Research paper on LEGALITY OF GAMBLING IN INDIA.
Gambling (also known as betting) is the wagering something of value (“the stakes”) on an event with an uncertain outcome with the intent of winning something else of value. Gambling thus requires three elements to be present: consideration (an amount wagered), risk (chance), and a prize1. It is basically the act of betting on something which is uncertain with the objective to win the luxury that was betted on. Thus gambling is a risky act which is done with some form of consideration to win a prize. Traditionally gambling is an activity where someone risks money or belongings, there is an element of randomness or chance involved and the purpose is to win. The traditional methods of gambling are:
- Gaming Machines/Pokies
- Scratch cards
- Online Gambling
- Sports betting.
As different ways to gamble have developed it has become difficult to identify some instances when someone has a gambling problem. In addition to the traditional definition of gambling, urges and the way they affect people are a strong factor in gambling addiction.
Someone can have a gambling problem if they are addicted to an activity where they cannot control the urge to participate, and it’s having a negative impact on their lives.
Emerging gambling activities include:
- Online investment trading
- Fantasy sports
- Games with In App Purchases
- Online Auctions.
1 Rose, I. Nelson; Loeb, Robert A. (1998). Blackjack and the Law (1st ed.). Oakland, CA: RGE Pub. p. 109
Gaming law is the set of rules and regulations that apply to the gaming or gambling industry. Gaming law is not a branch of law in the traditional sense but rather is a collection of several areas of law that include criminal law, regulatory law, constitutional law, administrative law, company law, contract law, and in some jurisdictions, competition law. At common law, gambling requires consideration, chance and prize, legal terms that must be analyzed by gaming lawyers within the context of any gaming operation2.
2. GAMBLING IN INDIA
Gambling in India varies by state as states in India are entitled to formulate their own laws for gambling activities. Some states like Goa have legalized casinos. Common gambling activities like organized betting are restricted except for selective categories including lotteries and horse racing.
In the 21st century, more people have started making cash bets upon prohibited betting and gambling activities in India. Critics of gambling claim that it leads to crime, corruption, and money laundering. However, proponents of regulated gambling argue that it can be a huge source of revenue for the state. Casinos in Goa contributed Rs. 135 crores to the state revenue in 20133.
Gambling is a state subject, and only states in India are entitled to formulate laws for gambling activities within their respective states. The Public Gambling Act of 1867 is a central law that prohibits running or being in charge of a public gambling house. The Information Technology Act 2000 regulates cyber activities in India does not mention the word Gambling or Betting thereby the act was left for interpretation by the Courts which have refused to examine the matter. Further, online gambling is a banned offense in the state of Maharashtra under the “Bombay Wager Act”. Only three states allow casinos, Goa, Daman and Sikkim. There are two casinos in Sikkim called Casino Sikkim and Casino Mahjong and 10 in Goa, of which six are land-based and four are floating casinos that operate on the Mandovi River. The floating casinos in Goa are Casino Deltin Royale, Casino Deltin JAQK, Casino Pride and Casino Pride 2. While the first two are controlled by the Deltin Group, the latter two are managed by the Pride Group. According to the Goa, Daman and Diu Public Gambling Act, 1976 casinos can be set up only at five-star hotels or offshore vessels with the prior permission of the government.
2 Internet Gaming Law (PDF) (2 ed.). Mary Ann Leibert, Inc. Publishers. pp. 11–13
Betting and gambling can be found in the State list3. They have been mentioned in detail in the seventh schedule of the Indian Constitution. In other words, this simply means that the state government can exercise full control over betting and gambling practices in their state. They can also formulate their state-specific laws. Horse racing and lotteries are legal in India. States such as Goa, Kerala, Arunachal Pradesh, Assam, Maharashtra, Madhya Pradesh, Mizoram, Manipur, Meghalaya, Punjab, Nagaland, West Bengal, and Sikkim have legalized lotteries. Online gambling and land-based casinos are legalized in Goa, Sikkim, Nagaland, and Daman under the Public Gambling Act, 1976. E-gaming (games of chance) has been legalized in Sikkim and Nagaland. Telangana and Arunachal Pradesh consider the game of skill as illegal as per the Telangana State Gaming Act, 1974. All India Gaming Federation, The Rummy Federation, and Federation of Indian Fantasy Sports have adopted a self-regulation code for all their advertisements.
