Laws on Sports Betting and its Lack of Regulation

Sports Betting is an activity that involves the prediction of sports results and placing a bet or wager on the outcome. The frequency of wagers placed on sports varies by culture. High amounts of bets are placed on sports like cricket, football, rugby, basketball, auto racing, MMA, hockey and boxing. It is not uncommon for sports betting websites to offer wagers for non-athletic events, like political elections, horse racing and reality show contests. Sports betting can also extend to entertainment events such as the Oscars, the Emmy Awards and the Grammy Awards.     

Sports betting is done by bettors either in legal ways or in illegal ways. The former is done through a bookmaker or sportsbook, the term “book” is referred to the books operated by wage brokers in tracking the bets, debts and payouts. The latter is done through illegitimately run private enterprises. Several legal bookmakers operate online over the internet, typically around selected markets carrying favourable gambling laws and in jurisdictions away from the clients they serve. These bookmakers take bets “up-front”, which means, the bettor must first pay and only then he is allowed to place bets. While such condition is not present with illegal bookies, as they operate anywhere. Illegal wagers create the possibility of debt to the bookie from the bettor and which, therefore, results in several other criminal elements.  

Since there is no uniform law present for sports betting across the worlds, it has resulted in a number is scandals in sports, compromising the integrity of such sports events. It has caused various shameful acts such as point shaving, spot-fixing, match-fixing and poor calls being made from the officials at crucial moments. Due to the lack of effective regulations, it attracts a plethora of illegal activities. Despite most countries banning gambling and betting, it still happens through the internet. Such activities are mostly controlled by the Mafia or huge criminal syndicates. For the ethical and moral values of society, there is an immediate need for regulations and reformed laws.  

Gambling laws in India

Gambling and betting activities in India have prevailed since the ancient Hindu Civilisation. It was a very popular sport of leisure among Kings and the common folk and was frequently been played those days. It is evident from the literary works of such times, like the Ramayana and the Mahabharata, that the passion in such activities has been thereby passed down from centuries and generations.

The Gambling and betting Laws in India have always been a topic of sharp debates. Despite having centralized Acts in place, different states have different laws concerning gambling. By virtue of the Seventh Schedule List II Item 34 of the Constitution of India, the States are empowered to legislate and make policies concerning gambling and betting. Whereas, under the Seventh Schedule List I Item 40, empowers the Union in making laws in relation to lotteries. Therefore, every State is free to enact any laws concerning gambling as per their discretion. So far, most of the States have enacted their gambling laws and whereas, only 13 States have legalized lottery. India with its diversity and 29 States, and their distinct gambling laws, one can only imagine the contrasting gambling laws.  

The perspective of the Government of India towards gambling and betting stays in a grey area. Each state considers the political, social, religious and economic factors while enacting laws around gambling, and in tightening and loosening restrictions. For decades, two schools of thought have been followed: (i) the conservative approach, which opposes the existence of such activities on religious and moral grounds and terms them as harmful addictions, (ii) the economic approach, which favours the existence of such activities in light of the revenue and economic generation from their practice.  

The Public Gambling Act, 1867

This Act was passed during the British Rule. In general, it is the centrepiece legislation of the gambling legislation in India. It is the primary legislative document that makes gambling a ‘grey’ legality in India. This 145-year old law provides the provisions for the operation, functioning and financing of Gambling Houses and also the people visiting them.

The Public Gambling Act explicitly states that “nothing in this Act shall apply to games of mere skill wherever played”, which means, in absence of other laws contrary to them, wagering on games of skill is legal.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”.

Gambling on Games of Skill vs Games of Chance

One of the biggest controversies surrounding the gambling industry is whether a game is a game of skill or chance, and why are some games termed legal while others are not. The line of distinction between games of skill and games of chance can be thin, thereby increases the complexity in categorizing these games.

Games of Skill

A game of skill is determined mainly on the intellectual abilities of the player, rather than luck. In skilled games, players generally win by their experience in that sport.  Such games provide significant benefits to their players as it allows them to explore their mental capabilities in the sport. These games encourage their players to form different strategies and implement them in order to make financial gains. For greater chances of success in these games, it requires regular practice even outside of tournaments.

Games of Chance

A game of chance is determined mainly by the luck of any random player. In such games, the player usually wagers money by selecting any random number and hopes to land on their selected choice. Games of chance include games like roulette, playing cards, dice or picking a numbered ball. Games of chance are intertwined with probability. For example, in regards to games involving two 6-sided dice, the probability of getting the number 7 is the highest probability of any combination which is – 16.67%. However, the probability of getting a 2 or 12 is the lowest being – 2.78%. 

