LEGALITY OF ONLINE GAMBLING IN INDIA

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Introduction

Gambling is a game that involves an act of predicting an outcome of an event based on Chance and no or little skill and includes a benefit to the player usually monetary and this act when done through online is known as “Online Gambling” . Gambling in India is an age old practice with evidences tracing its roots back to 1700 BC and 1100 BC in The Rig Vedas.

Gambling has become a very popular leisure activity and a great pastime among the people, it is often organized in 5 star Hotels, Casinos, Social Gatherings, etc.  However along with the passage of time as people started spending more time inside their homes with electronic devices and Smartphones and Internet access being readily available, people were no longer interested in meeting one another and therefore with time the face of gambling have also changed in the Society.

With the onset of the pandemic, people all around the country were forced to stay inside their home thereby increasing the amount of Internet users exponentially, with Internet being the only source connecting people and a source of leisure, apparently there was a great surge in the market for Online Gambling.

Large numbers of people found it as a source of relaxation and further with large number of people losing their jobs, it turned out to be a source and for some the only source of Income.

The People In India are deeply moved by the moral obligations and the prevailing customs which forces them to believe that Gambling can cause a great degree of damage in a person’s personality making him more vulnerable to the evils of the society as people often tend to lose their self-regulation and become addicted which finally leads to loss in all social relations and all of the accumulated funds.

Gambling comes under the purview of wagering contracts, as defined under section 30 of the Indian Contract, According to which a promise to give money or other benefits upon the happening or not happening of a mutual event where both the parties have equal chances of winning or losing is known as a wagering Contract, However according to the act wagering Contracts are considered to be void. Therefore it must be noted that unless given in any legislation no one can move legally against a person if at all any default as per the terms have been done by any of the party, however this is not applicable in the case of Horse races[1].

Psychological Distress

A major reasoning why many countries have decided to ban Gambling in every form is due to the presence of a risk factor of Youth being addicted to it. An early addiction will result in early pathological Gambling hence disturbing the balance in the society; this might further lead to alcohol and drug abuse in the early stages. While considering the Situation of Gambling In India In a survey conducted on college going students it was found that only 19.1% of the students were involved in Gambling whereas only 7.4% of the students were involved in Problem Gambling however it also revealed the pertaining risk of greater academic failures, higher substance use, higher psychological distress scores, higher suicidal tendency and higher ADHD symptom scores[2].

Legality of Such an Act

The seventh Schedule of the Indian Constitution defines three sets of lists namely the Union List, the Sate List and the concurrent list which helps to identify the distribution of powers between the Centre and the State, Herein it is specified that all activities regarding Gambling and Betting are under the powers of the state and thus the State has the powers to create or amend laws in this regard.

The Public Gambling Act 1867 was enacted as a central legislation curbing the acts of Betting and Gambling. States had the liberty to choose if they preferred to choose to continue following the central legislation or if a separate act had to be enacted.

States In India that still follow the Public Gaming Act include Andaman Nicobar, Arunachal Pradesh, Chandigarh, Dadra and Nagar Haveli, Haryana, Himachal Pradesh, Lakshadweep, Punjab, Madhya Pradesh, Chhattisgarh, Manipur, Mizoram, Tripura and Uttarakhand

According to the Public gambling act it categorized the games into two categories one that requires skills and the other based on chance, in a game of skill the use of skill is involved more than chance whereas in a game of chance, the chance factor has greater gravity.

However Horse races are exempted from game of chance after the decision of the Supreme Court in K R Lakshman vs. State of Maharashtra[3] that Section 49A of the Police Act and Section 4 of the Gaming Act do not apply to wagering or betting in the club premises and on the horse-races conducted within the enclosure of the club and the sections thereby mentioned in the Gambling act are applicable to the bucket-shops run in the city streets or bazaars purely for gambling purposes.

However considering the fact that the law was enacted about 150 years ago It thereby did not specify anything about online Gambling.

The transition to Online Form

The Information Technology Act[4] is a central legislation that regulates transactions carried out by means of electronic data interchange and other means of electronic communication, commonly referred to as ―electronic commerce. However Gambling is not mentioned in any of the sections of the act and nor has any cases relied upon the IT Act for a remedy mainly due to the fact that the IT act being a central legislation and the subject of Gambling as one related to the state.

