Tag: #Gambling

INTRODUCTION

In India, the online gaming market has exploded in recent years, raising concerns about its legality and the need for regulation. The legality of numerous games, including Rummy, online poker, and fantasy games like Dream 11, has been in question. Moreover, playing real-money games comes with a lot of psychological and financial risks. Numerous states and courts have made vain attempts to control the gaming industry. Understanding and creating appropriate regulations is crucial to establishing some order in the gaming industry.

Large Indian gaming enterprises now face a hefty financial burden because there is no unified national gambling regulation. One of India’s fastest-growing businesses would get a great boost from the creation of a harmonious national gaming industry with clear actionable guidelines. 

On April 1, 2022, the Online Gambling (Regulation) Bill, 2022 (the “Bill”) was introduced in the Lok Sabha to create an efficient regulatory framework for the online gaming business to stop fraud and abuse. The Bill proposes the establishment of a regulatory body to oversee the online gaming business, acknowledging the impacts of online gaming’s addictive qualities and the sector’s significant national influence.

ASPECTS OF THE ACT

With the help of the Bill, an Online Gaming Commission (referred to as “the Commission”) will be created, and a licensing system will be put in place that would require licenses from the Commission to provide and run gaming enterprises in India. According to the Bill, it is now illegal to sell and run gaming companies without a license. There is also a bond requirement. Anyone found to have participated in gaming on an unlicensed website will also be subject to legal repercussions under the Bill.

The Commission will have the authority to keep an eye on the operation of websites that offer online gaming and to take action to stop illegal online gaming. Additionally, the Commission will create rules and regulations governing the license and permit requirements, authorization for players to use gaming websites, requirements for providing gaming services, terms for player credit facilities, fines or penalties, and any other matter it may deem appropriate.

The Bill’s highlights

Any game played on an electronic device, such as a personal computer, a mobile phone, a tablet, or another device, is considered “online gaming” under the Bill. It is clear that the Bill seeks to regulate all games played on these electronic devices because the term does not distinguish between “game of skill” and “game of chance.”

The bill calls for the establishment of an oversight body called the Online Gaming Commission (OGC), which will have five members appointed by the central government and include at least one expert in each of the fields of law, cyber technology, and law enforcement. The OGC will have the authority to, among other things, supervise the operations of online gaming websites, produce periodic or one-time reports on related subjects, recommend appropriate steps to control and stop illegal online gaming, grant, suspend, and revoke licenses for such websites, and set fees for license applications and renewals of such websites.

Playing online games without a website and a non-transferable, non-assignable license would be prohibited under the proposed legislation. Without the appropriate license, operating an online gaming server or website is punishable by up to three years in prison and a fine. Six years will pass before the license expires.

If the licensee violates any of the license’s terms or Bill’s provisions, the license that is proposed to be issued under the Bill may be suspended or revoked. The Bill does not, however, apply to anyone who offers backend services in India, such as hosting and upkeep for any international gaming website based outside of India.

QUESTIONS ABOUT THE BILL

Although the Bill seeks to regulate online gaming in India through numerous checks and balances, it currently suffers from several drawbacks:

1. The difference between “games of skill” and “games of chance” is absent from the Bill. Furthermore, it is unclear from the Bill if its rules exclusively apply to for-real-money games or also apply to games played for free.
2. Although this Bill intends to be the primary piece of law controlling gaming in India, it will eventually be subject to court review because, according to the Indian Constitution, neither gaming nor gambling are federal topics and may only be regulated by state governments.
3. The conflict between the present licensing system and the state gaming laws of Meghalaya, Nagaland, and Sikkim is not addressed by the Bill.
4. The Know Your Customer (KYC) standards, customer complaint procedures, advertising and marketing regulations, user data protection, responsible gambling rules, and other issues have not been addressed by the bill.

Games of chance versus games of skill

The Constitution’s seventh schedule, List II (state list), section 34, is titled “Betting and Gambling.” the states alone have the authority to enact laws governing “games of chance.” Contrary to “games of chance,” “games of skill” are protected by Article 19 (1) (g) of the constitution.

Games of skill are not considered gambling under the gambling regulations of several states. There are several uncertainties when attempting to distinguish between a “game of chance” and a “game of skill.” In the absence of legislation defining a “game of skill,” courts have occasionally established definitions for the term.