Distinction

There are two main ways by which the Government separates games of skill from games of chance. The first difference being against whom the player is playing. The game is considered one of chance, if the player is playing against the House, as with slots. However, it is considered as a game of skill, if the player is playing against other players. The second difference being the involvement of strategies or mental skills like with the statistics or maths of the game.   

Although sports are considered skill-based, sports betting is considered chance-based. When betting on sports, the player always bets against the house and he has no control over the result of the match. Therefore, it is illegal to bet on sports, where the laws concerning chance-based games are illegal in a country.

Role of Judiciary and Commissions

In general, in order to not attract any restrictions under the gambling laws, these activities are at the mercy of their assessment as a game of skill or a game of chance. Games that involve a preponderance of skill over chance or pure luck are in the clear. Therefore, the Judicial system has a large scope for interpretation on a case-by-case basis on account of varying gambling laws from state to state and the non-advancement of the existing laws.    

In the case, Dr K.R Lakshmanan vs. State of Tamil Nadu (AIR 1996 SC 1153), popularly known as the Horse Racing case, the Hon’ble Supreme Court of India regarded horse racing as a game of skill and observed as follows: “Betting on horse racing or athletic contests involves the assessment of a contestant’s physical capacity and the use of other evaluative skills. Horse racing is an organized institution. There is nothing illegal in horse racing: it is a Lawful sport. We have no hesitation in reaching the conclusion that the horse-racing is a sport which primarily depends on the special ability acquired by training. It is the speed and stamina of the horse, acquired by training, which matters. Jockeys are experts in the art of riding. Between two equally fast horses, a better-trained jockey can touch the winning-post. In view of the discussion and the authorities referred to by us, we hold that the horse-racing is a game where the winning depends substantially and preponderantly on skill.”

In the case of State of Andhra Pradesh vs. K. Satya Narayana (AIR 1968 SC 825), popularly known as the Rummy case, the Hon’ble Supreme Court held that “The “three cards” game which goes under different names such as “flush”, “brag” etc., is a game of pure chance. Rummy, on the other hand, is mainly and preponderantly a game of skill.”

The High Court of Punjab and Haryana in a landmark judgement in 2017, in the case of Varun Gumber v. Union Territory of Chandigarh and Ors.,popularly known as the Dream 11 Case, held Fantasy Sports to be a game of skill. In the case, Chandresh Sankhla v. State of Rajasthan, the High Court of Rajasthan and the Supreme Court dismissed the appeals and relied on the Dream 11 case and held fantasy sports as a game of skill. Similarly, in the case, Gurdeep Singh Sachar v. Union of India, the High Court of Bombay took a similar view of the Dream 11 case. However, in March 2020, the Supreme Court stayed the order of the High Court of Bombay and the debate is once again thrown open.     

These judicial cases have given the framework that what should be the object of the regulation of betting and gambling laws in India. Propelled by the proceeding of the Supreme Court in the case of BCCI v. Cricket Association of Bihar (AIR 1993 SCC 892), in 2018, the Law Commission of India, headed by Dr Justice B.S. Chauhan, former Judge Supreme Court of India, said in a seminar, “Development of gambling industry in India requires a three-pronged strategy reforming the existing gambling (lottery, horse racing) market and legalizing the present illegal market (introducing new products) while introducing stringent and overarching regulations.” The Law Commission also provided 21 recommendations which include the amendments to be made to relevant clauses of various statutes, like the Information Technology Intermediaries Rules 2011, the Indian Contract Act 1872, the Foreign Exchange Management Act 1999, the Foreign Direct Investment Policy, the National Sports Development Code of India 2011, etc.

After the shameful match-fixing scandals which were involved in the IPL in 2013, the Supreme Court appointed the Lodha Commission to look into the possibilities of legalizing cricket betting. In July 2015, 36 people were acquitted by the Patiala High Court accused in the Spot-fixing scandal. Judge Neena Badal adjudged that betting on cricket matches is not illegal and thus no action can be taken against persons for betting on cricket matches.

In August 2017, an appeal against the discharge order was filed by the Delhi Police. Also in 2016, a Division Bench of the Supreme Court in an order passed by it, recommended: “recommendation of legalizing betting involves the enactment of a law that may be examined by the Law Commission and the Government for such action that it deems fit”.

In June 2018, the Law Commission put forward a recommendation to the Government favouring the legalization of cricket betting in India but under stringent supervision, to curb money laundering. The Commission believed that it would be an impossible task for the authorities to completely ban cricket betting in India so therefore they could regulate such activities under stringent laws. The Commission also suggested that by virtue of Article 249 and 252 of the Constitution of India, the Government has the authority to formulate laws in order to regulate gambling. In the event where if such legislation is made under Article 252, even non-consenting states shall be free to adopt them, which would rather help the states work around years of red tape. 

