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    Legal Position of Online Gambling in India- All You Need to Know

    This Article on “Legal Position of Online Gambling in India- All You Need to Know” is written by Manali Agrawal, a BA.LLB.(Hons.) student of Jagran Lakecity Univeristy, Bhopal.

    As the society changes, the law cannot remain immutable

    ABSTRACT:

    Since the last few decades, we have witnessed an astounding advancement in technology. The development of internet has been the most important among them. After its advent, internet has become an intrinsic part of human lives. From communication to shopping to, business to entertainment, we have become reliant on internet. One such development with the advent of internet is online gambling. There are both positive as well as negative impacts of Online Gambling. But the issue of the legality of online gambling in Indian legislation is still a grey area. There is no comprehensive legislation as such which expressly deals with online gambling. Thus the present article deals with the development of the online gambling industry and the issue of risks associated with this and why there is an urgent need to regulate online gambling activities in India.

    INTRODUCTION:

    Gambling has been in practice for a long time in the world, Online gambling has emerged as a great market for entertainment as well as for earning a huge amount of profit as anyone from anywhere can access the internet and gamble online.

    Gambling is defined as ‘the act of risking something of value for a chance to win a prize. Online gambling is defined as Gambling activities carried out via the Internet. Different countries have adopted various measures to regulate online gambling. Some countries have completely banned gambling activities within their territory due to their religious and moral believes while some have permitted it for the sake of revenue generated from the gambling industry. Some countries have decided to regulate online gambling and permitted it in a controlled way. But the status of online gambling in India is still a grey area. There is no central legislation as such whichexpressly deals with online gambling. Thus there is a need to regulate online gambling in India.

    Evolution of Online Gambling

    Online gambling is becoming very popular in the world thus, it becomes important for us to know about how, when, and where it was born and how it developed to such an extent. However, it is very difficult to tell exactly when gambling was started as it is known since time immemorial. The first evidence of gambling is traced back to the Paleolithic period roughly 2.5 million years ago to 10,000 B.C. Famous Hindu scripture, “The Ramayan”, “The Mahabharata” also mention gambling. Gambling is also mentioned in other Hindu Epics like The Rig Veda and The Atharva Veda. Vedas speaks about regulated Gambling. The development of Online gambling starts from the year 1994 in the Caribbean nation of  Barbuda and Antigua where online gambling was regulated for the first time in the world bypassing the Free Trade and Processing Zone Act, 1994. In 1996, InterCasino, the world’s first-ever online casino was launched. In 1998, the first-ever internet poker room was launched. After that Online gambling gained immense popularity and Grew exponentially.

    Reasons for the Development of Online Gambling

    There are many factors responsible for the growth of Online Gambling. Some of them are as follows:

    Availability of the Internet:

    Due to the availability of Internet and Smartphones to a large population, online gambling is now easily accessible to people. People can gamble online anywhere and at any time.

    Source of Entertainment:

    Online gambling has emerged as a popular source of entertainment in today’s era. It creates a perennial and pleasurable adrenaline rush of taking risks which is further intensified when they win the game with the sense of victory.

    Privacy-

    Gambling is considered immoral, pernicious, and undesirable activities in society and gamblers have to face abomination from society many times. In online gambling, gamblers have no fear of being judged by society due to this social stigma as they can gamble online in private. 

    No need to go to Casino:

    Gamblers do not have to go anywhere for gambling as they can gamble online at home, office, or any other place. Also, people need not bear the irritation caused due to lighting and music in casinos.

    Substantial amount of profit:

    The business of conducting online gambling is also proving to be beneficial for the companies providing online gambling services. There is a substantial amount of profit in the online gambling business.

    Lower cost for management

    Online gambling does not require much cost for the administration and management of online gambling sites.

    Less Investment required:

    The establishment of online gambling services requires less investment as compared to the establishment of physical casinos. This induces the companies to enter into this business.

    Risks Associated with Unregulated Online Gambling

    There is a number of problems associated with unregulated online gambling which must be a matter of concern to the governments, gamblers, and other stakeholders. Unregulated online gambling may lead to the following risks-

    Increase in Organized Crime:

    Online gambling may lead to many organized crimes in a society like match-fixing, money laundering, fraud, black marketing, etc. It also increases criminal behavior among gamblers.

    Depression:

    Gamblers may be the prey of depression when they lose the game. It may cause feelings of guilt and concealment which may further induce the thought of suicide among them.

    Debt:

    Once the person indulges in gambling and starts losing, he gets trapped in the vicious circle of debt, poverty, and high expenditure.

    Highly Addictive:

    Once a person indulges in gambling he starts enjoying it and becomes addict to it. It becomes difficult for him to come out of its vicious circle of problem gambling. It causes an adverse impact on the economic, social, and personal life of a gambler.