RMDC v. State of Bombay and KR Lakshmanan v. State of Tamil Nadu

The supreme court ruled in RMDC v. State of Bombay and KR Lakshmanan v. State of Tamil Nadu that a game of skill is one in which the element of talent outweighs the element of chance. A game can be categorized as a game of skill or chance depending on the facts and circumstances of each case, the court ruled in Manoranjitham Manamyil Mandram v. State of Tamil Nadu.

The Kerala High Court ruled that playing for stakes or not is not a factor in assessing whether a game is one of skill or chance when it dismissed a notification that sought to outlaw online Rummy when played for money. “Players have the right to support themselves with their talents.”

Online skill-based gaming is legal.

Using their jurisdiction under Entry 26 of List II, the states of Karnataka, Andhra Pradesh, Telangana, Tamil Nadu, and Kerala made changes to outlaw all types of internet gaming, including skill-based games, in their respective states. They cited an increase in cases of youth suicide, gaming addiction, and financial loss.

States are outlawing online gaming for the reasons listed below:

1. Online games are prone to addiction, and if played for money, they can cause users to commit suicide.
2. instances of children committing murder and crimes to make up for losses from online gaming
3. Websites can manipulate online gaming.

Because they violate the basic right to engage in commerce, business, and occupation, these changes have been brought up in court as being unconstitutional.

As a result, the rules outlawing skill-based gaming have all been overturned by the Madras High Court, Kerala High Court, and Karnataka High Court. Although governments have the sole authority to enact laws governing skill-based gambling, courts have cited the following as key justifications: 

1. A complete prohibition on skill gaming is arbitrary, unlawful, and in violation of Article 19 (1). (g).
2. Additionally, both Article 19 (1) (a) and Article 21 mention participating in games and sports of skill.
3. Such a ban is out of proportion to the goal that governments are trying to accomplish.
4. There are no scientific studies or data about the negative effects of real-money gambling supplied by the states to support complete prohibition.
5. The stakes in the game do not affect a player’s ability to use their skills to their advantage and support themselves financially.

India needs to regulate internet gaming

There are no regulatory frameworks in place for India’s online gaming sector. There is uncertainty over tax rates and revenue collection in the lack of any comprehensive legislation. Currently, several states have rules governing online gambling inside their borders, but due to the industry’s rapid expansion, there is a need for federal legislation that would apply to the entire nation. An effective regulatory system would also promote economic growth and other advantages.

The Online Gaming (Regulation) Bill 2022 has been introduced in Parliament to address the issues and guarantee the expansion of the online gaming sector. According to Article 249 of the Constitution, the Center may pass laws on state subjects provided they are in the “national interest.” This legislation aims to establish a central body for regulating and supervising internet gaming in India.

The 2022 ONLINE GAMING (REGULATION) BILL

A private member’s bill titled Online Gaming (Regulation) Bill, 2022 was presented in Lok Sabha.

While preserving the integrity of online gaming, the measure aims to establish a regulated framework for it.

Online gaming is defined as games played on any electronic device in Section 2(e) of the bill. A central government-created “online gaming commission” would be established under the proposed legislation as an oversight body to develop guidelines for online gaming, including licensing requirements and reporting requirements. Playing without a license is a crime that carries a fine. Any license requirement that is broken will result in license revocation.

The Know Your Consumer (KYC) requirement, the grievance redressal system, data protection or privacy, and one of the key reasons for bringing forth such a bill, mental health issues including addiction and depression, are not addressed in the bill.

The current regulations also have a lot of problems. The distinction between “game of chance” and “game of skill” is not mentioned in the definition of online gaming, which is essential given the conflicts that have arisen in the past as a result of this lack of demarcation. Furthermore, real-money gaming needs to be regulated due to its rising popularity and potential for an increase in unlawful transactions, but the bill does not offer any precise guidelines in this regard.

There is a lack of a thorough licensing structure with precise rules. Although the bill represents a big step, it does not effectively address the problems related to online gambling. The bill must be clearer and more open.

CURRENT SCENARIO

Currently, the majority of businesses that offer real money games are supervised by charters given by the All India Gaming Federation (“AIGF”) and the Federation of Indian Fantasy Sports (“FIFS”), two self-regulatory organizations created to oversee online gaming in India. The lack of enabling national legislation is felt deeply even though these charters help to streamline the conduct and governance of online gambling platforms.

CONCLUSION

Since the start of the epidemic, online gaming has grown in popularity and involvement, especially among young people. While it has been good for the economy, there are societal, psychological, and legal ramifications for online gaming in India. The internet gaming sector is in a “grey area” because there aren’t clear distinctions and rules.

