Recent revelations that the three players of Rajasthan Royals, a franchisee of the IPL, colluded with bookies for spot-fixing in return for huge sums of money, has caused some to advocate for a separate law to make match-fixing a criminal offence. I am not an expert on law and am not completely sure what the right course should be. But it is clear that the players are in a breach of contract with the team they represent, and should pay damages to whomever was harmed by their breach of contract. I don’t see why this would warrant a criminal investigation.

However, this event raises another issue to examine first principles: the status of gambling itself as an illegal activity.

Cricket players, like all other human beings, respond to incentives. For many, the cost of cheating—losing their sense of integrity and tarnishing their honor—will always outweigh the monetary benefits of cheating. However, the lure of easy money will always be there for the weak or immoral. When faced with an opportunity, these players will evaluate their chances of getting away with the deed and the money, and thereby make a decision. Unless we are living in Minority Report world of Steven Spielberg, it is impossible to pre-empt and stop such activities.

But the umbrella ban on gambling makes things worse.

Ban on gambling perpetuates and profits the underworld

Prohibiting something that may be considered a vice in the eyes of many and for which there is huge and stable demand, does not necessarily stop the activity. The activity is only driven underground with their own methods of operations. This was true of prohibition in the United States (1920-1933), and is true of the ongoing war on drugs.

When gold imports were banned in India, these organisations profited from smuggling gold into India. No wonder our action heroes of 1970’s and 80’s (Amitabh Bachchan, Vinod Khanna, Shashi Kapoor, etc.) spent a lot of time fighting these smugglers in Bollowood movies of the time.

Bollywood movies of the last couple of decades have moved on from gold-smuggling based themes, that is from the time importing gold has become easier. Harmless activities, activities that do not cause physical harm to body or property, like import and export of commodities, gambling, etc. can be legalised to great positive effect.

Today when gambling is illegal in India, evidence suggests that underground gambling activities profits underground bookies and their patrons underworld dons who provide the enabling network. Organisations like D-company profit from the provision of a good or service that is decreed illegal.

Legalised gambling will cause various contract enforcement to be formalised and not be at the mercy of informal underworld methods, such as kidnapping, threat of physical harm, etc. Police and courts can do the job of enforcing various gambling related contracts as they do for any other contractual activity. The bookies, under-writers and their customers will not have to depend on extralegal sources of contract enforcement.

The question may arise, if we legalise gambling, will there be an increase in match-fixing?

Gambling is already legal in many countries around the world, but this does not cause match, race or any other activity that people bet on to be fixed all the time. One can see that it is in the interest of the organisers of such events and the organizers of legal gambling exchanges to keep the fixers away, for continued patronage of their customers. This is not just theoretical. There are interesting examples of this happening where gambling is legal as we will see shortly.

Sports bodies and betting exchanges working together

In a world with legalised gambling, various sports bodies like International Cricket Council (ICC) for Cricket, Association of Tennis Professionals (ATP) for Men’s Tennis, Union of European Football Associations (UEFA) for Football in Europe would enter into contract with betting exchange organisations to keep a close watch on irregularities in the result of the game. Betting exchange organisations through their experience and knowledge of betting history and trend are best placed to keep a tab on irregularities in the event of a match-fixing.

In 2007, noticing an unusual betting trend in a tennis match between Nikolay Davydenko and Martin Vassallo Arguello, online betting exchange Betfair as part of their understanding with the tennis governing body, alerted ATP and suspended payouts on the match. Mark Davies, the communications director of Betfair had this to say, “the price movement on this was just not what you would expect of a free market where observers were making judgements on the basis of what was happening in front of their eyes.”

Similarly, we can imagine that in a world of legalised gambling, sports bodies and betting exchanges sharing information in India. In the event when huge and unusual bets are placed on certain players giving away a certain number of runs in a particular over of a cricket match, the news of irregular activity on exchange could be passed on to the authority concerned and an investigation undertaken.

This would be the spontaneous order of market forces coming together to produce a fair game. This is not to say that it will be a foolproof system and I am not sure what a foolproof system would be. But I know this, when people are left alone to conduct their business to mutual advantage, more often than not, peaceful solutions do emerge.

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Kumar Anand
Kumar Anand

Kumar Anand is an economist with over ten years of experience working with for-profit companies, government ministries and not-for-profit think tanks. Kumar has previously worked with National Institute of Public Finance and Policy (NIPFP) where he was part of the research team that assisted the Financial Sector Legislative Reforms Commission (FSLRC). Before joining NIPFP, he worked with Hong Kong-based Asianomics Limited, where he kept a watch on the developments in the Indian sub-continent markets. Before his present role, Kumar worked with Centre for Civil Society in New Delhi, where he created an online library of Indian liberal works to preserve and revive the rich Indian liberal and free market tradition.

Currently, Kumar leads the research team at Nayi Disha in Mumbai, where he is exploring the right set of principles-based rules that should govern a city and a nation and the ways to create a popular demand for such a change. Kumar's research interests are in Indian economic history, urban economics and public choice economics. He is a graduate of Gokhale Institute of Politics and Economics, Pune.