The luck and judgement of the international betting industry
It is now, apparently, the 18th most populous city in the world and the fastest-growing Indian metropolis behind New Delhi. It also has a racetrack. I’ll be there on Saturday.
It’s a major hub in a nation which bets an estimated $150 billion per year via illegal markets, but we’ll get to that.
Every city leaves you with a first impression. And, while I’ve not seen every billboard in every city around the world, I’m happy to take the evens (for something small) that none has bigger or brighter billboards than Bangalore. They’re like drive-in movie screens.
The evening sky exaggerates the neon kaleidoscope and perhaps hides a grimier side of the drive from the airport to the city. Shiny new buildings seem to dominate the landscape and the billboards tell their stories, in English of course, as the Brits ruled the place for 200 years; although the locals insist it was ruled for 90 years after taking almost 100 years to conquer the entire country.
One billboard promotes American Idol, which seems incongruous but is perhaps as a consequence of Katy Perry endorsing a young Indian girl who appeared on the show in March this year, while another is spruiking Motorola, a brand I’d thought had long since ceased to have any market share. Google ‘whatever happened to Motorola’ if you fancy a good read.
The intensity of hotel security is also striking. Bags scanned on entry. Cars checked on arrival with a trolley mirror slid under each vehicle, which is not necessarily that unusual these days. However, you do wonder how many security officers would have the pluck to casually step aside and phone the ‘bomb squad’ on the sight of something suspicious. Maybe such pluck has been instilled by those imperious Brits.
Like most Australians and most generally unadventurous diners, I naturally opted for the Rogan Josh in the hotel restaurant. Thought I’d had Rogan Josh before. Nup. This was superb. Washed down with an Indian Shiraz – Four Seasons. Surprisingly good. Then I noticed in very, very fine print on the label – ‘made in collaboration with Bouvet Ladubay, Loire Valley, France’.
The first racecourse in India was set up in Madras (Chennai) in 1777, just 20 years after the British took control of Bengal; seven years after that famous Brit James Cook landed at Botany Bay. The Bangalore Turf Club is not quite so old, instituted in 1920.
The local tracks, apparently, have had a few issues with illegal betting with various characters charged with setting up illegally on course and undercutting the tote and track managed bookmakers.
Quaintly, The Supreme Court of India ruled in 1996 that horse betting is not just luck-based, but also skill-based, thus it is not illegal gambling according to the 1888 Police Act or the Gaming Act of 1930. This made horse racing and betting immensely popular in India. Wise men – of course it’s skill-based.
So, betting on the horses is legal but apparently the illegal betting market in India is worth $150 billion per annum; mainly on cricket. That figure allegedly includes $200 million bet on every one-day international played by the Indian cricket team.
The world-wide extent of illegal betting seems to be the topic of the moment – well canvassed from last month’s Asian racing conference to Racing.Com’s recent interview with Racing Victoria’s new executive general manager of Integrity Services Jamie Stier.
It’s an intriguing subject on many fronts. Estimates of the size of the so called illegal markets generally appear to be no more than educated guesses which is, in effect, what Korean criminologist Changhun Lee rather cheekily told his fellow panelists at the anti-illegal betting forum in Seoul at the ARC.
Most of those estimates are not specific to horse racing and who knows what the volume might be in Australia and/or on the Australian racing product.
The Australian Government Department of Social Services reported, in March this year, Australians are losing between $64 million and $400 million every year betting in illegal offshore sites (which seems a vague estimate at best) and that “this means tax revenue is also lost”.
Could this be the heart of the matter? Untaxed rather than illegal, or are there genuine concerns that the risk of criminal activity, money laundering and gambling addiction is much greater in the illegal sphere?
The ‘illegals’ are untaxed other than for the amounts which are churned back into legitimate betting pools, which in itself is a vexed question. And, the biggest of the ‘illegal’ operators, Citibet will tell you it is licensed – in the Philippines.
Of course, it is asserted that those operators who are not regulated can be a lure and a haven for criminality and money laundering and that a greater number of problem gamblers emerge given the availability of credit.
The Hong Kong Jockey Club’s Douglas Robinson says US$3.6 billion is spent annually in Australia on the the treatment of gambling disorders, but that presumably includes all gambling related addictions, including those whose problems stemmed from legally betting on horse racing. Criminality, money laundering and gambling problems are not unique to the so called ‘illegal’ operations.