According to the Public Gambling Act of 1867, practically all forms of gambling are illegal in India4. However, there are certain provisions within the law that mark a difference between games of skill and games of chance. Technically, betters are allowed to place bets on games of skill. This places a lot of ambiguity around the legislation because it’s not entirely clear what constitutes the difference between a game of chance and a game of skill. This is why the betting culture is still rampant despite its technical illegality. The ambiguity allows for many establishments to circumvent certain provisions in the Public Gambling Act.
India is also divided up into various independent states that are all mandated to impose their own laws and regulations. Currently, the state of Sikkim is known to offer a more liberal stance towards online betting. In 2009, Sikkim welcomed its first casino and it now has a few lottery services that are run and operated by the state itself. The state of Goa is popular for having a wide range of luxury cruises and floating casinos that appeal to a large bulk of the tourism market. Other states around the country are more strict when it comes to the establishment of gambling operations.
3 Entry 34, State List, Part II, Constitution
4 Section 4
Given the ambiguity of the law, it’s still possible for most Indian residents to actually participate in online gambling. Technically speaking, casino operators are not allowed to establish their operations within the country. However, that doesn’t mean that residents of India can’t access offshore casino platforms. In most of India, residents have access to gambling platforms from all over the world that offer a variety of different casino games. Also, these casinos typically have their transaction mechanisms set up through third-party service providers like PayPal which are recognized worldwide. This is essentially how so many people in India are still able to participate in online gambling activities despite its technical illegality within the Public Gambling Act. To this day, no private citizen in India has ever been charged for gambling illegally. Post-independence most states adopted their acts by including amendments to the Central Act. There are various gambling laws in our country. First, which is governed by the Central Law. Secondly, which is governed by the State laws and lastly laws which differ based on being physical or online game & a game of skill or a game of chance.
3. CONUNDRUM OF GAME OF SKILL OR GAME OF CHANCE
A “game of skill” is based mainly on the mental or physical level of expertise of a player, rather than a chance. One of the most significant benefits of a game of skill is that it provides freedom to the players to explore their capabilities in the sport. These games invigorate the players to get accustomed to a certain set of rules while looking for ways to improve and implement different strategies through consistent practice. It is false that the game of skill does not have a chance component, in fact to a certain extent they do. However, it is the individual skills that determine the success rate. Example: Chess, Carrom, Rummy, Teen Patti, Horse Racing and Fantasy Sports are said to be games of Skill.
A “game of chance” however is determined mainly by a random factor of any type. In games of chance, the usage of skill is present but a higher level of chance determines success. Games like playing cards, roulette, rolling a dice, or even picking a numbered ball are reflected upon as chance-based games. It is pertinent to note that players here do not have control over the outcome of the result. Example: Blackjack, Roulette.
All games, naturally, consist of elements of chance and elements of skill. To determine whether any game is a ‘game of chance’ what essentially needs to be arrived at is that, the element of chance predominates over the element of skill5. In a nutshell, a game of chance is defined to be a game in which chance rather than skill determines the outcome6.
There is some major differentiation between any game of skill and a game of chance. To begin with, the primary difference lies in “who” the said player is playing against. If the supposed player is playing against the house (in simpler words the casino itself is called the house), the player is involved in a game of chance. However, on the flip side when the player is pitted against other similar players, it is looked upon to be a game of skill. Moreover, if any individual can successfully, without any doubt prove that a particular game involves the use of skills like statistics, math and strategies majorly, along with a slight factor of luck or chance, the game would be categorized as a game of skill.
There are currently a bunch of games like Ludo, online rummy that are currently trying their level best to persuade in order to get it classified as a game of skill. It can be conveniently stated that the debate over which set of games are based on skills and which ones are not will go on for quite a time with no end date till a proper method of resolving this issue is thought of.
The good part about this complicated situation is that there are various judicial dictums, especially by the Hon’ble Supreme Court of India on matters relating to classifying particular groups as games of skills and games of luck.
There have been numerous cases filed by groups and gaming organizations to classify them as a game of skill to get legal status and never be termed as illegal. However, when the Hon’ble Courts of India are posed with difficult questions, an answer to those follows with eloquent explanation to their interpretation of that particular subject matter. The Courts have, from time to time, weighed skill and chance carefully in each game to determine the predominance of one over the other and decide whether betting in such games would amount to gambling.
