It has long been suspected that the summer tournament in cricket, the Indian Premier League (IPL), is a hotbed of gambling. Indeed, thanks to its nature, all limited overs cricket is tailor made for betting. That is why many countries have legalised it. However, India which generates 80 per cent of the revenues that the game generates has not made betting legal. The result, as the report by Justice Mukul Mudgal shows, is not just betting but also perhaps attempts to fix outcomes. In consequence, there are bound to be calls for different types of bans, on the one hand, and for legalising betting, on the other.
Regardless of what the government chooses to do, it is important to understand the nature of sports betting. An old piece of research by Steven D Levitt, who became famous for his books Freakonomics and Superfreakonomics, points us to what could be the key to understanding sports betting. Such an understanding would be critical in framing the law, either banning or legalising betting.
The key, wrote Levitt, lies in realising that in sports betting, a price is announced and virtually no adjustments are made to it thereafter. This is unlike the financial markets where prices of securities keep fluctuating based on new information. Thus, bookmakers are not market-makers in the way a broker in other markets is. The difference lies not in the fact that bookies in sports bet on final outcomes rather than intermediate ones (though in some countries the latter is also allowed so that you can bet on much shorter outcomes). The most important consequence of outcome betting on infrequently changing prices, says Levitt, is that bookies tend to lose or gain (usually the latter) huge sums.
My own conclusion from this is that in cricket it tends to increase the temptation to fix matches. The only thing that the bookie has to choose from then is the actual method of fixing. This can vary from passing on information for determining the price (benign wrongdoing) to bribing players to underperform (malignant wrongdoing). Much depends on what the aggregate losses of the bookies are through the tournament. If the gains are normal, only benign wrongdoing happens. But if the losses are huge, it turns malignant. So the key variable to keep an eye on is the profit levels of bookmakers.
The only way this can be done is to legalise betting in cricket. Otherwise, after periodic fuss, things will go back to business as usual where the chances of malignancy will dominate the tournaments. The problem, of course, is that those who gain the most from illegal betting perhaps also influence the course of government decisions the most.
But one thing at a time should take care of that problem also in a few years.