Gambling is perhaps one of the oldest vices known to mankind. From illegal common games houses to sporting events like the Indian Premier League being accused of spot-fixing, gambling has flashed headlines. Over the course of a few decades, the European nations have been opening up their doors for regulated and monitored gambling. India has forever maintained a strict vigil on gambling. However, with the advent of online gambling, the country’s laws appear weak and insufficient to face this threat (if it at all is). This paper seeks to identify the lacunas in the gambling laws and the future of online gambling in India.
Gambling, betting or wagering is the act of putting at stake something of value for the hope of gain based on the outcome of a game. The person(s) stake money or something valuable with the full knowledge of the risk and the uncertainty of the outcome of the game. To give a brief idea of the amount of money that is involved in gambling worldwide, the Grand View Research predicts that the amount wagered in online gambling portals will alone reach a valuation of USD 123.7 billion by 2027 with a CAGR of 11.5%.
Gambling in the Indian context can be traced back to ancient times. Old Indian scriptures, namely the Mahabharata, clearly shows that gambling was a known and a prevalent concept in the bygone era. If the political descriptions are to be believed, wagers sought to conclude wars without the involvement of fighting and loss of life and livelihood.
Twentieth century gambling has massively evolved since then. A host of nations have legalized betting on sports. European nations have legalized casinos and pokers. Today even India has a host of online fantasy game portals that indirectly incite active participation in gambling. The International Centre for Sports Security is of the opinion that the gambling market in India could be USD 130 billion.
Indian Gambling Laws
The legislation in India is however conservative in regard to open gambling. The Constitution of India allows the state legislatures to draw upon the rules and regulations with respect to gambling. The backbone for these legislations is provided by The Public Gambling Act which was enacted in 1867. A list of the individual gambling regulations are as follows:
- Assam Gaming and Betting Act, 1970
- Bombay Prevention of Gambling Act, 1887
- Madhya Pradesh (C.P.) Public Gambling Act, 1867
- Orissa Prevention of Gambling Act, 1955
- The West Bengal Gambling and Prize Competitions Act, 1957
Gambling today is generally practiced in two distinct methods, offline and online. There are government sanctioned offline means of gambling. The most popular means of gambling offline are:
Legislations for lotteries are enacted by the Central Government according to the provisions stipulated in the Constitution of India under its Seventh Schedule, List I, Entry no. 40. The Lotteries (Regulation) Act, 1998 along with the state specific regulations and the Lottery (Regulation) Rules, 2010 provide for the legal framework. The state can organize and promote a lottery following the Central Lottery Laws and can appoint individuals or a corporate as a distributor.
The state government then enters into an agreement with the said person which allows the individual or corporate to market and sell lottery tickets on behalf of the state. However, the state has the power to ban lotteries from being held. Unlike Punjab where the state provides for online lotteries as well, states like Bihar and Madhya Pradesh strictly hold that no lotteries shall be held within the bounds of the state.
The Indian Penal Code, 1860, under the provisions of Section 294A strictly prohibits arranging private lotteries. In this front, certain states like Karnataka, Maharashtra, Gujarat and Andhra Pradesh have repealed the provisions of Section 294A and allowed private lotteries only if they are non-profit lotteries.
Casinos are primarily banned all across India and the legislation for the same falls under the state list. It was only in 1999 when Goa came forward and permitted casinos in the state. Since then, several states have been trying to follow suit in this regard.
In Goa alone, there are ten casinos out of which four are floating casinos and six are land based. The casinos are subject to a taxation of 10%. In 2012, the efforts to build comprehensive casino laws were undertaken. The laws ensure that the casino patrons are properly tracked, labour standards are met and standardized equipment testing procedures are followed. Apart from Goa, Sikkim and the union territory of Daman are also places that have legalized casinos. The Deltin Daman casino is India’s largest casino.
The Goa, Daman and Diu Public Gaming Act, 1976 states that casinos can only be set up after prior government permission has been acquired. The place of the casino has to be either off-shore or only at a five-star hotel.
Other than these, horse betting is one of the most common forms of gambling that draws a good amount of attention from gamblers.
However, with technology infiltrating our daily lives, and a paradigm shift in the modes of payment post-demonetization, the online gambling industry has been surging at an unprecedented rate. This is where most experts spot a lacuna in the law. Up until now, all the legislations that were passed were aimed at preventing the spread of ‘common gaming houses’. However, with the advent of fantasy gaming sites like Cricket360.com, Dream11, Online Poker and Rummy, Teen-Patti, Indian laws find themselves grossly under-equipped.