5 Para 24 of Shri K.L. Mansukhani v. Senior Inspector of Police & Ors., 1999 SCC OnLine Bom 843
6 Black’s Law Dictionary, 6th Edition (Page 679)
It has been held by the Hon’ble Supreme Court that whether a game is considered to be one of chance or skill is a question of fact to be decided on the facts and circumstances of each case7. The Supreme Court clearly drew a line between games of skill and games of chance and held that games involving a certain skill level wouldn’t be considered gambling. The Court also gave the definition of skill games as, “The competitions where success depends on a substantial degree of skill are not ‘gambling’ and despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of mere skill”; Thus, the games of skills were exempted from the ambit of gambling and are not prohibited8.
The Supreme Court Interpreted the difference between the three-card game ‘Teen Patti’ and ‘Rummy’ and held that while the former was a game of pure chance, the latter required a certain degree of skill because one has to memorize the fall of the cards and the building up of Rummy requires considerable skill in determining which cards to hold and which one to discard. Therefore, it was held by the Apex Court that the game of rummy has a greater prevalence to qualify as a game of skill9. The Hon’ble Supreme Court while dealing with the issue of horse racing, held that horse racing is neither to be considered as ‘gambling’ or ‘gaming’, but a game of ‘mere skill’ and that the expression ‘mere skill’ would mean a substantial degree or prevalence of skill. This was interpreted so on the reasoning that horse-racing is based on the inherent capacity of the animal, the competence and proficiency of the jockey riding it, the form and physical fitness of the horse, the weight it can carry and the distance of the race which are all equitable facts capable of being assessed or studied by race-goers. Thus, it was held that the prediction of the result of the race is the result of knowledge, study and observation viz. skills and not a mere chance10.
As stated earlier, gambling by and large has three elements: ‘Consideration’, ‘Risk’ and ‘Prize’. The Public Gambling Act, 1867, prohibits running or being in charge of a public gambling house and provides that games of mere skill are exempt from the application of the Act. Additionally, this Act prohibits visiting gambling houses. Gambling is not considered an offense until and unless it takes place in a public place or a common gaming house. Simply the occasional convening of mates and acquaintances to play cards and perhaps for money does not make it a common gaming house.
7 Manoranjithan Manamyil Mandram v. State of Tamil Nadu (2005)
8 RMD Chamarbaugwala vs. Union of India case, 1957
9 State of Andhra Pradesh v. K. Satyanarayana (1968)
10 Dr. K.R. Lakshmanan v. State of Tamil Nadu (1996)
With reference to the game of Poker, the Hon’ble High Court of Karnataka11 observed that Poker is a game of skill and that no license is required for conducting a game of skills, including Poker, in club premises meant for recreational purposes, as long as they are conducted in accordance with the law enacted by the State. It further held that since Poker is not included within the head of gambling activities12 under West Bengal Gambling and Prize Competitions Act, 1957, the officers of the law cannot interfere with such games.
However, the Hon’ble Gujarat High Court had a contrary view while following the Supreme Court’s decision in K. Satyanarayana’s case, and has held that Poker is a “game of chance”13. However, an appeal to this decision is pending in the same court.
To date, views are exchanged whether or not Poker is a skill-based game or not and in many cases online Poker is considered to be illegal. Various service providers and online sites have even modified the game in order to make it a more skilled game. To back this, certain sites have eliminated the luck of draw element from the game and for this reason, the skills of the players have become predominant in determining the winners of the game.
While dealing with this issue of whether the fantasy sports like Dream 11 qualifies as a game of chance or a game of skill, various High Courts, after careful analysis of different facts and circumstances, have held it to be a game of skill.
