PLAYING WITH THE LAW: THE NEED TO REGULATE ONLINE GAMBLING IN INDIA


Source : 888 Online Gambling

This article has been authored by Yashna Singh, a second year law student at Maharashtra National Law University, Mumbai.


Introduction


The advent of the Covid-19 lockdown saw an increase in the amount of time people were spending on their devices and brought issues of gaming addiction and online gambling to the forefront. [1] Lured with the chance of making easy money, many people became debt trapped due to gambling and also committed suicide. [2]This brought a spur of litigation in Courts across the country to deal with the menace of online gambling.


However, a look at the existing gambling laws in India will make one realize of their inadequacy and individual states have started taking steps to rectify the same. Most recently, on 10th February,2021 the Kerala High Court in Pauly Vadakkan v. State of Kerala directed the State government to include online gambling under the purview of the Kerala Gaming Act, 1960[3].While this is a welcome step, it is not sufficient.


This article makes a case for regulating gambling rather than banning it and highlights the need to revisit most gaming legislations in our country. It also provides remedies that would effectively overcome the obstacle that online gambling has presented in our country today.


Pre historicity and Inadequacy of Existing Legislations


Gambling is a part of the state subject under the Indian Constitution which means that each state has the power to frametheir own rules on this subject. The central legislation on gambling is the Public Gambling Act (1867) which has been adopted by states such as Madhya Pradesh, Punjab, Uttar Pradesh etc. Other states such as West Bengal and Kerala have their own laws and therefore no unified law exist in relation to gambling. In fact, several deviations exist as there is a complete ban on gambling in Telangana, Tamil Nadu and Andhra Pradesh. [4] It is also important to note that these legislations were enacted before online gambling became a reality and are mainly concerned with gambling activities that take place within physical spaces usually known as "common gaming houses."[5] Therefore, these legislations make no reference to online gambling and cannot be applied to them.


Lack of uniformity has ensured that Courts have taken different approaches while deciding this issue. One guiding principle was laid down in State of AP v. K.Satyanarayana(1968) where the Supreme Court had differentiated between ‘game of chance’ and a ‘game of skill’. The ratio laid down was that was that when there was a greater applicability of chance over skill then a game will be classified as 'game of chance' and not be permitted under law. [6]


In the absence of an objective test to draw a distinction between a 'game of chance' and a 'game of skill', this principle has been applied differently to different set of facts. The effect is that it is difficult to decide whether or not a specific game is allowed unless expressly stated. This results in a complex situation because determining whether there is greater preponderance of skill in a game becomes the subjective discretion of a judge.


Recent Changes and the Need for Regulation


Most recently, the Andhra Pradesh Gaming (Amendment) Bill, 2020 was passed. This amendment to the Andhra Pradesh Gaming Act, 1974 was carried out to make ‘online gaming, online gambling and online betting an offence’ in Andhra Pradesh.[7]This was based on the Telengana Gaming (Amendment) Act of 2017. The judgment passed by the Kerala High Court was also based on the plea to ban online games in Kerala . Tamil Nadu has also introduced a Bill in February 2021 to impose a ban with imprisonment of upto two years for violation along with a fine of rupees ten thousand. The Bill also punishes wager on 'games of skill' if played with stakes. Even though the Bill does warn companies from playing against stakes, it does not specifically lay down the punishment for violation of the rules by the companies. [8]


The key problem with such legislations seeking a ban is that they focus on the end-users or the players. This approach of punishing the player instead of the enabling company is problematic and often leads to only the player facing penal action while the companies are left scott free.


The lack of online regulations makes it easier for companies to flout rules. They engage services of celebrities to endorse their websites. Even a PIL was filed against celebrities Virat Kohli and Tamanna in August 2020 for endorsing gambling websites. [9]


However, the 276th Report of the Indian Law Commission on Gambling has recommended that instead of imposing a complete ban, it is better to regulate gambling to eliminate the existing black market and increase revenue of the state. Since the State will be the regulator, it will be possible to see that the young children and vulnerable sections of the society are not defrauded. [10]


Nagaland and Sikkim


In India, only two State legislations, namely Nagaland and Sikkim have made changes in their state laws to regulate and deal with the issue of online gambling.


Under the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016 (hereinafter the "Nagaland Act"), “Gambling means and includes wagering or betting on games of chance but does not include betting or wagering on games of skill.”Licenses are given in Nagaland to regulate gambling of "games of skill." The Finance Commissioner is appointed as the "Licensing Authority" in Nagaland. [11] The Nagaland Act has also provided a schedule for games that qualify as 'games of skill' so there is no ambiguity about which games are permitted under the law.


