IS GAMBLING LEGAL IN INDIA? WHERE DO WE STAND?

AUTHORS:

GUNJAN HARIRAMANI, MNLU MUMBAI

KANIKA JAISWAL, KLE BENGALURU

EDITOR: AKANSHA SINGH, RMLNLU LUCKNOW



Introduction

Gambling has not been defined under the Gambling Legislations. The dictionary meaning of the word is mentioned as betting, is that the wagering of cash or something, which has value on an occasion, where the result is uncertain, with the most motive of earning money or winning material goods. Gambling is often conducted in several ways like – games offered within the casino, table games, non – casino games, sports betting, arbitrage betting, etc. Within the 21st century, people have begun earning cash upon betting and gambling activities in India. This is often the rationale for gambling being illegal in India because it leads to corruption and money – laundering and may also cause crime. So, to avoid these situations, these games are prohibited by the law. While the debate on what gambling is legal and what is not continues among gambling experts in Indian courts, and between states and thus the central government. The legislation that creates gambling in India, a ‘grey ‘legality is the Public Gambling Act,1867. This act was enacted during the colonial era and is that the reason casinos and gambling are made illegal within the country. India continues to enforce the pre-independent gambling legislation enacted by British rulers, but it's interesting to notice that the UK has changed its gambling laws by allowing most sorts of gambling in the UK in light of the changing societal norms of their country. The Public Gambling Act, 1867 provides for the punishment of public gambling and the keeping of common gaming houses in the United Provinces, East Punjab, Delhi, and the Central Provinces. Section 13 and 17 of the acts shall extend to the whole of the said states and it shall be competent to the state government whenever it may think fit to extend the act by a notification. As per section 3 of the Act, if a person owns, keeps or controls a gaming house is liable to a fine not exceeding two hundred rupees, or to imprisonment extending up to three months. As per section 4 of the act if a person is found in gaming houses, playing or gaming with cards, dice, counters, money or other instruments of gaming is liable to a fine not exceeding one hundred rupees or imprisonment not exceeding one month. Section 5 of the Act invests powers to District magistrate, District Superintendent of police, or any other officer to enter the common gaming house and search all parts of the house. A portion of fine may also be paid to the informer. As per section 17 of the act, all fines may be recovered in the manner prescribed by section 61 of the criminal procedure code.[1] However, Gambling comes under the State List, so states have the facility to formulate or amend their gambling laws. Apart from the three Indian states of Goa, Daman, and Sikkim, no other states have legalized gambling activities. Gambling is often understood in its conventional also as in its revised form. The normal gambling is known within the context of physical space, brick and mortar format, whereas modern gambling consists of computers connected offline or online, mobile phones, internet, etc. There are numerous debates everywhere on the planet on which games or activities are often considered as 'games of skill' and which games or activities are often considered as ' game of chance '. The Gambling Legislations exclude 'games of skill' from the purview of gambling and hence do not attract the penal provisions. The Gambling Act, by Section 12, excludes the 'game of skill' from the purview of the law. Supreme Court within the case of Dr R. K. Lakshmanan v. State of Tamil Nadu [AIR 1996 SC 1153] defined 'game of skill' as "one during which success depends principally upon the superior knowledge, training, attention, experience, and adroitness of the player". In the present world where most are connected through the internet, an individual sitting in India can bet through a far-off owned website. Online Gambling is in its infancy in India. However, Sikkim planned to supply three online gambling licenses in 2010. This failed despite India being the foremost sought out country for online gambling. Indian casinos are not allowed to possess sites that encourage online gambling games like sports – betting and bingo. However, it is not illegal for offshore companies to possess sites that specialize in Indian players. Since 2009 the penalty for being caught gambling online has been a fine of Rs 90,000 per day. Despite acts imposing bans, there's extensive illegal gambling throughout the country. The Indian Gambling market is estimated to be worth US$ 60 billion once a year, of which about half is illegally bet. There are many professionals also as online forums who are in favour of legalizing betting in sports. They comply with this that the illegal funds profited are through underground bookies that use the cash to fund terrorism and drugs. They need to request the government to bring legitimate and controlled gambling laws in India to bring the gambling economy out of the control of mafia and underground don. The gambling laws in India are still ambiguous. It is advisable that before someone ventures into any gambling activity in India, he/she may take sound legal advice in respect of an equivalent so on avoid any unnecessary legal implications.[2]

Physical Gaming

Is gambling a centre or state subject? In India, it is a state subject, but the standard in most states is, if a chance-based game is played with stakes then it is gambling. But if a skill-based game is played with stakes, it is not gambling, but real-money gaming. If there is more skill, less chance then it is legal and less skill, more chance then it is illegal. With few exceptions, states like Goa, Nagaland, and Sikkim have not adopted The Public Gambling Act, 1867 (Hereinafter referred to as ‘The Public Gambling Act’) whereas few states like Delhi, Uttar Pradesh, and Madhya Pradesh have adopted The Public Gambling Act.

Casinos

A Casino can be simply defined as a public room or building where games are played with stakes. The casinos in India are regulated by The Gambling Legislations. The Gambling Legislations of Goa[3], Daman & Diu[4], Sikkim[5]

allow gambling to a limited extent and under a license in five-star hotels. The law also permits casinos on an offshore vessel. Goa was the first Indian state to grant permission for casino gaming and the other states in India followed Goa’s lead in introducing casinos in their states to encourage tourism.[6] The casinos are taxed at a rate of 10% in Goa.

