrong, you can bet against that bookie’s spread.

Ticket sizes in India are also massive because it’s not worth the illegal bookies’ time to deal in less than four figures, preferably five. The ticket sizes could be reduced, mopping up a potential untapped market.

Say, I’ll bet the price of a drink (Rs 200 or so) on somebody winning Wimbledon. But I can’t bet that cash at an illegal bookie, who wants at least Rs 2000. So I don’t bet at all. If I could bet Rs 100 or Rs 200 legally, I would do so, much more often than I would bet Rs 2000.

The market could be expanded. Sites like Betfair will match all sorts of wagers between individuals including those on election outcomes or on scientific breakthroughs. There are pools on tournaments and leagues like the EPL, La Liga, the Big Bash etc.

There’s also nothing analogous to the pool or the totaliser in cricket betting in India. A totaliser works this way: Everybody puts small sums into a pool; the bookie and the government take their cut. The winners split what’s left in proportion. Similar pools could easily be set up for the IPL if sports gambling was made legal.

You cannot stop gambling anyway

And you should not try. Any entrepreneur takes decisions that involve gambles. Set up a new factory, hire more people – what happens if the demand isn’t there?

Any investment decision, including hiding your money under the pillow involves a gamble. For that matter, travelling from A to B involves a gamble – insurers can quote you the odds on an accident, depending on the mode of transport, locales, etc.

In fact, insurance itself is an industry based entirely on gambling – every contract is essentially a bet. Insurance has been the world’s fastest growing industry over the past several centuries. A modern industrial society couldn’t exist without it.

It seems that, by making betting on certain types of contracts illegal, the government just forgoes revenues. In addition, it spends money on trying to ineffectually implement bad laws.

Gambling is not the only “victimless” crime on the statute books. There are several others. Among the most obvious are prohibitions on liquor consumption, and bans on soft drugs. While the arguments in favour of lifting those bans are similar, there are differences that are specific to those proscriptions. We will look at those in later pieces.

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About the author

Devangshu Datta

Devangshu Datta is a columnist. His Twitter bio says "Carnivorous, right-winger. Interests = markets, science, history, chess, bridge, sex, religion and anything with high troll-quotient. " That pretty much covers it.

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