Robinson also claims that illegal betting operators in Australia make US$780 million profit annually, but is the problem that vast in terms of betting on the Australian racing product? That’s a key question along with the immediate forecast and just what should be the primary focus of the Australian racing and wagering industries.
As to volume, I spoke last week to an Australian agent for Citibet who said the turnover on Australian racing was not huge. “Asians generally have little interest in betting on Australian racing and 99 per cent of Citibet’s clients are Asian. There are also fewer Australian account holders following legislative changes introduced last year.
“Citibet does not show matched bet figures, like a Betfair, so nobody can say with any certainty what the turnover is but I’d say you wouldn’t match a bet beyond about $5,000 on a Saturday race in Australia and less midweek. The turnover is primarily on Hong Kong and Singapore. There’s not even great interest in Japan, as huge turnover is driven by rebates and there are no rebates in Japan,” the source said.
That, of course, suggests only that it may not be huge ‘relatively” and Betfair Australia chief executive Tim Moore-Barton, says research suggests Australian racing volume on Citibet ranges from 10 to 20 times that on Betfair, which implies a volume of at least $11 billion – $23 billion in the 2017 financial year on Australian racing.
“Due to the lack of transparency and regulation, it is difficult to gauge the full extent of Citibet activity. At the lowest estimate of 15 per cent activity coming from Australian residents, that equates to $2.6 billion of leaked volume from Australian customers. In terms of revenue leakage, assuming these customers bet via Betfair, this equates to approximately lost product fees to Australian racing bodies of $31 million and $7 million in lost GST to the Federal government,” Moore-Barton said.
As to the immediate outlook, it was almost a throwaway line from the HKJC’s Martin Purbrick, but perhaps the most significant of the recent conference. “In the next few weeks a substantive white paper will be released, detailing the full results of our research,” he said in reference to the Asian Racing Federation’s anti-illegal betting task force set up in 2016.
As to focus, Purbrick said the task force would have a long-term strategy formulated before the end of this year. Whether that will include trying to capture illegal betting funds into legitimate areas remains to be seen. That would seem the most sensible approach rather adopting an entirely punitive one.
Locally, a response will surely be required to the task force’s preliminary report.
An examination of the likely impact of the recently introduced Point Of Consumption Tax on betting would also be of interest, while farther afield what impact will the recent U.S. Supreme Court decision – which freed the states to legalize gambling on individual sporting events – have?
It’s claimed that Citibet boasts annual turnover of as much as US$50 billion, which you’d think would have legitimate wagering operators thinking ‘how do we get hold of some of that?’.
A fair question I’d have thought, irrespective of the alleged criminality linked to the branded illegals which is widely underestimated according to Purbrick. “They are generally criminals,” he said plainly enough as he outlined that illegal betting was growing twice as fast as legal; that it threatened to kill racing and that it threatened the integrity of a host of sports.
Such was the extent of the problem, Purbrick said that his task-force had ‘memorandums of understanding’ with key law enforcement agencies, including the Australian Federal Police and ICAC (Independent Commission against Corruption) in Hong Kong.
The other issue facing legitimate operators is the onus to report suspicious activity as highlighted by AUSTRAC – an Australian government financial intelligence agency – fining TABcorp $45 million for ‘contravening its obligation in reporting’ despite TABcorp being co-operative.
Citibet is not dissimilar to legal betting exchange Betfair in that you can back and lay, but punters have been able to lay horses to lose since day dot. An exchange just makes it a bit easier. That it necessarily heightens integrity risk is highly debatable.
I wonder how the wagering world would look had Betfair been developed in Australia or Hong Kong where the parimutuel betting funds the industry rather than in the UK. Had that been the case, there’s every likelihood that the founders would have factored in a 3 or 4 per cent return to the industry (similar to the totes) and still been able to offer a win bet product with a take-out much smaller than existing operators.
In that case, Betfair would have taken over the world; been licensed in every jurisdiction and possibly have circumvented the creation of a Citibet.
It still might take over the world if licensed through Asia and that’s a topic I will examine in detail in Saturday’s column – with Betfair’s Moore-Barton.