The Hon’ble Punjab and Haryana High Court14, has held that games such as horse, boat and foot racing, football, baseball, chess, golf are games of skill and significant judgment and not a game of chance. However, in a fantasy game, a participant user who builds a virtual team would require considerate skill, knowledge, judgment and discretion, as the participant has to estimate the relative value of each athlete/sportsperson as against all athlete/sportsperson available for selection
11 Indian Poker Association (IPA) v. State of Karnataka (2013)
12 West Bengal Gambling and Prize Competitions Act, 1957
13 Dominance Games Pvt. Ltd. v. State of Gujarat (2017)
14 Varun Gumber v. Union Territory of Chandigarh (2017)
India as a country has definitely come a long way from outdated laws to systematic state governed laws but only in a few states. With a meteoric rise in the field of technology and online games now gradually taking over and most certainly preferred over physical ones, a set of laws and reforms can be formulated at the Central Level which shall lead to a rise in an emerging market like India. From a gambler’s point of view, with a set of rules and regulations in place, one does not have to worry about the laws they may be breaking.
In a country like India where the gambling market has become such a widespread industry, people’s inherent love for gambling is seamlessly evident. The involvement of such a large number of population in this growing industry and the prevalent flouting of this law makes it onerous for the government to limit the involvement in this industry. In 2016, The Supreme Court of India mandated the Law Commission of India (LCI) to deduce the best way to deal with illegal gambling. The LCI held that the government must draft new laws, or update the existing ones to regulate gambling, since it is not possible to prevent these activities completely and eﬀectively regulating them remains the only viable option15. Thus, the LCI has suggested legalizing Sports Betting with strict regulations.
One argument relates to the amount of money involved in gambling. Looking at the annual spending which amounts to billions of US dollars, if this is taxed efficiently it could make sizable economic benefits to the government in terms of revenue generation. For example, the legal online gaming industry in India (legal games such as online poker, online rummy, and fantasy sports) has grown significantly with increased digitization and high internet penetration. A 2017 study suggested that the Indian online gaming industry will be worth USD one billion dollars by 2021. If all areas of gambling were to be legalized like this, it could generate substantial amounts of funds for the central and the state governments.
A second argument suggests that if gambling were to be legalized, it would curb the use of illegal black money, which is being used or laundered to fund terrorism.
15 LCI Report (2016)
A complete ban on sports betting wouldn’t help as it would push the betting towards the black market. The report also stated that the profits earned through such activities escape the purview of taxation which increases the use of black money in the market16.
A third argument suggests that legalizing gambling would create potential job/employment opportunities and would attract tourism. As seen in the legally operating casinos in Goa which have brought about immense tourist attention and therefore contributed in financial gains and employment creation.
Another argument in favor of legalizing/regulating gambling is that the percent of population which is adversely affected by gambling is less than 1 %. For the rest it remains a fun leisure activity with a potential chance to earn money. Why deny the majority a pleasurable pastime just to be wary of some problem gamblers.
Whenever we think of the negative effects of gambling, things like financial worries, addiction and other serious issues spring to mind. The putative argument which is the first to be put forward is the boundless financial losses which leads to large debts and even bankruptcy. The person involved not only puts himself in a defenseless state but his whole family. This leads to depression and which leads to potential problematic and addictive behaviors. This culminates in increased substance use. The public health argument is that there is a potent relationship between substance consumption and subsequent problems.
The more the people indulge into gambling, the greater is the possibility for them to develop problems. Thus, if gambling were to be legalized, inevitably more people would indulge into gambling and more is likely-hood for them to spend their time and energy into it and develop addictive problems subsequently becoming problem gamblers. These developing problems will follow greater gambling-related harms to the individuals, their families and to the society. Research from across the world has shown that gambling and its related problems undesirably affects the most vulnerable in society such as the ethnic minorities, the socially and economically disadvantaged, the elderly and the young minds. Studies also show that the ratio of problem gamblers to the population engaged in it is considerably higher than the high-income countries. Hence if legalized the rates of problem-gambling would significantly increase.
16 Law Commission Report No.276
Another argument proposes that a person who bore a financial loss is likely to indulge into criminal activities. Addictive gamblers are in need of money constantly and indulge into criminal activities like fraud and embezzlement to meet their gambling demands. Hence the money gained through these activities only expedites the involvement in gambling. This cycle continues till the opportunity of committing the crime remains and the person doesn’t get caught.
Though the arguments are pretty balanced for both the sides, the government should behold the pros and cons before considering such a huge policy change. Even though there are a lot of steps proposed showing the path to effective legislation, there are many concerns which still remain unanswered. On the face of it many theories seem apt but there is no guarantee or unequivocal evidence that this is the way through. In the end there is no one argument which edges out the decision in its favor so as more research work is required to deduce a conclusion.