    Risk of Privacy of Customers: 

    There is always the risk of invasion of privacy of the consumers. The personal and account details of the consumers are vulnerable to the risk of being used to defraud the consumers.

    Illegitimacy of Gambling Sites:

    Due to unregulated online gambling, the legitimacy and authenticity of the gambling sites cannot be checked. They can misuse the consumers’ information entered by them for other wrongful acts.

    Risk of minors indulging in the activity:

    Unregulated online gambling can involve the participation of minors in gambling. Minors can involve in the activities like gambling without the notice of anyone which can ruin their future.

    No Redress to Consumers:

    It is an important risk of an unregulated online gambling market. If in case a consumer gets cheated financially by the companies providing gambling services, there is no legal stage where the consumers file a suit against them if there is no law governing online gambling.

    Game of Skill Vs. Game of Chance

    Indian law classifies gambling games into two categories namely, game of skill and game of chance. Thus, It is important to distinguish between a game of skill and a game of chance because it is the main test to determine whether a game comes under a gambling activity or not and whether it is punishable under the Public Gambling Act or not. The Public Gambling Act of 1867 expressly exempts the games of skills from the ambit of Gambling and thus from criminal prosecution. It says –“Nothing in the foregoing provisions of this Act contained shall be held to apply to any game of mere skill wherever played.”[1]

    K.R. Lakshman v. State of Tamil Nandu

    It implies that if a person is indulged in a game of skill, he shall not be punished as this is permissible under law. Courts in India have also exempted games of skill from the ambit of Gambling activity through various judgments. Supreme Court of India has interpreted the meaning of the terms ‘skill’ and ‘chance’ in the case of; K.R. Lakshman v. State of Tamil Nandu.[2] The relevant excerpt from the judgment is given below-

     “There are few games, if any, which consist purely of chance or skill, and as such a game of chance is one; in which the element of chance predominates over the element of skill; and a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element – “skill” or “chance” – which determines the character of the game. We, therefore, hold that the expression ‘mere skill’ would mean; substantial degree or a preponderance of skill.”

    Game of Rummy

    Supreme Court in the case of State of AP v. K. Satyanarayana [3] held that the 13 card game of Rummy is a game of skill and thus; is not punishable under the law. The Court said-

    “The game of Rummy is not a game entirely of chance like the ‘three-card’ game; mentioned in the Madras case to which we were referred. The ‘three card’ game which goes under different names such as ‘flush’, ‘brag’ etc. is a game of pure chance. Rummy, on the other hand, requires a certain amount of skill because the fall of the cards has to be memorized and the building up of Rummy requires considerable skill in holding and discarding cards. We cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill”

    The Public Gambling Act, 1867

    Gambling activities in India are governed by The Public Gambling Act, 1867 which is a pre-constitutional legislation. It came into force when the words like internet or online gambling were not even known to the public. Gambling houses are prohibited and are punishable with fine and imprisonment.[4] It deals with gambling activities in physical form only and does not mention online gambling. There is no central law as of now to regulate online gambling in India.

    Seventh Schedule of the Constitution of India

    List II of the Seventh Schedule of the Constitution of India empowers the state governments to legislate on matters relating to gambling and betting. Thus, Different states have different provisions regarding the regulation of online gambling in India. Certain states like Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Delhi and Punjab adopted the central legislation under Art. 252 of the Constitution of India in their respective territories while some states have passed their own legislation to allow online gambling.

    Sikkim Online Gaming (Regulation) Act, 2008

    Sikkim and Nagaland are the only states which have regulated online gambling in their territory. Sikkim enacted Sikkim Online Gaming (Regulation) Act, 2008, which allows certain gambling games like poker, bingo, blackjack, roulette, sports betting, etc to be played and operated within its territory after getting a license for the same.

    Regulation of Online Gambling Act, 2016

    Nagaland passed the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Gambling Act, 2016 which exempts “games of skill” from the preview of gambling and thus allows games of skill to be played and operated by obtaining a license on a pan India basis.

    After going through the legal position of Online Gambling in India, it can be concluded that excluding Orissa and Assam; most of the states have exempted “games of skill” from the applicability of their laws prohibiting gambling activities. Further, the states of West Bengal, Nagaland, and Sikkim permit playing certain games like ‘Poker’; both online and offline, subject to a license from the appropriate authorities. . In Goa gambling is permitted only in government permitted places operated as casinos.[5]

    Bombay Wager Act

    Further, the State of Maharashtra has banned Online Gambling under the “Bombay Wager Act”. But, the applicability of these laws is limited only to the territorial limits of the respective state.

    Information Technology Act, 2000

    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. The issue of online gambling in India is not adjudicated in India. Therefore, legislation is needed to govern online gambling activities.