On the other hand, the Sikkim Online Gaming (Regulation) Act 2008 (hereinafter the" Sikkim Act") defines “online gaming” as “any gaming where any player enters or may enter the game or takes or may take any step in the game or acquires or may acquire a chance in any online gaming or Sport Gaming, by means of a telecommunication device including the negotiating or receiving of any bet by means of a telecommunication device.” [12] The regulatory authority for issuing licenses for online games provided within the state-wide intranet of Sikkim is the authorized officer under the Finance, Revenue and Expenditure Department of the Government of Sikkim.


Penalties


Sikkim: The Sikkim Act can penalize the following entities/persons: (i) the licensee under the Sikkim Online Act for contravening license terms or other provisions of the Sikkim Online Act (ii) an operator/person acting on his behalf (iii) an operator who does not have a license under the Sikkim Online Act, but offers online games, sports betting or both. [13]


Nagaland: A licensee under the Nagaland Act can be penalized. In case of breach of terms of condition by the licensee, a show cause notice will be issued under Section 8(1) of the Nagaland Act [14]and it will be the liability of the licensee to show why the license should not be revoked. Further, under Section 12(1) of the Nagaland Act [15] a license holder or individual found to be dealing in 'games of chance' will be fined Rs 20 lakhs thus imposing strict responsibility on the licensee. An entity which has made a deliberate mis-declaration to obtain a license will also be penalized Rs 20 lakhs or face a 6-month imprisonment and would not be liable to have their licensed renewed.


Lessons to Learn from the United Kingdom


Gambling in the United Kingdom is legal and is regulated by the Gambling Commission which was formed by the comprehensive Gambling Act of 2005 (hereinafter "the Gambling Act"). The Commission assesses prospective license operators, issues licenses, and then tracks current licensees to ensure that it is run in a secure and successful manner. Further, the Act needs operators to show that they are financially solvent, capable of maintaining a stable financial position and willing to provide players with fair games.[16]


The Gambling Commission issues codes of practice under Section 24 of the Gambling Act [17]regarding the manner in which facilities for gambling are laid down to ensure that:

  • Gambling is conducted in a fair and open way

  • Vulnerable groups such as children are protected from being exploited or harmed or by gambling websites

  • Assistance is given to people who are, or couldbe, affected by problems associated with gamblin


Each and every licensee is mandated by law comply with the codes of practice produced by the Gambling Commission.Section 139 of the Act states penalties for Breach of the personal license condition with imprisonment upto 51 weeks or fine to the licensee [18] and holds them accountable thereby focusing on punishing the enabler. The Gambling Act is an ideal example of a regulated gambling regime supervised by a commission which can be incorporated in India as well. By conducting gambling in an open and fair way and ensuring that licensees are financially stable, the law ensures that companies will not evade their liabilities.


Other Suggestions:


The 276th Law Commission Report [19]made the following suggestions to regulate online gambling in India:

1. Linking of PAN Card/Aadhar while making transactions related to gambling: The Report opined that linking a person's PAN/Card Aadhar would ensure transparency in gambling transactions. It would also enable the government to restrain people, particularly those Below Poverty Line from gambling large sums. Further, a maximum amount would be set beyond which wager cannot be made by a person.

2. Uniform Law: The report stated that a law should be enacted by the Parliament in exercise of its legislative power under Article 249 [20] or Article 252 [21]of the Indian Constitution. Additionally, an Inter State Council could be formed in accordance with Article 263 [22]of the Indian Constitution for effectively regulating Gambling in India. [23]


Even though gambling comes under the state subject list and thereby every state is empowered to make its own rules, since many states have adopted the Public Gambling Act (1867), suitable amendments can be made to the Act to adopt the above suggestions. This would bring about the much-needed uniformity in law on the aspect of online gambling. The same could be used as directions for all the other states.


For example, the recent draft guiding principles laid down by Niti Aayog includes establishing a self-regulating organization, upholding the dominance of 'games of skill', mandating approval of an independent committee for games of wager, age limit of 18 years for participation, transparency and fairness in terms and conditions of the game, policies on misuse, etc.[24] This approach can be adopted in the name of co-operative federalism by enacting a model legislation for online gaming to ensure uniformity in implementation, enhanced supervision and clarity for businesses.


Conclusion


The legality of online gambling in India has always remained a grey area. However, there is an urgent need to update our laws to ensure that people with addictions do not fall prey to it while gaming enterprises continue earning large revenues. The tendencies by state governments to impose a blanket ban on online gaming can be replaced by a regulated regime where games of skill are permitted and games of chance are disallowed. Wager amounts can be restricted by linking PAN Cards. A Gambling Commission on the lines of the one existing in United Kingdom can be set up. Further, the licensing policies adopted in Sikkim and Nagaland can be implemented in the rest of the country through the medium of a model uniform law. This would ensure in a robust online gaming industry which is based on fair play and benefit of all the stakeholders.

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