The lottery sector, if properly regulated, will not only provide player protection but could also augment government revenues through profits and taxes by approximately USD 11 billion, according to a report published recently.

The report further said that the boost to revenues, in turn, would fund multiple government welfare schemes.

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Lotteries (paper and online) are legal in only ten states in India; this has resulted in a proliferation of offshore entities offering illegal gambling opportunities, resulting in a massive loss of revenue for the government and exposing players to fraud, according to Pahle India Foundation, India’s premier policy research institute founded and headed by Dr Rajiv Kumar, former Vice Chairman of NITI Aayog.

The inefficacy in banning the lotteries in the wake of rampant digitalisation – with cheap internet and huge smartphone penetration across the country – has forced the sector to operate from underground leaving participants with no legal recourse which undermines player protection.

India has a potential annual lottery market size of USD 33 billion (with minors prohibited) if the lottery is legal albeit robustly regulated across the country. For example, the entire budgetary allocation for MGNREGA was USD 7.2 billion and that for the National Health Mission USD 4.5 billion in 2023-24 – both schemes could be nearly fully funded by lottery revenues.

Legislation for the sector is 25 years old and leaves a lot to be desired when compared to global best practices promoting player protection, responsible gaming, and transparency. Banning lotteries will essentially result in the industry going underground, endangering player safety, exposing participants to fraud and malpractice, and loss of revenue for the government, it said.

The report stated that if people are still playing despite the ban, which seems to be the case in India, it is critical for governments to consider effective regulation to protect consumer interests.

“Regulation offers an opportunity to implement the best practices from responsible gaming frameworks and player protection mechanisms across the world to ensure people can, if they so wish, participate in lotteries in a safe environment while returning significant revenue to the state,” said the study.

Apart from its immense revenue potential, the lottery industry will generate employment opportunities for both skilled and unskilled workers.

The role of licensed private players in government lotteries is restricted mainly to selling and marketing of government lotteries. The report suggested that the current lottery regulations should include specific provisions promoting player protection and responsible gaming.

Regulations pertaining to gambling, including restrictions on FDI and certain IT rules, prevented the modernisation of lotteries and introduction of robust payer protection mechanisms, as well as aided inefficiency, the report said.

It suggested that digital public infrastructure (DPI), such as unique digital ID (Aadhaar) and UPI (Unified payments Interface), can be leveraged to digitise the lottery in India with specific KYC requirements.

The report stressed the point that providing safer, properly regulated gambling options will help check illegal offshore entities offering online games and may go a long way in preventing the haemorrhaging of government revenues.