This is an example of why libertarians get thulped for being impractical:
If betting was legal, and as a punter you could choose from a) an HDFC subsidiary offering betting facilities, b) a Taj Group company and c) some shady outlet like the ones you can choose from now, you’d obviously choose one of the more legit ones. Being public companies, and part of bigger brands, they would be far less prone to fix matches. That would reduce bookie-led match-fixing.
It will work, in theory. Also, in theory, banks and NBFCs will drive loansharks out of business. The problem is that theory requires that there are no barriers to customers. Real life will have barriers in plenty.
Let’s look at the real real world first. Suppose we do get an enlightened government which legalises betting. Even so, the Income Tax Department and the Prevention of Money Laundering Act are going to play spoilsport. The IT Department is going to monitor all transactions made with legitimate bookies. Punters will be required to submit their PAN details with every bet they make.
This is not an issue for a software sarariman who is going to put a thousand rupees down. But if you’re a big-time punter betting ten megarupees of black money then a legitimate bookie is out of bounds for you. The big money will continue to be placed with underworld bookies, and because it’s big money, the underworld will continue to fix matches.
This is where my own inner libertarian pops up and says, bah, get rid of the regulation and the problem is solved. Money being laundered is actually a good thing as it will then find its way into legitimate uses.
Unfortunately, even in an idealised real world with no regulation or monitoring, there will still be barriers to customers, especially if the bookmaker is an HDFC subsidiary that is accountable to shareholders and can’t take too many chances. Just as HDFC won’t give anybody a loan beyond a certain limit, HDFC’s bookmaking subsidiary won’t allow anybody to place a bet beyond a certain limit. The bigtime punters will still be excluded, not by regulation but by the bookmakers’ own risk appetite. And so the biggest bets will still remain underground, and the incentive for the mafia to fix matches will still remain.
Two points before I end this post:
- Even so, betting should still be legalised, if only for the benefit of the small ticket punters who’re betting a day’s worth of salary. And once legit bookies are successful enough with small time punters, they’ll be able to create risk management systems robust enough to deal with the big betters.
- I’m sure Skimpy will respond to this by saying something to the effect that hedge funds will have enough risk appetite to serve big punters and so I’m worrying needlessly. I actually hope he does.