For a long time now, courts have dealt with these ambiguities. The country needs a well-regulated gaming industry if it is to fully realize its enormous economic potential. The recently proposed bill does not seem to be sufficient; the only way to guarantee everyone’s safety and privacy in one of India’s fastest-growing businesses is through a thorough legal system.

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References:．

1. India’s Online Gaming Bill: Regressive Regulation – JURIST – Commentary – Legal News & Commentary [Online][Cited: 3 September 2022] https://www.jurist.org/commentary/2022/05/nishka-kapoor-online-gaming-bill-india/．

This article is written by Kanika Arora from Delhi Metropolitan Education (Affiliated to GGSIPU).

Abstract

Gambling, in the current time, is mushrooming at an enormous speed, thereby posing a grave threat to the stakeholders involved due to its inherent vulnerability. The vociferous and the reverberating calls for its legalization newer assume more significance given the nebulous state of gambling laws in the country. Although the legalization would bring with itself a gush of entailing benefits, the profound and the pressing issues at hand pertaining to legalization are required to be given a thorough perusal including the pricking need to overhaul enforcement mechanism rather than venturing into the question of how and when to legalize the gambling given the legal and socioeconomic intricacy of India.

Introduction

It would be apposite, to begin with, the scrutinization of the term “gambling”. Gambling is a game that involves chances of winning or losing money or possessions of bet. Cambridge dictionary defines betting as the habit of risking money and placing a wager on the outcome of sports events. Gambling is a genus while betting is a species and both function on the coefficient of unpredictability especially those of the sporting events. The modern world thrives on the perpetuities of monetary gains and gambling serves as a handy way to satiate those materialistic needs.

This article seeks to systematically articulate the advantages and disadvantages that ensued due to the legalization of gambling, thereby concluding with some apposite and congruous solutions.

Background

India and gambling have had a substantiative co-relationship since ancient times, with the Rig Veda believing to have documented its first description. Since then, gambling has been a popular choice in India among the masses when it came to quick monetary gains in the course of satisfaction with worldly needs. Initially, gambling was encouraged in colonial India due to its economic benefits, but soon, it was illegalized due to its ensuing negative consequences such as bankruptcy, criminal delinquency, etc.

Thus, the Public Gambling Act of India was passed in 1867¹ to regulate and restrict gambling practices, thereby, illegalizing gambling albeit without sufficient punitive sanctions. The Act sought to restrict most forms of gambling including sports gambling (lotteries, casinos, festive gambling, etc were allowed and regulated in a few states) that was wagering in nature involving pure chance (eg: using the roll of dice or marble to determine the outcome) baring the few games that involved “skill” and not pure chance such as horse racing; online games of skill such as rummy, poker, fantasy games, etc. In K.R. Lakshmanan v. State of Tamil Nadu², the Apex court held that “The test of the legality of gambling vis-à-vis nature of sports is dependent upon the dominance of the element of skill/chance with regard to a recognized sport.”

With the advent of the constitution, Subjects of betting and gambling were kept in the State list as entry no. 34. The States have been given the liberty to delve into their own legislation on betting and gambling, having the freedom to regulate and deregulate it. While some states such as Sikkim (which has legalized betting in the online form), Kerala (conducts State-run lotteries), Goa³ (which has legalized casinos), etc have framed their own betting laws, others continue to govern themselves via the Central legislation of 1867. In a nutshell, both online and offline sports betting baring the games involving “skill” are currently illegal in India.

In recent times, gambling has unfettered its wings, mushrooming at an enormous speed with no signs of ebbing down in near future, more so due to the advent of advanced technology, penetration, and access to the internet in even the remotest corner of the world. India, too remained at the forefront to exploit this vice opportunity, with the 2016 ICC and the 2013 IPL betting scandals that involved thousands of crores of Rupees, giving testimony to this booming trend. It was in light of such massive illegal betting markets and the large-scale flouting of the law by the masses that the Supreme Court of India, in 2016, mandated the Law Commission of India (LCI)⁴ to examine a logical way to deal with India’s illegal gambling.

