Beyond the controversies surrounding the finances and ownership of IPL teams now raging, there are long-standing murmurs of betting and match-fixing that periodically surface as rumours. Whether or not these have a basis in fact, they do raise an important question — would it not make sense to legalize betting in India as it is in almost all of the developed world?

The arguments in favour of such a move are persuasive. The strongest among them is that criminalizing betting doesn’t prevent it happening, as reports have repeatedly shown. In this year’s IPL, for instance, as the TOI reported on Tuesday, an estimated Rs 5,000 crore has already been bet in India and another £2 million (about Rs 13.5 crore) through bookmakers in the UK. What banning betting does achieve is to drive all this activity underground and hence into the playground of criminal elements.

That has serious implications. With such serious sums of black money sloshing around and criminal elements involved, there is a serious risk of some or large parts of it finding its way to terrorists, drug mafia and the like. Legalizing betting and other forms of gambling would not only bring all of this activity out into the open and hence minimize, if not eliminate, the underworld’s role, it would also mean the government would be able to tax it and raise substantial revenues from it.

Legalizing gambling may, in fact, have a bigger impact in terms of turning hitherto black money into white, accounted-for wealth than the tax amnesty schemes that governments periodically come up with. It could also bring back money now going into countries where gambling is legal. These are some of the reasons why most countries do not have a blanket ban on gambling.

To get an idea of the kind of sums potentially involved in the gambling or betting industry, check out these facts. The gross revenues of the sector in the US, where different states have different laws, were $93 billion in 2007, according to the American Gaming Association. The tax revenues accruing to governments were $5.7 billion (about Rs 25,000 crore).

In the UK, official data puts tax revenues from the gambling sector at £1.5 billion last year (about Rs 10,000 crore). A European Commission study in 2006 estimated the size of the sector in 25 EU member states at €51.5 billion, projected to rise to €64 billion (Rs 380,000 crore) by 2010.

The same study also found that the size of this sector was roughly equivalent to 1% of GDP in most member countries. Now, if we assume that gambling in India would be of a proportionate scale if it were legalized (that is, 1% of GDP), that would imply revenues of the order of Rs 62,000 crore. This is way, way more than the Rs 7,594 crore tax collected under the amnesty Voluntary Disclosure of Income Scheme in 1997-98 (even after discounting for inflation).

If the government were to adopt the same sort of attitude towards this sector as it does towards, say, cigarettes or alcohol, it could impose some sort of sin tax on it and thereby raise a tidy sum of money.

But what about the social consequences of gambling? Have we not all heard of stories of people — men, in most cases — gambling away a family’s savings reducing it to penury? Impressive as this argument against gambling may sound, it is an argument against unchecked gambling, whether legal or illegal. If anything, making it illegal increases the chances of such problem gambling happening, since the sector is simply not supposed to exist on paper. If gambling is legalized, it can be regulated and measures introduced to minimize this possibility. Obviously no system can completely check those bent on self-destruction.

What impact would legalizing gambling have on match-fixing? It would be foolhardy to suggest that match-fixing would become impossible if gambling were legalized, but it would be equally foolish not to recognize that it would reduce the incentive for such nefarious activity. When making money from running a betting operation itself is illegal, the temptation to take an extra step into criminality to maximize returns is huge. When one can legitimately earn money from running such an operation, it means taking the first step into criminal activity, always harder than just enhancing the scope of your criminal deeds.

Obviously, if the sector is legalized, it must be regulated. That is exactly what the UK, for instance, does through the Gambling Commission, an independent body sponsored by the department of culture, media and sports. India could well take a leaf from this book. Prohibition never stopped people getting their hands on alcohol — it just made some of the alcohol unsafe. It makes sense to take betting and gambling out of the illegal nooks and crannies in the underground and make it a legitimate, regulated tax-paying business.