The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017— Updated On 24-07-2019 further prohibits investment of a person resident outside India unless stated in the act of Lottery, Online Lottery, Gambling and betting including casinos

According to section 115BB of the Income Tax Act of 1961, tax is levied on a person who earns an income by means of any betting or gambling.

The Sikkim government was among the first one to enact a law pertaining to online Gambling: the Sikkim Online Gaming (Regulation) Act[5]. The act was predominantly enacted to earn revenue by the state through such means. The act legalizes Online gambling within the state whether, it involves an element of skill or Chance solely through websites and not organized for any person at a public place, It legalized multitude of games such as Poker, Roulette, Blackjack or any game played with cards, dice or by means of any machine for money or its worth.

Subsequently The Nagaland prohibition of gambling and promotion and regulation of Online Games of Skills Act was enacted which held that playing games of skills either by betting on Games of skills through online or through other mediums for any monetary benefit is acceptable given that it is operated from any territory where game of skill is not considered as Gambling[6].

Chess, Sudoku, Quiz, Binary Options, Bridge, Poker, Rummy, Nap, Spades, Auction, Solitaire, Virtual Golf, Virtual racing games including virtual horse racing, virtual car racing etc., Virtual, Sports including virtual Soccer, virtual Cricket, virtual Archery, virtual, snooker/bridge/pool, Virtual Fighting, Virtue wrestling, Virtue boxing, Virtue combat games, Virtual adventures games, Virtual mystery, and detective games, Virtual stock/monopoly games, Virtual team selection games, Virtual sport fantasy league games Included games that were deemed as legal

According to the Telangana Gaming Act, 1974, it held that any person who either keeps and operates or permits any common gaming houses or conducting of online gaming for money or by wagering or betting except in case of a horse is punishable[7].

In Tamil Nadu it is stated that No person shall wager or bet in cyberspace using computers, computer systems, computer network, computer resource, any communication device or any other instrument of gaming by playing Rummy, Poker or any other game or facilitate or organize any such wager or bet in cyberspace. Moreover it was particularly stated in Section 11 of the act such restrictions shall also be applied in the case of games of skills[8].

However the Madras High Court on 3rd of August 2021 struck down the amendment of 2021[9] and stated that as far as gambling is considered it only applies to wagering on games of mere chance without an interference of skills. Moreover from a judgment of the Supreme Court in 1968 it was stated that Rummy was a game of skill, unlike three cards which was predominantly a game of chance. However the Government was not satisfied with the decision of the High Court and has stated to appeal against the order in the Supreme Court.

Rise of Fantasy Sports

Online forms of gambling include online poker, Casinos, Sports Betting on sports, Bingo, etc. However there has been a big impact in the online gaming environment with the introduction of fantasy sports. Fantasy sports have had a huge boom in the recent years with the coming in of Companies such as Dream 11, MPL, Cricplay, etc.

A fantasy sports involves a person to create a team of players based on the game opted for and compete with another team based on the real performance of the players in matches either for free or for monetary benefits. Fantasy sports include wide range of sports such as Cricket, Football, Basketball, Volleyball, Hockey, etc.

However considering the fact whether these apps consists of an element of gambling and if it considered legal, Based on the decision in the case of State Of Andhra Pradesh vs. K.Satyanarayana & Ors, 1967[10] it was held that though in games such as Rummy there is an element of chance involved however it is predominantly based on skills. Further the Rajasthan High Court in the year 2020 in the case of Chandresh Sankhla vs. The State Of Rajasthan[11], It was held that Fantasy sports involved an element of skill and rational decision making based on the knowledge of the game and performance of each individual players thereby the element of skill predominates that of chance and hence declared that the company was not involved in Gambling.

Lotteries Also has been prevailing in the society for a long period of time now, it provide the users a chance to win prizes based on the lots drawn, In the Indian context Lotteries however are not included in the ambit of Gambling and therefore is not included in the Public Gaming Act, 1867. The Lotteries Act 1997[12] was enacted to ensure a Systematic process of Lottery; Lotteries are however legalized only in a few states of the country, these States include Assam, Arunachal Pradesh, Goa, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Punjab, Sikkim and West Bengal and are not legal in the other 16 states.

