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Play it Even

India’s Safest Bet- Legalising of Gambling

 

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By Sakshi Pawar and Rishika Mendiratta ( Founder and Managing Editor at KhelAdhikar)

The subject of betting and gambling is all encompassing. It combines man’s natural player instinct with the desire to know about his fate and income. -Franz Rosenthal                                                                                          

The above quote summarises the difficulty that has to be addressed while deciding the aspect of legalising gambling and betting.  The triggering point of this controversial topic was the Lodha Committee recommendation. The subsequent constitution of the Law Commission of India and the recent PIL[1] in the Supreme Court showcases the importance of this issue in the current scenario. Lately, the problem of online betting has encased the hugely unregulated arena of online gaming. In this article, the authors discuss the legal framework, inadequacies and the inconsistencies associated with gambling and betting in general and online gaming in particular.

The urge to gamble is so universal and its practice is so pleasurable, that I assume it must be evil. –  Heywood Broun

The term gambling is defined by the Black’s Law dictionary as constituting three primary components – consideration, chance and price[2]. The outcome of this activity is primarily dependent on contingent events. The basic problem of governance in India stems because of ambiguity of laws governing betting and gambling.

The Public Gambling Act, 1867 [PGA], was enacted in India during the colonial period. List II, in Entry 34 of the Constitution, empowers the state governments to regulate gambling and betting. The lacunae exists because most states have not utilised this constitutional power for the enactment of the state specific regulations. Nonetheless, some states such as Goa, Sikkim, West Bengal and Nagaland have done a commendable job by passing specific regulations and clarifying the investment regime pertaining to various games. They have prepared a list of games which are prohibited and come under the ambit of gambling.  The remaining states abide by the provisions of the PGA and the Supreme Court decisions, whereby they exclude games of skill from the scope of gambling. Games of skill are those which involve the aspects of experience, attention, personal attributes and the adroitness of the player[3]. Games of chance (gambling) , include those games where the outcome dependent on external factors (outside the control of the man) such as dice or roulette wheels. The Apex Court in the case of Dr. State of Bombay v Chambarbaugwala[4] clarified that betting on the games of skill does not constitute and is protected under article 19(1)(g) of the Constitution. The dominant factor test (preponderance of skill over chance) was reiterated in the case of K.R. Lakshmanan v. State of Tamil Nadu[5] which rules that horse-racing is a game of skill. The above-stated principles are applicable in those states that have banned gambling or have no specific legislations. The states of Goa and Sikkim are examples where gambling is prevalent. Goa has regulated gambling by providing licenses for opening slot machines in five-star hotels and casinos in off-shore vessels.[6] Even Sikkim has permitted gambling in some licensed premises.[7] In stark contrast, the states of Assam[8], Orissa[9] and Telangana[10] have completely banned gambling in both games of chance and mixed games of skill + chance. This is disputable because as per the M.J. Sivani v State of Karnataka[11] states can restrict occupations only on the ground of public interest. Otherwise. they enjoy the constitutional protection under article 19(1) (g). Further, in the K.R Lakshmanan, it was clarified that games of skill should not be banned.

A gambler is nothing but a man who makes his money out of hope – William Bolitho

Technological advancement has drastically expanded the gaming arena. The online platforms have become the major hub of gambling activities. Surprisingly only three states Sikkim, Nagaland and Telangana in the country have been prudent to enact online gambling laws to regulate them.  Sikkim is the only state which has permissive online gambling laws. The Sikkim Online Gaming (Regulation) Act, 2008 [Sikkim Act] and the Sikkim Online Gaming Rules, 2009 [Rules] allow for intranet connection in the state. As per this system, the servers and websites are locally available in the state of Sikkim. The rationale being that most states have banned online gambling and any extra-territorial application will be in contravention of their laws. The Sikkim Act has provided for an elaborate procedure for licensing. Initially, a provisional license is issued. Following which technological investments are made.  If all the conditions of the Rules are adhered to, then, after the payment of the license money, an annual license is given for operation with a provision for renewal for an equivalent period on the payment of fees of Rs 1 lakh. This is in accordance with Rule 5(2) of the Sikkim Online Gaming Rules. As per the Sikkim Act, only persons, companies and limited liability corporations (LLC) incorporated or substantially controlled in India are allowed to grant licensees.

Nagaland is another state which has extensive gaming laws. The Nagaland Prohibition of Gambling and Regulation of Online Games of Skill Act, 2015, and Nagaland Prohibition of Gambling and Regulation of Online Games of Skill Rules, 2016 (Nagaland Gaming laws) permit licensing for virtual cricket, football, chess and Sudoku. This is in addition to the games of skill as permitted by the Supreme Court of the country through previously mentioned judicial precedents. The licenses are granted by an empanelled committee of lawyers, informational companies etc. after the requirements of incorporating the license and technology in India are met. The Nagaland Gaming laws explicitly prohibit gambling and therefore the websites can operate in other parts of the country as well.

Recently the state of Telangana has come up with Telangana’s State Gaming Amendment Ordinance, 2017. The ordinance seems likes a regressive step as it penalises all those who promote online card games (also games such as rummy and poker) and online gambling.  The case  of State of Andhra Pradesh v K. Satyanarayana[12] which declared rummy to be a game of skill also delineated that any operator or business owner who earned more than administrative profits would be running a ‘public gaming house’  The public gaming houses are illegal as per the PGA. As the online websites that permit rummy usually partake in the percentage of the award that is won, it makes them illegal. Interestingly in the case of Krishna Kumar v State of A.P[13], the Andhra Pradesh High Court held that games of skill should not be equated to gambling. Therefore it would not matter even if the operator derived profit from such games.

