The China Sports Lottery is one of the few legal avenues for betting in the country, but it’s a pretty big avenue and it’s growing. Sales climbed to $16.5 billion in the first quarter of 2018 as it became the second largest lottery in the world. Legalized gambling is on the rise in China, and soon, match-betting will more than double in June.

The China Sports Lottery is one of two lotteries in China, along with the Welfare Lottery. Unlike the Welfare Lottery, though, the sports lottery involves an element of gaming: punters can predict outcomes of international soccer matches and levy wages on the results. It's popular, and has seen healthy growth for years. The latest figures from March show sales at 40 billion yuan($6.2 billion), a 6% rise from last year. For the first quarter, sales grew 18.3% year-on-year.

That growth is about to balloon. During the 2014 FIFA World Cup, held in Brazil in June, the China Sports Lottery’s match-betting sales jumped 384.3% , compared to the previous June. The single month's total of 9.62 billion yuan was impressive at the time, but this June will dwarf it, if you can take the run-up to two tournaments as any indication. In 2014, March sales were good, at 5.9 billion yuan. ($949 million, at that time). This year, March took in 40 billion yuan ($6.2 billion) in sales.

And while Hong Kong police are beginning to gear up to handle the expected surge in illegal gambling that accompanies a World Cup, Chinese police have been at work for months, ensuring most of that surge in bets runs through the lottery system.

A shrinking underground

“Sports Lottery Radio,” a new podcast created by lottery and news app Catjc and podcast hosting firm Ximalaya, runs each night for four hours with a gaggle of hosts. Some above-board contributors use their real names, while other pseudonymous commentators like Lion King, Moral Brother and Once Prosperous are more clandestine.

The mix of commentators fits the audience, a country of gamblers half-submerged in shady business and half-surfaced in the open air. And through a series of massive raids on illegal online gambling operations, the population's mass is slowly rising to official betting channels.

The number of arrests, and the amount of profits seized, is staggering.

Last week, one set of raids in the southern cities of Shenzhen, Guangzhou, and Jieyang nabbed 150 suspects. The group had supposedly raked in an estimated 400 million yuan ($62.7 million). On May 8th, police announced 36 arrests, and seizures of more than 65 million yuan ($10.2 million). On May 4, Chongqing police made only two arrests, but took more than 350 million yuan ($55 million) in cash won through 13 websites with more than 100,000 users in total. At that time, the city's police force announced they had made 453 arrests since February. A pair of raids in March and April together took 140 suspects and seized 85 million yuan ($13.4 million) in funds and 130 million ($20.2 million) in property. In one raid in central China, police used aerial drones to survey the headquarters of illegal gambling sites.

A new “Liberal Market Zone”

While police have cracked down on gambling at one end of the law, legislators are expected to lighten up at the other.

The latest Five Year Plan, a regular announcement of intent for forthcoming policies from China’s national government most recently released in 2016, includes accelerated growth and innovation in China’s sports lottery. And this year, the government announced plansto transform the touristy island province of Hainan into a horse racing and sports lottery hub. While horse racing is allowed in some areas of China, betting is currently illegal. If all goes to plan, Hainan will one day compete with the $33 billion casino industry in Macao, which remains the world’s largest gambling center and the main destination of mainland Chinese looking to bet.

Several companies have taken note of the expected shift. In 2016, China Vanguard You Champion Holdings, a lottery technology supplier, signed an agreement to provide the technology and marketing for the Hainan Sports Lottery Administration Center, through which much of the government‘s expansion funding will run. China Vanguard has also recently inked a five-year agreement with Hainan Huan Yu Assets Investment Company.

One huge indicator of the upcoming switch will be the status of a now three-year-old ban on online lottery sales, which came in March 2015 after a fraud scandal. Beijing suspended online sales when it came out that provincial lottery administrators had misused $2.8 billion in lottery funds. Even at its onset, the ban was characterized as "temporary" and the 2016 Five Year Plan, and its nod to the sports lottery, pushed hope for a release of the suspension. But it didn’t happen.

Now, China Vanguard’s new agreements shows expectations for the three-year-old suspension to soon lift. It seems a safe bet, but it's definitely still a gamble.

https://www.forbes.com/sites/augustrick/2018/05/30/the-worlds-second-largest-lottery-in-china-is-set-to-become-even-bigger/#4df6a9d46355