It is not legal to for a private individual or a company to host a lottery and can only be held by the State also Advertising for any lottery other than that provided by the State is illegal. Considering online lotteries held by International Companies it is Evident by means of Section 4 of the Lotteries Act that private lotteries are considered illegal in India, therefore any amount that has been earned by a person through Lottery organized by an International Company, the Tax for the amount credited to the account must be paid accordingly to the Government.

While considering games that provides a person a benefit, and does not come under the ambit of Gambling, Solving Puzzles, crosswords, etc. for monetary benefits are also becoming popular among people, These solving puzzles come under the coin term of   “Prize Competition” and is regulated by the Prize Competition Act[13] which holds that the prize included must not exceed one thousand a month with not more than two thousand entries, Hence prize competitions are considered legal in India considering the above constrains

Further according to the Report published by the FICCI (The Federation of Indian Chambers of Commerce & Industry)[14], it suggested that the government must work closely with the sports federation, players, betting operators and state governments to deduce a detailed report in order to structure the financial revenues, social Impact, licensing mechanism, etc. from the game as this can, rather than being allowed to be traded illegally can be used to support substantial problems in the economy, further in order to rectify the system, the most practical way of going about it would be by creating laws at the state level for betting based on premises and at the Central level for the ones based on online.

According to the report of the Law Commission in the year 2016[15], based on the suggestions of State governments, lawyers, law students and the general Public as a whole, it gives a common idea that while many considered Gambling as one possessing a great threat if legalized, They were also of the notion that once proper guidelines were set up the advantages that the sector will provide would be enormous.

CONCLUSION

Gambling in India has been an age old practice, with the advancement in the society Online Gambling has started taking its roots in the Society, However Till date there is an ambiguity while considering the act of Gambling either Online or offline. Considering the present laws in the country Gambling in the physical form is taken care of by the Public Gambling Act for the states that has chosen to adopt it, the constitution also provides liberty to states to draft their own laws, However while considering Online Gambling, It is nowhere mentioned in the Gambling act and thereby a few states abovementioned have codified specific laws for governing these acts in order to regulate it and more states are expected to form their own as well considering the Exponential Increase in the internet users indulging in such activities, and considering the revenue potential of this market a much more sophisticated system is vital.


[1] Avtar Singh, Contract and Specific relief act 335 (EBC, 12th edn. , 2016).

[2] Sanju George, Jaisoorya TS, Sivasankaran Nair, Anjana Rani, Priya Menon, Revamma Madhavan, Jeevan Chakkandan Rajan, Komath Sankaran Radhakrishnan, Vineeta Jose, Vivek Benegal, K. Thennarasu and Nancy M. Petry, “A cross-sectional study of problem gambling and

its correlates among college students in South India”, BJPsych Open 199–203 (2016).

[3] (1996) 2 SCC 226.

[4] The Information Technology Act, 2000.

[5] The Sikkim Online Gaming (Regulation) Act, 2008.

[6] Nagaland Prohibition of Gambling And Promotion And Regulation of Online Games of Skill Act, 2015 (Act No.3 OF 2016).

[7] The Telangana Gaming Act, 1974 (Act No. 27 OF 1974).

[8] Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021.

[9] Suresh Kumar, “HC quashes Tamil Nadu’s ban on online betting games”, The Times of India, Aug 4, 2021

[10] AIR 1968 SC 825. 

[11] (2020) 2 RLW 1601

[12] The Lotteries (Regulation) Act, 1998 (Act No. 17 of 1998).

[13] The Prize Competitions Act, 1955 (Act No. 42 of 1955).

[14] The Federation of Indian Chambers of Commerce & Industry, Report on Regulating Sports

Betting in India (2013).

[15] Law Commission of India, 276th Report on Legal Framework: Gambling And Sports Betting Including In Cricket In India (July, 2016).

Author: Govind S Nair, VIT School of Law, Chennai      

Editor: Kanishka VaishSenior Editor, LexLife India.

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