The legislations surrounding gambling were enacted before the advent of the internet. This makes online gambling vastly untethered by legal regulations. The Central Government and the state laws have enacted laws to control the gambling spree. In a recent development, Google removed Paytm payments app from its store on September 18, 2020, stating that the app violated the gambling policies laid down by Google.
The app allegedly diverted the user to the Paytm First Games where the user could invest to participate in games and win real money and cash prizes. Although the app was reinstated shortly, the removal served as a warning against potential gamblers since the Indian Premier League has already kicked off.
Central Government on online gambling
The Central government brought forward a circular in 2015 that was titled Consolidated FDI Policy Circular where the government clarified that any FDI for the purposes of conducting or facilitating online lotteries, gambling or betting was strictly prohibited.
State based online gambling laws
Online gambling leaves a lot to be desired from the Indian legislation. So far, only Sikkim has declared online gambling to be legal vide Sikkim Online Gaming (Regulation) Rules, 2009. This Act made online gambling sports like Roulette, Blackjack, Pontoon, Punto Banco, Bingo, Casino Brag, Poker, Poker Dice, Baccarat, Chemin-de-for, Backgammon Keno, and Super Pan 9 legal games for online play. In 2016, the state of Sikkim also allowed Golden Gaming International Private Limited to conduct online gaming and betting inside the state.
However, the view on online gambling is largely divided. Telangana amended their legislation to include online gambling within the ambit of their gambling laws. In the case of Ramachandran K v The Circle Inspector of Police, the High Court held that playing rummy for stakes would amount to violation of the provisions laid under the Kerala Gaming Act, 1960.
A review petition was filed shortly after where the High Court of Kerala held that whether playing rummy with or without stakes would constitute an offence under the aforementioned act could only be determined on a case to case basis.
Fantasy game portals largely contribute to online gambling. It is often argued that fantasy gaming portals are skill-oriented and hence should be exempted from the restrictions under Gaming Legislations. Nagaland too under the provisions of its online gambling regulations lays down that a game can be said to require a certain skill if it requires selection of teams or stocks upon careful analysis. The law also stipulates that fantasy games are games of skills as they include virtual team building upon careful analysis of the player’s recent and past performance in real life.
The High Court of Punjab and Haryana in this regard has held that Dream11 is a skill-based fantasy game in the case of Shri Varun Gumber v UT of Chandigarh and Ors. In the case, the plaintiff had wagered 50,000 INR in Dream11 and subsequently lost the bet. The plaintiff then moved the court stating that business conducted through Dream11 directly violated the provisions under the gambling legislations of Punjab.
The High Court pronounced that the game required a substantial amount of skill and relied on the judgement pronounced by Supreme Court in the case of KR Lakshmanan v State of Tamil Nadu where the apex court had held that horse race was a game of skill and not a game of chance.
The High Court of Punjab further elucidated that since the business conducted by Dream11 did not amount to a violation of gambling rules, the business was protected under the provisions of Article 19(1)(g) of the Indian Constitution. This judgement was also upheld when the Bombay High Court pronounced the verdict in the case of Gurdeep Singh Sachar v Union of India. The Bombay High Court further went on to state that GST could not be levied upon the entirety of the amount that was received from the player but only upon the consideration payable or collected from within the platform.
Law Commission Report
The Law Commission in its 276th Report stated that betting could be legalized in a regulated manner, similar to the actions of Australia, UK and a number of states in the USA. The Law Commission laid down that the state governments could enact legislations on this front. The Indian Parliament could exercise the rights conferred by the provisions of Articles 249–252 and draw a legal framework for the states to adopt.
The Foreign Exchange Management Act and the FDI policies could be altered to encourage investment into online gambling portals. This would directly influence the promotion of hospitality and tourism opportunities along with boosting the revenue streams of the country. The social menace of gambling was also adeptly addressed in the report where the commission stated that the regulations ought to be extended in the form of licenses.
Certain categories of people could be legally prohibited from participating, namely minors, beneficiaries of government subsidies and those who were exempted from paying Income Tax. The state could also reaffirm that participation in fraudulent activities such as spot-fixing would be criminally punishable.
Online gambling sharply contrasts the inadequacy of the gambling legislation with the advancing times. When it comes to gambling, there exists two opinions, one which advocates that legalizing online betting will open up multiple streams of revenue. As Hon’ble Justice KTS Tulsi rightly states that the income generated could be used for the betterment of sports and “impart world-class training to our sportsmen” and also strive to better the infrastructure which is mostly outdated and primitive.
The other school of thought vehemently protests legalizing gambling as it has been known to be one of the most destructive social vices. The present recommendations from the Law Commission hint that India has high chances of following suit with the European countries that have legalized online gambling with governmental recommendations and regulations.