Other Legislations:

  • Section 30 of the Indian Contract Act 1872, makes any agreement by way of wager void and unenforceable, except agreements regarding betting on horse racing.
  • The relevant regulations and the Foreign Direct Investment Policy under the Foreign Exchange Management Act 1999, generally prohibits the remittance of income from sweepstakes, racing, lotteries and also investments in gambling and betting businesses.
  •  Under the Payment & Settlement System Act 2007, the Reserve Bank of India has been solely authorised to control and draft policies for all forms of electronic payment frameworks and any payment processor operating in India is compulsorily required to comply with such policies.
  • All entities carrying on businesses offering a game of chance for cash including casinos are expressly required to comply with and to adhere to the Prevention of Money Laundering Act 2002.
  • The regulations under the Information Technology Act 2000 prohibits operators and internet service providers etc. from being platforms for any content which promotes gambling or betting.
  • Under the Cable Television Network Rules 1994, advertisements of gambling activities are prohibited.
  • Under Section 115BB and 194b of the Income Tax Act 1961, income and revenues from races, betting, winning from lotteries etc. is taxable.  

Reasons to regulate sports betting:

Are match-fixing and money laundering the only reasons for the need for regulations?

Of course, the fight against match-fixing, money laundering and other unlawful activities is a vital element that regulations seek to curb but there are several other elements as well that regulations seek to achieve.

  • Protection of the young

Minors do not completely understand how to control their behaviour, with regard to things with the potential for entertainment, risk and excitement. Therefore, most countries that regulate gambling activities put in place restrictions on the age after which betting can take place. To curb underage gambling, certain obligations must be placed on gambling operators. Those obligations include:

  • Criminal sanctions to be imposed on operators gambling with minors.
  • The age of persons must be checked on the premises and valid identifications must be taken from those who register online.
  • Operators must ensure that they separate gambling areas from the areas available to children or the general public.
  • Prohibition on advertisements of materials that would potentially attract minors or young people to gambling.
  • Any profits derived from gambling with minors must be forfeited and should be returned.
  • Protection from addiction

Statistically speaking, looking across the globe, we find that a small portion of people, including adults, aren’t able to control their gambling habits. Societies that seek to regulate gambling, place obligations on operators to deal with the problem of addiction. The solutions include the following:

  • The operators must advertise the existence of help to those persons who may feel that their gambling habit is getting out of hand.
  • A compulsory provision of self-exclusion must be introduced, where the gambler can himself inform the operator that he be barred from the premises.
  • Controlling the availability of intoxications in gambling premises.
  • To make sure that only mentally and physically abled people are allowed to gamble and genuine people are to be permitted to offer those services.

Possible Approaches to Regulation for India

Across the globe, there is no specific rule or law for sports gambling and betting. Different countries have dealt with this matter distinctively based on the public interest, socio-economic needs, religious beliefs, political interests, practicality and logic. However, with the persistent advancement of technology where communication and travelling have become laughably easy, with the constant need for entertainment and also the fact that a large portion of the Indian population is under the age of 25, therefore, it is rational to believe that regulations in sports betting and commercial gambling in India would be amenable for many groups.

It would perfectly make sense to legalize gaming, it is just a reasonable action to be done from every perspective or nevertheless at least initiate dialogue on the issue, Indian states could look up at the operational structures of regulatory bodies, both in the US and the UK. For example, the Nevada Authority is probably the most popular and successful just because of the scope, duration and scale of the Vegas strip.  

The Government in India would do well in examining and understanding the history and evolution of the system of sports betting and gaming regulations in the United States, as it resembles the scope and structure of the Indian system. It shall include a complete study of the mistakes made, the practicalities, the approaches adopted and the logistics needed.

From a practical perspective, the betting and gaming regulations in India must make sense, both as a revenue generation model and must prevent illegal activities like corruption, money laundering and potentially the money later being used for financing criminal activities. A cogent plan must be placed to curb the spread of illegal; betting, spot-fixing, sporting fraud and other unlawful activities. However, pretending that such unlawful activities do not happen or believing that these activities are “morally wrong”, therefore the public will not allow them, would worsen the situation. In a country like India, unless there is a strong regulatory body administering the system, sports betting shall continue to be controlled by powerful illegal betting syndicates or the mafia with direct connections to organised crime.

In conclusion, India could consider the following points:

  • A central betting administration identical to the one in Nevada or the United Kingdom Gambling Commission.
  • A thorough investigation and the backgrounds of the licensees and their key operators must be checked.
  • A strict code of procedure and practice should be introduced concerning the operators.
  • Prohibition of express solicitation and advertising of bets.
  • Limitation of age for placing bets.
  • Tie-ups with sports federations to facilitate investigations and for setting up early warning systems.
  • Independent agencies must regularly audit the accounts of operators.
  • Strict monetary and penal punishments must be imposed.