    267th LAW COMMISSION REPORT:

    Law Commission of India in its 276th report titled “Legal Framework: Gambling and Sports Betting including Cricket in India recommended to legalize and regulate betting and gambling in India.  The celebrated platform where spot-fixing and the betting issue came into light was the IPL matches of 2013, after which 2 committees were formed, i.e. Mudgal Committee and Lodha Committee among which Lodha Committee suggested legalizing betting and while considering the same in the case of Board of Cricket Control in India v. Cricket Association of Bihar[6], the Supreme Court made a reference to the Law Commission to examine the issue of legalization of betting.[7]

    Board of Cricket Control in India v. Cricket Association of Bihar

    Law Commission pointed out that with the advent of online gambling, gambling has acquired a global presence and it is now more challenging for countries to curb these activities completely. Gambling and betting have an adverse impact on one’s economic, personal and social life and it is considered an immoral activity in the country therefore, it is not desirable in the present scenario to legalize gambling and betting. But, due to its transnational nature, completely banning gambling activities may not prove to be fruitful as it can still lead to a lot of illegal gambling activities taking place resulting in a boom in the black market. Therefore, regulating gambling activities is the only viable option. Regulating online gambling and betting activities will ensure stoppage on the illegal market and also generate additional revenue for the government. It will also ensure detection of fraud and money laundering etc.

     Law Commission recommends a three-pronged strategy in order to regulate the gambling activities in the country-
    1. Reforming the existing gambling (lottery, horse racing) market,
    2.  Regulating illegal gambling,
    3.  Introducing stringent and overarching regulations.

    Law Commission Recommendations

    1. Parliament can enact law dealing with online gambling since online gambling and betting are offered on media covered under Entry 31 of List I of the Seventh Schedule to the Constitution.
    2. Parliament can enact a model law by exercising its power given under Articles 249 and 252 of the Constitution. State legislatures can also enact laws to regulate online gambling as gambling is state subject under List II of the Seventh Schedule to the Constitution.
    3. Certain Games of Skill can be exempted from the ambit of blanket prohibition on “Gambling”.
    4. Operators should focus on the safety and protection of the players indulged in the games of skill.
    5. Gambling and Betting should be offered only by licensed operators. There should be a limit on the number of transactions a participant can make in a particular period of time. The nature of stakes should be restricted to money with a linkage to PAN card and Aadhaar card, and the betting amount should be prescribed by law, having an upper limit on the amount one can legally stake in a gamble.
    6. Gambling must be classified into two categories- Proper Gambling and Small Gambling based on higher and lower-income groups respectively.
    7. All gambling and betting transactions should be linked to the operator’s as well as the player’s Aadhaar Card/PAN Card to enhance transparency and state supervision.
    8. The law should be enacted in such a way so as to protect the vulnerable section of the society i.e. Minors, Persons below the Poverty Line, subsidy holders of the government, etc.
    9. There should be no objectionable or pornographic content in the advertisements displayed on gambling sites.
    10.  All the gambling and betting platforms should display the information and risks involved in gambling/betting.
    11. There should be cashless transactions between and among the operators and the players.
    12. Any income derived from such activities should be made taxable under the Income Tax Act, 1961, the Goods and Services Tax Act, 2017 and all other relevant laws in force applicable to such activities in India.
    13. The Foreign Exchange Management Act, 1999 and the rules made thereunder as also Foreign Direct Investment Policy should suitably be amended to encourage FDI(Foreign Direct Investment) in Online gaming industry to permit lawful technological collaborations, licensing and brand sharing agreements etc. Stringent laws should be made to regulate FDI and to prevent money laundering at the same time.
    14. The Information Technology (Intermediary Guidelines) Rules, 2011 should be suitably amended to insert the word ‘illegal’ before the word ‘gambling’ so that only that content is barred which is part of illegal gambling and not the licensed gambling.
    15. The “National Sports Development Code of India, 2011” or any other code applicable from time to time should also be amended in order to create an exception for the same as it aims to prevent betting and gambling in sports.
    16. Section 30 of the Indian Contract Act, 1872 which declares wagering agreements void should be amended to exempt transactions that legally take place with licensed gambling operators or casinos, from the ambit of ‘wagering agreements’.
    17. Employees of casinos, minors, internal control requirements for casinos like customer due diligence, maintenance of accounts, audits etc. should be safeguarded. A council should be established to look into prevent ‘problem gambling’ and ‘gambling by minors’.
    18. Match-fixing and sports fraud should be made criminal offences with severe punishments.
    19. Any other law which puts an impediment to bringing into effect the regulating mechanism should be amended.

    Justice D.P. Madon

    The Law Commission concluded the report by quoting Justice D.P. Madon that “as the society changes, the law cannot remain immutable” and that “the law exists to serve the needs of the society which is governed by it.”