The LCI mentioned in its report that– “since it is not possible to prevent these activities completely, effectively regulating them remains the only viable option” Also, a Private Member Bill was introduced by Mr. Shashi Tharoor in 2018 in this regard, which articulated the legalization of sports betting in India under strict surveillance as it would curb the illegalized betting ecosystem in India which was under the monopolistic ambit of underworld mafias. It would curb the black money market, along with the generation of massive revenues for the government which could then be utilized for funding the sports infrastructure and betterment of athletes. Some of the potential restrictions that the bill sought to introduce were barring the minors from participating and limiting the highest betting fees one can bid. The bill impeccably envisioned the regulation mechanism by introducing a 7 member committee that would be responsible for formulating the rules and regulations monitoring sports online gaming. The bill also sought to criminalize the activities of sports fraud and match-fixing to the extent of 5 years of imprisonment and hefty fines which in turn would espouse deterrence. The bill also focused on maintaining the integrity of sports and preventing any event such as manipulations or match-fixing as those current pressing issues were not dealt with by the present legal framework.

Advantages of legalizing gambling

Gambling is one of the forms that has been an inherent phenomenon in Indian society and curbing it entirely won’t be certainly possible, more so because of the willful and brazen flouting of the legal norms by masses. Hence, giving it a legal sanctity would be a desirable approach in the discourse of its regulation and fund generation thereby espousing public consent and adherence rather than remaining oblivious to its incongruous existence. Far from this realization has been the seemingly illogical approach of the legislative setup which has still kept it within the cloak of illegality. This has been further reinforced by the Indian Judiciary by keeping horse race (on the basis of predicting the winnability) under the gamut of ‘games of skill’ but not the other games involving technicality and intricacy of similar nature such as cricket or hockey.

The most popular form of gambling has been in the sporting activities involving bets, which has evolved itself as a clandestine ecosystem possessing a huge network of people and enormous amounts of money. The Drastic modernization in the sports ecosystem coupled with the digital boom has led to sweeping revolutionary changes across the spectrum. This in turn accentuated the gambling culture creating a mammoth web of individuals and finances involved in this subculture. The first step in the legalization process would involve systematic identification and acknowledgment of these prevailing entities. Next would come regulation, owing to the fact that an exorbitant amount of Rs 300,000 Crores of black money is used annually for betting and the sector involves an enormous cash flow worth 60 billion dollars which is 3.5% of India’s GDP. It will lead to transparency as the source of cash flow could be traced and tracked thereby keeping a tight check on the black money market. Licensing of the brokers would further keep a check on them by curbing the black money laundering in illegal betting which is often used to fund terrorism and related nefarious activities¹. Involving in such illegal activities could lead to the cancellation of their licenses which in turn would serve as a deterrence to them. The legalization of sports betting would also ensure the protection of the subtle interests of minors, uneducated, poor fellows with a limited income and lack of bargaining power, and the elderly with shrinking life savings, who are often cheated by brokers. They remain at disadvantage due to unregulated and unenforceable market agreements lacking legal recourse owing to the wagering nature of the contract where the interests of the weaker party lacking bargaining power is jeopardized.

Currently, the earnings under betting are not reported as a source of taxable income under the Income Tax Act, 1961, thus, creating an avenue for black money. Legalizing the same would make the disclosure of such income mandatory (paving the way for effective surveillance and regulation) along with the generation of revenue receipts for the government to the tune of a minimum of Rs 12000 crores per annum⁵. It would also check on the tax evasions by brokers and bettors. The fund generated could be used for revamping sports infrastructure and related welfare schemes of the country along with peddling the development of the tribal and conventional sports that have been grossly neglected owing to their unpopularity and lack of resources.

Legalization would also serve as the panacea for ever-rising unemployment in the country by providing jobs ranging from the post of officers (required to monitor betting transaction) to a new catena of brokers who would specialize in sports betting along with a majority of unskilled workers employed in the implementation of menial economic activity in the betting industry. India, having the required knowledge, expertise and population could also evolve itself into a niche avenue for cyber betting like Denmark, the USA, etc, thus bringing with itself valuable foreign exchange which in turn would fuel the economic prosperity of the country.

Further, policing of the current gambling laws which illegalize it becomes a major problem due to the sheer numbers of “law-breakers” and exhaust colossal time of the law keepers which could be efficiently used for other productive work. Even effective policing results in large numbers of people gaining criminal records, with all of the consequential social problems. (employment problems, social and family stigma due to criminal record, etc). Hence, legalization would serve to meet the above ends. One other argument often posed in favor of legalization/regulation is that gambling adversely affects only a minority (less than 1% of the population due to problem gambling). So depriving the majority of a harmless leisure activity when it could add to a mix of other advantages is not worth it

Disadvantages of legalizing gambling

It is argued that the job of the government is to lead the people and not to simply follow popular views, especially if there are “public interest” reasons for pursuing unpopular routes. The concept and practice of gambling have historically been frowned upon in the Indian context. The moral issues constrain the government from peruse the idea of legalization as this has been a forbidden virtue in the Indian sub context given its entailing disadvantages. Giving it a legal sanctity would go against this entrenched ideal of morality.