Despite the Government is inclined towards the regulation of sports betting, still, all the stakeholders including the sports federations, betting operators, players and the State governments must be consulted to draw up a detailed report. The consultation process would evaluate the possibilities of social impact, financial revenue, licensing mechanism amongst other issues. After addressing all the relevant issues and once a detailed report is available to the Government, they would be in a better position in formulating regulations. 

The year 2020: Emerging a movement for a regulatory body and a unified Betting and Gaming Code

2020 has been a year filled with unprecedented challenges for the entire world. The arrival of the pandemic, health emergencies and complete lockdowns, the cancellation of many public events and sports being conducted within the invisible shield of bio-bubbles. In these situations, the online gaming industry came to the rescue of the confined population. During COVID19, the gaming industry is listed among the top 5 booming sectors. The emergence of movement and cries for attention for the betting and gaming laws is evident from these reported facts:

  • According to Craig Chapple, a mobile insights strategist in Sensor Tower, there is an enormous surge due to the global pandemic and lockdown in the mobile gaming market as to grew by 26% to $79.6 billion last year.
  • MSI and Asus have announced massive growth in gaming laptop sales in 2020.
  • There has also been a spike in gaming time, with more users move from free apps to paid apps, which involve real money gaming that allows players to compete for cash prizes. The number of fantasy players increased by 7 times on Mobile Premier League (MPL) during the IPL 2020.
  • The High Court of Madras in D. Siluvai Venancein July 2020, highlighted that “A comprehensive regulatory framework by a regulatory body is necessary to regulate the online sports and to curb any illegal activities as well. In fact, such regulation of online sports would encourage investment in the sector, which could lead to technological advancements as well as generation of revenue and employment” …” and further stated that “This Court is not against the virtual games, but, the anguish of this Court is that there should be a regulatory body to monitor and regulate the legal gaming activities, be it in the real world or the virtual world…”
  • In C Gopal v. State of Karnataka and ors, the Karnataka State Government’s action in July 2020 of approving the Bangalore Turf Club (BTC) to conduct online betting, is questioned. 
  • In September 2020, the State of Andhra Pradesh passed a bill to amend the State Law, and the Andhra Pradesh cabinet approved a proposal to amend Andhra Pradesh Gaming Act, 1974, to ban online games such as rummy and poker that involve money transactions. Shortly after in November 2020, the State of Tamil Nadu banned online gaming by passing the Tamil Nadu Gaming and Police Laws (Amendment) Ordinance, 2020 and included Section 3A, which states that “No person shall wager or bet in cyberspace using computers, computer system, computer network, computer resource, any communication device or any other instrument of gaming by playing rummy, poker or any other game.”
  • With Effect from 15th December 2020 under advisory from the Ministry of Information and Broadcasting, the Advertising Standards Council of India issued guidelines for all broadcasters concerning advertisements of online gaming, fantasy sports, etc., to correctly convey the risks of such activities in conformity with the advertising codes under the Cable Television Network Act and the Consumer protection act 2019 and not to advertise any activities prohibited by law.

Conclusion

There has always been a sharp debate over the subject of Gambling and Betting Laws in India. The authority of legislation of these laws being in the State List, each state enacts its laws around gambling and tightens or loosens restrictions based on the factors – social, political, religious and economic. For decades, two schools of thought have been followed: (i) the conservative approach, which opposes the existence of such activities on religious and moral grounds and terms them as harmful addictions, (ii) the economic approach, which favours the existence of such activities in light of the revenue and economic generation from their practice.  

Universally there is a dual approach between the conservative and the supporters of regulating the betting and gaming industry. However, the ever-growing “Grey” area needs to be tackled by updated and improvised laws and regulations.

With the absence of evolved regulations under the Gambling and Betting head, expressly with technology and the online interface, there is a flagrant and striking overlap across the categories scrambling under the concepts of gambling, betting, game of chance, game of skill, wagering, real money gaming, esports etc. Thereby, these ambiguities to be conveniently used as and when required to be passed off as legitimate and benefits derived from exemptions and restrictions under existing laws on a case by case and ad hoc basis.

India could lose billions and billions of taxable money, an estimated 12000-20000 crores annually, in the absence of gambling and betting regulations. In the present year, further propelled by the pandemic and lockdown year of 2020, India is forecasting a $1 billion+ market for online gaming. Therefore, the world and India is keeping a close watch on the International wave massively intending towards the need for regulating gaming and betting activities. 

Author: Manish Jain from Ramaiah Institute of Legal Studies, Bangalore.

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