The legal scenario with respect to online gambling is muddled because of the lack of clarity by the Apex Court.  The matter went up to the Supreme Court in the case of Mahalakshmi Cultural Association v. The Director, Inspector General of Police & Ors[14], but was withdrawn before any decision could be arrived at. In M/s Gaussian Networks Pvt Ltd. v. Monica Lakhanpal and State of NCT[15] the judiciary once again had the opportunity to clarify this point which was wasted. The court had explicitly equated online poker site to be a gaming house. The counsels for the petitioners, in this case, withdrew their application. They justified their stance on the basis of the reasoning that states such as West Bengal and Nagaland consider poker to be a game of skill. Thus they could pursue their activities legally in these states. Any adverse order from the Apex Court might have been detrimental to them.

The interpretation of the legal reasoning in the Satyanarayana case for online games seems to be flawed.  The reason being, gambling in itself is determined by the components of the game and not by the method of the business or the operator. As per the criteria of PGA, a gaming house is one where the instruments of gaming are kept by the person who owns the house. The functional equivalence test  (applying PGA to online gaming laws) extends its application to the instruments of gaming and not to games of skill. The skill games are specifically excluded from the sup,ervision of PGA.

Playing online games involves a considerable degree of skill. The ability to play the game at a much faster pace rationally in accordance with the tactics of the opponents in the previous games requires skill and is not left to the vagaries of chance.

A man’s gotta make at least one bet a day else he could be walking around lucky and never know it. – Jim Jones

The uncertainty over the enactment of laws legalising or regulating gambling in the country needs to be done away with. We need one comprehensive code for its regulation to tap the benefits associated with it. The advantage of legalising online gambling will make monitoring easier. This will help in achieving our country’s objective of circulation of black money and even assist in streamlining foreign investment. It is intriguing how the current judicial reasoning tilts toward legalising sports betting.  Sports betting and horse racing are similar to a very great extent as they involve determining the skills of players before them. The IPL Probe Committee headed by Justice Mudgal and the case that absolved the 36 cricketers in the match-fixing scandal also supported this rationale.[16] However, there is no concrete law formalising the same. Recently there have been several proposals for legalising online betting and gambling in India. The government has also upped its response. A law commission is already constituted to decide the legal fate of gambling and betting. Recently former Justice Balbir Chauhan visited United Kingdom to understand their betting and gambling laws. As we wait for the Law Commission of India Report and the judgment of the Supreme Court in the light of recent PIL to decide the fate of legalising betting and gambling we can certainly speculate on the probable outcomes.

Firstly we need to consider, “Whether the Union would be able to legislate on this subject?” This would entail an amendment as per Article 368 of the Constitution. As most states already have not legislated on the aspect of betting and gambling it would be unwise of them to petition against such a move. A central law is the need of the hour because online gambling transcends the state boundaries. Therefore, a central legislation will provide an overarching framework to govern the same. Further till the enactment of a new legislation, the online gaming houses should be excluded from the ambit of PGA in line with the reasoning of the Krishna Kumar case. The new legislative framework should be at par with the laws of the developed and democratic of the world.[17] Until then we have only one request to the law makers (On behalf of the players and the organisers) Oh Lord, Help me break even, I need the even.

 

[1] Amit Choudhary, Supreme Court to examine legalising betting in sport, The Times of India, (Apr. 29, 2017), http://timesofindia.indiatimes.com/sports/off-the-field/supreme-court-to-examine-legalising-betting-in-sport/articleshow/58428615.cms.

[2] H.C. Black, Black’s Law Dictionary (6th ed. 1994).

[3] Dr. K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226.

[4] AIR. 1957 SC 699

[5] (1996) 2 SCC 226.

[6] The Goa, Daman and Diu Public Gambling Act 1976, §13A

[7] Sikkim Regulation of Gambling (Amendment) Act, 2005

[8] Assam Game and Betting Act, 1970

[9] Orissa Prevention of Gaming Act, 1955.

[10] Ganesh Prasad and Mukund Thirumalai Srikanth, India: Salient Features  Of The Telangana State Gambling (Amendment) Ordinance, 2017, Mondaq, (July 3, 2017)  http://www.mondaq.com/india/x/607360/Gaming/Salient+Features+Of+The+Telangana+State+Gaming+Amendment+Ordinance+2017

[11] (1995) (3) SCR 329.

[12] AIR 1968 SC 825

[13] (2003) CriLJ143

[14] Special Leave to Appeal (C) No(s).15371/2012 (Arising out of impugned final judgment and order dated 22/03/2012 in WA No. 2287/2011 passed by the High Court of Madras)

[15] M/s Gaussian Networks Pvt Ltd. v. Monica Lakhanpal and the State of NCT, Suit No 32/2012, Delhi District Court

[16] Jay Sayta, The court order that freed Sreesanth may have also opened the gates for cricket betting, Scroll.in, (Aug. 4, 2015), http://scroll.in/article/745894/the-court-order-that-freed-sreesanth-may-have-also-opened-the-gates-for-cricket-betting.

[17] Jay Sayta, Legal Eagles advocate regulating betting, Glaws, https://glaws.in/2016/01/10/legal-eagles-advocate-regulating-sports-betting/ (Jan. 26, 2017).

 

Categories: Betting and Gambling, Ethics and Governance

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