Legalization would entail massive social costs as various studies have revealed that adolescents engaging in such activities possess a higher rate in school and academic failure accompanied by a history of family conflict triggered by the loss of household income, erratic sexual activity, severe financial difficulties such as large debts, poverty, and even bankruptcy; conflict and breakdown in relationships and a variety of psychological illnesses including anxiety and depression and psychiatric disorders, thus, paving way for baleful tendencies to commit suicide arising out of the ensuing depression.

State-sanctioned gambling would disproportionately burden the socially and economically backward people who expend a greater portion of their income into such wagering contracts, thus, exposing them to the channels of destituteness and crimes such as fraud and embezzlement, to address the mounting financial demands of their gambling. It will also push them into the scourging avenues of alcohol and drug addiction thereby instigating a vicious cycle of economic losses. Apart from the above menaces, gambling would also seriously impact the integrity and the true sportsmanship spirit of the sports due to the money factor and instances of match-fixing.

A logical argument against gambling follows that if gambling were to be legalized, it follows that more people would gamble (due to its enticing nature), and subsequently, more would become problem gamblers who face the adverse effects of gambling. Studies corroborate the above fact showing that increased availability of and easy accessibility to 2 gambling increased the participation in gambling and also the consequent prevalence of problematic gambling that entails massive social costs. Studies show that in India, although the prevalence of gambling was low, the proportion of people who had developed problem gambling among those who did gamble was considerably higher as compared to other countries. The final argument against legalization is that, even if it were to be considered a good idea, in theory, the time for such a major policy change in India is not right, because India did not possess the infrastructure to conceive, implement, monitor, or regulate such a huge change.

Suggestions

Certain suggestions could be considered in the light of the given circumstances. First, because of India’s inherent diversity, changes should be piloted in one or few states instead of going for pan India legislations so as to evaluate the post and pre-policy changes along with avoiding the deleterious and incongruous effects. Second, sufficient research needs to be undertaken so as to generate the local and relevant empirical pieces of evidence vis a vis the Indian sub context instead of relying on foreign pieces of evidence. Third, the question of government or private ownership of gambling monopoly needs to be delved upon. Fourth, the safeguard mechanism for the stakeholders needs to be put in place along with relevant and requisite standardized norms for regulation.

Conclusion

Keeping gambling under the scope of criminal legislation in spite of its nonviolent nature has been a source of contention amidst the scholars who view this as a step to give legitimacy to State paternalism. Section 30 of the Indian Contracts Act 1872 renders such betting (wagering) agreements voidable and takes off the recourse of legal enforceability, thus, exemplifying its vulnerability to financial exploitation and illegitimate transactions. Now in recent times, with a drastic surge in online gambling, the IT Act, falls short to curb people from engrossing in illegitimate offshore gambling websites where there is the absence of the protective blanket of national laws.

Thus, the archaic legislation of 1867 and the present laws being incompetent, abruptly fail to regulate the ongoing inconsistencies pertaining to betting. Further, nonchalance concerning the present penal provisions and the recklessness of the stakeholders exacerbate the administrative incapacities and ineffective framework of government. Against this backdrop, the vociferous and the reverberating calls for newer legislations assume more significance given the nebulous state of gambling laws in the country.

Given the pros and cons of the current issue at hand, there is no unambiguous evidence to support the status quo. Although the legalization would bring with it a gush of entailing benefits, the profound and the pressing issues at hand pertaining to legalization are required to be given a thorough perusal including the pricking need to overhaul enforcement mechanism rather than venturing into the question of how and when to legalize the gambling.

References

1. The Public Gambling Act, 1867. http:// www.sangrurpolice.in
2. 1996 AIR 1153, https://indiankanoon.org/doc/1248365/
3. https://www.scams.info/online-casino/india/#laws
4. Law Commission of India. Legal framework: Gambling and sports betting including in cricket in India. Report number 276. New Delhi: Law Commission of India, 2018.
5. http://timesofindia.indiatimes.com/business/india-business/Goa-casinos-contribute-Rs-135cr-revenue-in-2012-13/articleshow/19524670.cms

Written by Riya Ganguly student at Bharati Vidyapeeth New Law College, Pune.