Maharashtra rolls the dice on casinos, politicians to decide on sports betting

Lawmakers in the Indian state of Maharashtra are considering moves to legalize casino gambling, while the Supreme Court has handed the decision on whether to allow sports betting over to politicians.

Both moves are being followed closely by the industry, which views India as a potential sleeping giant in Asian gaming.

India has a similar demographic potential as its giant neighbour China, whose outbound travel preferences and spending are now shaping the global tourism industry and who play a major role in ensuring the success of any gaming venture.  

The country has a population of more than 1 billion people, a rapidly expanding middle class with a growing appetite for travel and also a strong propensity to gamble.

At present, casino gambling is only permitted in three states -- Goa, Sikkim and Daman -- and there is little in the way of upscale facilities, or modern machines. The properties on the whole do not provide the scale and range of amenities seen in some of Asia’s other integrated resorts.

The current move to consider legalizing casinos in Maharashtra, which would likely prove the game changer for the market, follows the discovery of mothballed legislation dating back to 1976 by then law student Jay Sayta, which was never enacted. The Maharashtra Casinos (Control & Tax) Act could lead to casinos in the state if it is notified.

The government of the state, whose capital is Mumbai, is expected to make a decision by the end of this year.

Global Market Advisors in a recent update to its April White Paper on India estimated that the potential market in the state alone could be worth about $1.1 billion by 2021. The bulk of that -- $874.9 million -- would come from locals gambling, with the remainder from tourism, both domestic and international.

If the State of Maharashtra were to employ a 25 percent gaming tax rate, the state could expect to receive approximately $273.2 million in gaming revenue in the subject year, it said.

The report, compiled by director of research Kit Szybala, finds that “Maharashtra and Mumbai in particular, present an appealing gaming market opportunity.”

Maharashtra is home to about 112.4 million people, or 9.3 percent in total. About 18.4 million people live within the urban agglomeration of Mumbai and, additionally, about 50.8 million people live within a five hour drive.

The state makes up about 23.2 percent of India’s Gross Domestic Product and its per capita income in 2011 was $1,500, above the national average of $1,100.

Adding to the momentum have been calls from industry and tourism bodies, seeking to boost revenue.

A newly created gaming body, the All India Gaming Federation, is pushing the government to allow foreign direct investment in the gambling, betting and lottery sector. The AIGF has argued that while these industries are recognized as legitimate industries globally, they remain illegal in most parts of India.

Under the current FDI policy, any form of foreign technological collaboration is prohibited in the gambling and betting sector. AIGF has sent a letter to the ministry, asking it to allow at least 26 percent foreign equity participation, saying such a move would bring in foreign investment of more than $1.5 billion to India and provide thousands of jobs.

The AIGF will be holding its event launch in Delhi on August 3, with a discussion called “Legislation and the Future of the Indian Gaming Industry." It will be attended by parliamentarians Kts Tulsi and and Kirti Azad as well as Ranjit Sinha, a former director of the CBI.

Still, opposition to opening the market remains strong.

Delta Group, which has received the necessary five-star accreditation to operate a casino in the state of Daman, is still waiting on final approval to open the resort, while the High Court of Bombay has received a petition against a casino license for the group’s five-star hotel in Goa.

Add to that, forecasts for the market’s potential assume that locals will be allowed, which is not a given. The state of Sikkim recently banned state residents from entering casinos and hiked the entrance fee from Rs. 500 (US$7.4) to Rs. 1000.

Also, the opposition Bhararitya Janata Party (BJP) was quick to jump on a proposal by the Congress government to encourage the opening of casinos in Puducherry, local media reports.

In the sports betting world, the Supreme Court noted earlier this month that it is up to the Government or Law Commission to decide whether betting can be legalized in the country, implying that individual state governments or the centre should be tasked with the decision and that the judiciary does not want to be involved in policy making.

Vidushpat Sidhania, Partner specializing in Sports Law at Krida Legal, commented: "With the judiciary supporting legalization of sports betting much of the negative sentiments pertaining to it shall subside. The judiciary has taken the first step to end the limbo pertaining to who will initiate the first step towards legalization. The legislature can also now consider taking a measured call after consulting the stakeholders."

However, it remains to be seen whether the legislature will pay heed to the remarks of the Supreme Court and formulate a policy on the issue.

In the meantime, the potential of India’s outbound market is being closely eyed by international casino operators. Silver Heritage last year opened The Millionaire’s Club in Katmandu’s Shangri-la Hotel in neighbouring Nepal, where casinos are legal. It is also developing a five-star resort in the south of the country. The investment rationale is to benefit from the huge untapped potential from Indians, who are able to cross the border freely.

While Crown Resorts had been considering an integrated resort in Sri Lanka, before the island’s government banned casinos.