Sin, supply and sarkar

There's another cricket/shady fixers scandal. So, inevitably, the question: why isn't sports betting legal in India? When analysing how the political establishment feels about sports betting, economic liberals rightly point to and argue against politicians' paternalistic instincts. But that's not the most important reason why sports betting isn't legal. Before understanding the more important disincentive for politicians, though, we must ask whether legal sports betting would make shady bookies buying players a thing of the past. Reforms rarely achieve full correctional effect. So, the test is whether legal sports betting will radically alter shady bookies' profit calculations. It will.

Betting is about odds. And on average most punters lose money. Otherwise, those who provide gambling services will go out of business. If you can fix the outcome, or alter the odds massively in favour of a particular outcome, you can influence the fundamental principle of taking a bet the uncertainty that confronts you. The cost of doing this is far more if betting is legal.

Assume that cricket betting is legal in India. When a legal business offers a cricket bet, if those who lose their money are suspicious of the outcome, they have any number of forums to articulate their suspicion from the media to the cops to the courts, the grounds being contractual violation. The firm risks massive reputation loss. The sports betting industry in general risks reputation loss if there is credible suspicion on fixing. Players tempted to make money on the side risk far more than investigation by sporting authorities. Sports-loving punters who have lost money because players helped fix an outcome can be very, very unforgiving to those players.

The shady bookie's and the shady punter's profit calculus changes radically under these circumstances. In the specific context of cricket betting and India, a legal betting industry is likely to be big enough to formidably raise the cost of outcome-fixing. Given the potential size of the business, it is likely that good brands will quickly develop, acting as a signalling mechanism for punters when they choose between decent and dodgy gambling service providers.

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