    Prohibition of Gambling V. Freedom of Trade and Commerce

    The Public Gambling Act, 1867 prohibits the running of gambling houses, on the other hand, Part III of the Constitution of India under Article 19(1)(g), which is a Fundamental Right,  guarantees  all its citizens to have the Right “to practice any profession, or to carry on any occupation, trade or business.” [8] Similar freedom is granted under Article 301 [9] of the Constitution of India.

    Res Extra Commercium

    The Doctrine of res extra commercium, meaning ‘things beyond commerce’ is used in India to exclude certain activities from the ambit of the Freedom of Trade and Commerce enshrined under Article 19(1)(g) and Article 301 of the Constitution of India.

    State of Bombay v. R.M.D. Chamarbaughwala

    The above states Doctrine was introduced by Chief Justice Das in 1957 in the famous case of State of Bombay v. R.M.D. Chamarbaughwala.[10]In this case, the Supreme Court observed –

    “We find it difficult to persuade ourselves that gambling was ever intended to form any part of this ancient countries’ trade commerce or intercourse to be declared as free under Article 301… the real purpose of Articles 19(1)(g) and 301 could not possibly have been to guarantee; or declare the freedom of gambling. Gambling activities from their very nature and essence are extra commercium though the external forms; formalities and instruments of trade maybe employed; and they are not protected either by Article 19(1)(g) or Article 301 of the Constitution.”

    M.J. Shivani v. State of Karnataka

    Further, in the matter of M.J. Shivani v. State of Karnataka,[11]The Apex court confirmed the Chamarbauga judgment to the extent that freedom of Trade and Commerce is available to games of skill. The Supreme Court However clarified that reasonable restrictions or conditions may be imposed on vedio games based on chance and the constitutional protection under Article 19(1)(g) does not apply to owners of video game parlours.

    R.M.D. Chamarbaugwala v. Union Of India

    Similar view was given in other Supreme Court Judgments like R.M.D. Chamarbaugwala v. Union Of India,[12]; M/s. B.R. Enterprises v. State of U.P. & Ors, [13] K.R.Lakshmanan (Dr.) v. State of Tamil Nadu [14] etc.

    Therefore, through the series of Judgments passed by the Apex Court of India, it is concluded that Gambling business comes under the doctrine of res extra commercium and is not protected under Article 19(1)(g) and Article 301 of the Constitution of India

    Conclusion

    With the advancement in technology and availability of internet services, the activity of online gambling is reaching a new height. While some are in approbation of it due to its advantages like increase in revenue, employment and as a good source of entertainment, others are abhorrent due to its disadvantages like crimes, illegal parallel economy, fear of infringement of privacy, etc. Some people desire its complete prohibition because it is considered immoral. But regardless of all these facts, the demand for online gambling is increasing day by day in the world. Most developed countries of the world have decided to legalize gambling activities so as to earn revenue and to save themselves from the threat of creating an unchecked black market and crimes due to the unregulated gambling industry. Further, there is much scope in the future of online gambling in the world economy. It is especially beneficial to India. Because, it is almost impossible to completely prohibit online gambling in the territory due to the vast nature of the internet and the willingness of the people to indulge in the activity, permitting gambling in a controlled way is the most viable option for India.


    [1] Sec.12, The Public Gambling Act,1867.
    [2] K.R. Lakshman v. State of Tamil Nandu AIR 1996 SC 1153
    [3] State of AP v. K. Satyanarayana AIR 1968 SC 825.
    [4] The Public Gambling Act, 1867
    [5] Rahul Dhote, Legal Position of Online Gaming/Gambling in India, (Feb. 06,2019). https://www.lawyered.in/legal-disrupt/articles/legal-position-online-gaminggambling-india/
    [6] Board of Cricket Control in India v. Cricket Association of Bihar (2014) 7 SCC 383 
    [7] https://www.scconline.com/blog/post/2018/09/05/276th-law-commission-report-on-legal-framework-gambling-and-sports-betting-including-in-cing the gambling ricket-in-india/
    [8] Article 19(1)(g) ,The Constitution Of India 1949
    [9] Freedom of trade, commerce and intercourse Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free
    [10]State of Bombay v. R.M.D. Chamarbaughwala AIR 1957 SC 699
    [11] M.J. Shivani v. State of Karnataka AIR 1995 SC 1770: (1995) 6 SCC 289
    [12] R.M.D. Chamarbaugwala v. Union Of India AIR 1957 SC 628, Supreme Court held that Gambling is not trade but res extra commercium
    [13] M/s. B.R. Enterprises v. State of U.P. & Ors AIR 1999 SC 1867.
    [14] K.R. Lakshmanan (Dr.) v. State of Tamil Nadu AIR 1956 SC 1153.


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