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Brazil misses World Cup bets. What is India’s bet? ~ Washington

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The most exciting bet in the gambling world right now is Brazil: will President-elect Luiz Inacio Lula da Silva end the country’s decades-long ban on gambling? If he does, Brazil could overtake Italy to become the second largest betting nation in the world by number of machines behind the US.

At least that’s what Martin Storm, CEO of BMM Testlabs, tells us. BMM and its competitor Gaming Laboratories International or GLI test more than 80% of the world’s gaming products and help keep the industry on track. But Storm isn’t speaking to us from Sao Paulo or Rio de Janeiro, who are losing an estimated 3 billion reais ($560 million) by not enacting a sports betting law in time for this year’s FIFA World Cup.

We catch the Melbourne native – via Zoom – in India. An Australian in the upper echelons of global gambling comes as no surprise: the nation with less than half a percent of the world’s population has 20% of its slot machines. 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 infuse a bit of “Made in India” into the certifications that regulators insist on before letting consumers anywhere near a slot machine or online game. This is what drives the testing market, aside from the checks that casino operators do for internal controls. “There’s nothing worse than players losing confidence in a market,” says Storm. Of the 474 regulated gambling jurisdictions, around 120 have specific requirements. Taxes make it a high-stakes sport. “Nobody is more addicted to gambling than governments,” he adds.

Yet only a handful of jurisdictions have their own labs; Most rely on companies like BMM and US-based GLI, which sometimes require 100 submissions before approving a product. It is labor and skill intensive work that Storm brought to India. It helps that Aristocrat Leisure Ltd., an Australian sister company and creator of such hits as Queen of the Nile, is located nearby in the same New Delhi suburb where Storm opened its 14th facility worldwide. At some point he wants to hire between 500 and 1,000 employees in India in order to serve the world market from there.

It seems the maker and the reviewer are after the same thing: a slice of India’s 5 million-strong outsourcing talent. The computer code running the game must be examined for elements of predictability that hide behind a promise of randomness. The odds of winning must be analyzed to ensure that the results are not being manipulated. It used to be easier when slot machines were sitting in a casino hall or the local pub. Being online comes with its own set of challenges, as then operators are valued like any financial institution dealing with money and data.

Hackers prey on games, just as they try to exploit every 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, keeping an incident secret is a knee-jerk reaction born of embarrassment or risk of reputational damage. For gambling websites, this threat is even more serious. Players want to know they are playing a fair game, and any indication that something is wrong could make them look elsewhere. This is how the sites keep violations silent.

While physical machines and online casinos are subject to rigorous 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 working properly, but that doesn’t mean that malicious actors are prevented from getting in and causing problems.

In 2019, a hacking group targeted betting companies in Southeast Asia and 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 hypothesized, was cyber espionage. With access to the underlying code, a savvy group could theoretically understand the algorithms for win-loss calculations, devise strategies to beat the casino, or simply sell that information on the dark web.

Countries have an ingrained cultural response to gambling. Lee Kuan Yew, the founding father of modern Singapore, was against casinos because his father was a problem gambler. But in the 2000s, Asia’s financial hub decided to allow two integrated resorts to spice up its nightlife — and dump a whole lot of taxes on its coffers. Brazil’s outgoing President Jair Bolsanoro got cold feet in the face of pending sports betting regulation because he didn’t want to lose the evangelical vote. Lula is not a fan of gambling. But having promised fiscally responsible government, he may not be willing to lose budget funds that look like they’re free when they usually come with significant social costs. Betting sites believe a law is coming: They are the preeminent sponsors of the Brazilian Premier League soccer teams.

At some point, India too will find out that resistance is counterproductive. It is ridiculous to give up the proceeds of cricket, the national craze, for illegal betting dominated by the mafia. 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 creating games and in reviewing.

More from Bloomberg Opinion:

• Global Gambling Coming Out Party in Qatar: Lionel Laurent

• Don’t bet on the money for the world champion: Eduardo Porter

• Cybersecurity needs its own Sarbanes-Oxley: Tim Culpan

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

Andy Mukherjee is a columnist for Bloomberg Opinion, covering Asian manufacturing and financial services. 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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