This week the Government of India banned betting apps on which punters were betting on sports (largely, betting on cricket and kabbadi players) in fantasy league tournaments. This industry was generating $4 billion of revenue each year for the betting app providers (not that different from the sums of money transferred from the poor to the rich via the F&O market). Andy Mukherjee says in this column for Bloomberg that it is hard to understand the logic behind this betting app ban.
He says that whilst the Government can rightly claim that the ban will curb addiction, money laundering, and financial fraud associated with these apps, the downsides of the ban are manifold. In particular:
- Shift to Offshore Betting: Users – many of whom are part of India’s vast army of unemployed youth – may turn to offshore casinos, using cryptocurrencies like Bitcoin and Ether, which could worsen money laundering and capital outflows.
- Loss of Tax Revenue: The ban could cost the government over $2 billion annually in taxes and fail to address the $100 billion of Indian gambling demand that already leaks to overseas sites.
- Impact on Sports Sponsorships: Fantasy sports apps, which sponsor events like the Pro Kabaddi League, may no longer support traditional sports.
- Addiction Persists: People addicted to the betting apps are likely to seek alternatives on international platforms with minimal regulations.
- Criminal Activity: The ban could lead to more scams and fraud related to gambling, diverting law enforcement resources from serious crimes.
To us the differing treatment meted out to gambling apps and to F&O trading seems to be arising from control & oversight. With the latter market, the Government feels that its regulator and the exchanges can track flows, winners and losers pretty accurately (thus empowering the authorities with valuable information on financial flows). With the gambling apps however, this is much harder to do – the customers are coming from all over the world (Russians says Mr Mukherjee’s article are hooked to gambling on the IPL) and the winners & losers and the flow of funds is much harder to nail down accurately.
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