Required licenses, permits, authorizations, or other approvals for the lawful offer of the Relevant Product to persons located in a particular area –
The need for licenses is dependent on the type of product and the medium through which it is offered. In India, certain Relevant Products require licenses which are mentioned below. We have covered the key ones only.
For the state of Goa, Daman, Diu, and Sikkim, a license is required and the same is available for providing casino products in five-star hotels under the Goa Act and Sikkim Act, respectively. For offshore casino products, a license is required and is available under the Goa Act.
- Skill games, poker, and fantasy betting:
As mentioned before, games of skill are excluded under most Gaming Enactments. India does not have a licensing regime for skill-based games at the federal level. However, a license is required in the state of Nagaland, Meghalaya, and Sikkim to provide skill games online including but not limited to poker, rummy, and virtual sports fantasy league games.
Though there can be different formats in which bingo is played, each of these formats would fall either in the category of lotteries or games of chance. In the case of the latter, they would be barred under most Gaming Laws. However, a license will be required for operating in the states of Sikkim and Meghalaya.
Most Indian states prohibit betting on games of chance.
- Sports/Horse betting:
Betting on physical horse races is subject to the conditions respective race clubs may impose and also subject to the regulations that the club itself is operating under as per the terms of the license issued by the respective state government. Apart from a few states, betting on horse races online may be possible without a license by relying on the Lakshmanan Case. This is also subject to the terms, conditions, and permissions applicable vis-à-vis the domestic horse races in specific turf clubs. Creative structures can be explored to allow operators to provide these games.
Lotteries are state-organized in India. The Lottery laws require state governments to nominate a corporate or an individual through an agreement to function as the “distributors or selling agents”. The said individual or corporate sells lotteries for the organizing states. Only state-authorized persons can sell lotteries.
- Social Gaming:
No license is required for engaging in these games in the majority of the states of India.
The Indian gambling market is estimated to be worth US$60 billion per year, of which about half is illegally bet17. According to the Indian National Newspaper, the chief executive officer for the International Cricket Council (ICC) said he was in favor of legalizing betting in sports. He believes the illegal funds profited are through underground bookies that used the money to fund terrorism and drugs. Many Indian professionals, as well as online forums, have urged the government to introduce legal but regulated gambling in India to bring the gambling economy out of the grip of mafia and underground dons.Yet The gambling laws in India continue to be confusing and unclear. The judiciary time again through various decided case laws have tried to clear the air and provide clarity on the subject. However, the recent technological changes have thrown open the sector and have allowed the masses to participate in activities which lie in the border line of gambling laws in India. The following are a few acts which regulate gambling in India.
The Public Gambling Act of 1867 – This national law bans running or being in charge of public gambling establishments.
17 Thompson, James (27 October 2009). “Betfair and William Hill target India”
The Prize Competition Act of 1955 – The Prize Competition Act was passed by Parliament in 1955 to restrict gambling activities that awarded prizes as winnings. According to the Prize Competition Act, any prize competition where a prize is offered on solving a puzzle, number, alphabet, crossword, missing word, or picture prize competitions, where the winnings more than 1,000 Rupees shall be banned.
The Information Technology Act of 2000 – This law regulates cyber activities in India and does not include any information about gambling or betting”. Thus, this document was left for interpretation by the Courts, but they have refused to consider the matter.
Whereas there are various legislations in India, even every state has its own legislation for gambling as legal and regulated in the most appropriate ways. There is a need for a section or portion which would provide which type of gambling is legal and which is not. Apart from this, there is a need for central laws for online Gambling, a few States like Goa, Sikkim, and Nagaland are the only states that permit online gambling. Also, such a type of thing showed that there are no possible ways to stop or curb.
The Government, being a welfare State, acts in a manner to promote the economic and social well-being of its citizens, and therefore, it is necessary for the State to protect the sensitive sections of the society. About gambling, they can at least form a committee to survey the need for gambling and improvisation on the current legislation based on that survey. Thus, there is a need for aggressiveness to be taken from the side of the executives as well as the parliament to provide such norms which would codify the system of gambling in India.
By – Ritabh Singh | Government Law College, Mumbai