Legalization key to tackle rising illegal gambling, experts say

India’s authorities lack a coherent approach when it comes to tackling rampant illegal gambling, with criminal syndicates often enjoying political patronage from a ruling class which has publicly opposed legalization of the industry.

Gambling is mostly forbidden in India, but legislation is drawn up by individual states, creating a patchwork of mixed rules. Casinos are allowed in Goa, Sikkim and Daman, while about 12 out of 29 states allow lotteries. Sikkim and Nagaland have recently permitted online gambling and to add to the mix, the Supreme Court has ruled that games of skill, such as rummy, are permitted.

Despite the restrictions Indians remain keen gamblers. Six years ago an oft quoted report by the Federation of Indian Chambers of Commerce and Industry put the size of the market at about $60 billion, with much of that being wagered illegally. That number appears to have since ballooned with The Doha-based International Centre for Sports Security in a report released in January putting the amount illegally bet on sports alone at $150 billion, with most on cricket.

However, the country’s approach to tackling the problem is as fragmented as the legislation covering the sector. While central investigating agencies like the Enforcement Directorate and the Central Bureau of Investigation do look into some high-profile cases with a pan-India impact, at the state level, the matter is generally dealt with on a case-by-case basis by the police.

Major racket

In July,  the Delhi police claimed to have unearthed a major betting racket running all over India, with millions of dollars being bet annually. It was allegedly being run under the protection of a former member of parliament.

A.K. Singla, the deputy commissioner of police (DCP), north-east Delhi, who is investigating the racket, told AGB that he had been brought in last year especially to handle increased incidents of illegal betting in the area, mainly in the east and north-east districts of Delhi.

A police source told AGB that the previous DCP handling north-east Delhi was himself found to be involved in the ring, along with junior policemen.

“Political patronage is essential to their operations as the market is cut-throat and violent. They started running this racket after toppling someone else’ business in 2005, for example,” said Singla.  

He added that the commission agents usually rigged the process to ensure maximum profits for themselves.

Illegal betting on lotteries is known as the Satta and usually bets are made on single digits. The agents, locally known as the Khaiwal, distribute paper slips or tickets to those betting with numbers marked on them. “It is called parchi katna (distributing slips.) The money is bet on numbers. The announcement of the winners is made after all the bets have been collected and winners selected, which is called ghadi kholna (dismantling the clock). The act of announcing the winners is called awaj lagana (to give a call),” Singla said.

Lotteries were banned in Delhi in the late 1990s following a campaign by current Minister of Sports Vijay Goel.

Lack of resources

However, the state, like several others where lotteries are banned, has no special unit to look after violations. “It remains a low priority area for us as we are more focused now on issues related to terrorism and others,” a highly placed police source told AGB. “It is not that we are unaware that stakes can be very high in some of these modules. We also know that money laundering takes place. But our hands are further tied by the fact that plenty of business is also conducted online now and we do not have ways to track them yet.”

“Moreover, in the past, when we have cracked down hard on such modules, there have been cases of misuse of the law and innocents got targeted which is why we have to maintain extra caution,” he said.

Given the widespread nature of the problem, experts agree the only real way to make a meaningful dent in the black market would be to have a proper legal framework.

At a recent event in Delhi to discuss the potential for legalization of gambling in the country, former director of the Central Bureau of Investigation, Ranjit Sinha noted that money laundering often takes place in instances of illegal betting and some of this money also funds terrorist activities, further compromising the security of the country. Sinha said that this could be curbed by legalizing gambling in India.

“It seems that the series of scams and problems relating to gambling and black money is only due to the hypocrisy of the political class. None of these investigations would have been necessary if betting and lottery was legal and if the trade was carried out in a legitimate fashion,” Jay Sayta, an expert on gambling laws in the country, wrote on his website last year while discussing the bust of a racket worth $600 million in North India.

The racket was allegedly run by an associate of Dawood Ibrahim, a notorious Indian terrorist, who is now said to be based in Pakistan. The agencies probing the bust were also looking into potential money laundering.  

Speaking to AGB, Sayta said that illegal Satta operations formed one of Ibrahim’s primary business interests in India. “This is well-known to Indian intelligence agencies. The money thus acquired, running into billions of dollars, is subsequently laundered to countries in the middle-east and Pakistan from where these operations are usually run,” Sayta said.

Lost revenue

In southern Indian states, Santiago Martin is often called the alleged kingpin of such rackets. Although Martin has fallen foul of the law in the past, he continues to be in public life as a businessman – his wife and son are both in politics.   

Sayta added that legalizing lotteries would create opportunities for employment and generate revenues for the government.

“Several states in the north-east India have legalised lotteries and they earn a substantial chunk of their revenues from it. In Kerala, the revenue generated from lotteries is used for social welfare schemes,” Sayta elaborated. The lottery business in Kerala was worth around $1 billion, with the state making revenues to the tune of a few hundred million dollars, said Sayta.

He suggested that the central government should form a body to deal with these issues on an all-India basis. “Something on the lines of the Securities and Exchange Board of India may be created. However, it would require the amendment of existing laws, and the Constitutional provisions,” Sayta said. At the same time, at the state level, commissions to look into matters related to gambling could be created. “The commission need not have penal powers as there might be issues related to jurisdiction with regard to law enforcement, which operates on a territorial basis. However, it may gather intelligence, create awareness and monitor the trade,” Sayta said.