Fantasy Sports

Fantasy sport has a flourishing industry in India. According to the FIFS-KPMG report, the number in India is expected to rise to 100 million by the end of the year, 2020. The fantasy sports market value in India is expected to reach over $5 billion in the coming two years. Certain Fantasy sports are clearly called pure skill-based games in India and accordingly, these games can be treated as exceptions under the Gaming Legislations. Except for Assam, Odisha, and Telangana fantasy sports are allowed all over India. There is no written legal definition of fantasy sports but the legality comes when there is a question, whether the game is a game of skill or game of chance? Games of skill are outside the purview of gambling laws whereas games of chance come under gambling legislation. Courts have examined the format of the Dream11 game and have called it as a ‘game of skill’. Courts have not examined any other fantasy gaming formats and have not offered any sort of judgments, views or analyses to the format of any other fantasy gaming platform.[7] The legality of any fantasy sport is based on the modalities of each game. 18% GST is applicable on games which are skill-based, such as Dream11, and fantasy sports gaming. The Hon’ble Court referred to Schedule III of the Central Goods and Services Act, 2017 which states that ‘actionable claims, other than gambling, lottery, and betting’ are excluded from the scope of supply.”

Lottery

The central Legislature has the power to enact laws for lotteries.[8] Lotteries have been explicitly excluded from the purview of gambling because they are governed by the central law i.e. Lotteries (Regulation) Act, 1998 under which the Lottery (Regulation) Rules 2010 (Central Lottery Laws) and state-specific rules have been framed (Lottery Laws)[9] The Central laws give permission to the state governments to organize or promote a lottery subject to various condition put by the central government. While states like Punjab is specifically providing for and approving online lottery systems within the state. Section 294 (A) IPC, 1860 states that private lotteries are prohibited and if this is done then there is imprisonment of three months. States like Andhra Pradesh, Gujarat, Karnataka, Maharashtra have repealed Section 294 (A) IPC and have enacted their state legislation for banning the lottery system, but there is an exception as non-profit lotteries are not banned. On the other hand, states like Bihar have introduced legislation to completely ban the lottery system.[10]

Horse Racing

The Supreme Court of India gave judgment in 1996 that horse betting is not just chance-based sport, but also skill-based sport. According to the 1888 Police Act or the Gaming Act of 1930, it is referred to as legal gambling. In the case of K R Lakshmanan vs State of Tamil Nadu[11], the Supreme Court held that betting on horse racing is a game of skill and not chance since factors like fitness and skill of the horse and jockey could be objectively assessed by a person placing a bet. Turf Authority of India is the nodal authority of horse racing and 5 main race clubs under this authority are:

  1. Royal Calcutta Turf Club at Kolkata

  2. Bangalore Turf Club Ltd at Bengaluru

  3. Madras Race Club racing at Chennai and the hill station of Ootacamund

  4. Royal Western India Turf Club, Ltd. racing at Mumbai and Pune

  5. Hyderabad Race Club at Hyderabad

Online Gambling

The legal status of online gambling is as unclear as to the opaque glass because the regulation fails to provide any clarity regarding online gambling laws. In order to filter and block risky foreign-based gaming sites and online sportsbooks, it is said that the government has an internet censoring system in place. Sikkim is the first state which has legalized the terms of online gambling as the government grants licenses to companies that offer virtual gambling within its specific borders.

Due to the absence of legal national online casinos, Indian gaming people have massively moved to gamble sites that are hosted in other countries. Most foreign-based virtual casinos call and accept players from India so that even they get a source of income, while some of the casinos even offer game-play in Indian rupees. Although technically illegal, it is clearly seen that Indian gamblers are enjoying their games of chance on the internet. There are no reports on whether players of overseas internet casinos are prosecuted. Maharashtra is the only state out of 29 states with clear laws relating to online gambling. The online gaming market in India is expected to reach $1 Bn by the year, 2021. Of late, a new segment of startups has seen a sudden growth. These are known as Real Money Games, these online gaming platforms host games like poker, trivia quizzing, rummy, daily fantasy sports, and are offering cash prizes as a gratification. Loco by PocketAces, MPL and BrainBaazi are a few other popular names offering the same services.[12]

[1] Nishith Desai, The Curious Case of the Indian Gaming laws, Nishith Desai Associates (July 20, 2020, 10:04 AM), http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/The_Curious_Case_of_the_Indian_Gaming_Laws.pdf . [2] Team Bridge, A Look at gambling in India, The Bridge (July 19, 2020, 11:00 AM), https://thebridge.in/latest/a-look-at-gambling-in-india/. [3] The Goa, Daman and Diu Public Gaming Act, 1976, Act No. 14, Acts of Parliament, 1976(India) [4] Supra Note 1. [5] Sikkim Casinos (Control and Tax) Act, 2002 r/w Sikkim Casino Games Commencement (Control and Tax) Rules, 2007 and Sikkim Casino Games (Control and Tax) Amendment Rules, 2011. [6] India: Gambling laws and Regulations 2020, ICLG, (July 20, 2020, 3.10 P.m.), https://iclg.com/practice-areas/gambling-laws-and-regulations/india. [7] Indian laws on fantasy sports business you need to know, Vinfotech, (July 20, 2020, 5 P.m), https://blog.vinfotech.com/the-most-vital-Indian-laws-on-fantasy-sports-business. [8] Constitution of India, Seventh Schedule, List I, Entry No. 40. [9] The Curious Case of the Indian Gaming Laws, Nishit Desai Associates, (July 20, 2020 5.45 P.m.), http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/The_Curious_Case_of_the_Indian_Gaming_Laws.pdf. [10] The Bihar Ban on Lottery Act, 1993, Act No. 13, Acts of Parliament(India). [11] AIR 1996 SC 1153 [12] With 40% M-O-M Growth Rate, How Funnearn Is Redefining Skill-Based Gaming In India, Inc42, (July 20, 2020, 10 p.m.), https://inc42.com/startups/funnearn-redefining-gaming-india/.


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