The Great Gamble: Demystifying The Legal Policy Of Gambling Industry In India
Written & Reported By: Adithya Anil Variath, Law & Policy Group Intern – School of Law, University of Mumbai
With the new global order beleaguered by the cajolery of materialism and amelioration of illicit money, the gambling industry has witnessed an unprecedented growth. Gambling is popularly referred to playing a game in which you can win or lose money or possessions in a bet i.e. to stake something on a contingency. Despite the political and economic instability of economies, the gambling industry gains around $265 bn revenue globally and employ more than 1.5 million people. Largely illegitimate and partially regulated, the industry also saw a decline in its annual growth in the last five years by 0.9%. Despite the popularity of gambling in India, it is technically prohibited in most of its forms. The Government has played a pro-active role to usurp and illegalize this parallel economy. It was reported that India’s overall gambling market including the illegal and unaccounted is valued at around $60 bn which accounts to 3.5% of India’s Gross Domestic Product. The Public Gaming Act of 1867, is the prime legislation banning gambling in India and is supported by various other statutory regulations. Its scandalous companionship with most other human depravities is well known. It is documented to be have a negative impact on the cultural morality of an individual, thereby destabilising the socio-economic parameters. With the advent of technology and online gambling, these regulations and their implementation have failed to match technological advancements. Columbus voyage to the Americas was a gamble. At a time when the popular belief was that the earth was flat, he gambled on reaching India by travelling westward, and not eastward, even though he knew India lay to the east of Spain. Economists have made gambling an exercise in scientific exploration by applying to all economic activities the rigours of the theory of probability. Various judicial pronouncements have called for a periodical review of national and international norms to regulate and legalize gambling. This translational issue of cross-border gambling has raised several questions in international legal jurisprudence. The impact of unregulated gambling on the global economy is an extensive area to encapsulate in few pages and in this context, the current research study focuses on one indispensable element of this domain – Legislative dynamism vis-à-vis Gambling Industry.
Keywords: Gambling and Betting – Law and economic policy – International perspective – Legislative measures – Online gaming
Gambling is considered to be one of the oldest industries in the world and has played a quintessential role in shaping the moral and cultural human civilization. The roots of gambling with different backgrounds can be traced in every religion, culture, age, and civilization with societal attitudes varying across time and geography. Being one of the oldest forms of entertainment and money making, it has been globally practiced in different forms such as gaming, betting, races, wagering, etc. Gambling is susceptible to a risk of self-inflicted damage. This has made gambling a formidable impediment for law and morals.[i] From a jurisprudential and philosophical point of view, John Stuart Mill, “the saint of rationalism,” attempted to define and promote individual liberty and held that individual freedom is important in any society and it is different from individual happiness. He wanted to preserve a space for individual action which should be free from interference and raised a question on licensing of gambling and prostitution 150 years ago. To economically analyze the legal concepts of gambling, it is pertinent to distinguish wagering, gambling and betting from each other. Wagering is an all-inclusive term that encompasses within its ambit, the various acts of gambling and betting. Gambling entails the occurrence or non-occurrence of an unpredictable event. A vital distinction between betting and gambling is that in gambling, the stakes or wager is placed on an event without any clue of the outcome. In contrast, in betting the stakes are placed on an event, the outcome of which is based on the performance of the players, influenced by their skill.[ii]
‘Gambling’ according to its statutory definition means, “the act of wagering or betting for money or money’s worth”. Gambling under the Gambling Legislations does not include (i) wagering or betting upon a horse-race/dog-race, when such wagering or betting takes place in certain circumstances, (ii) games of “mere skill” and (iii) lotteries (which is covered under Lottery Laws).[iii] The inherent nature of the activity has made it a pool of risks, as the result of the gambled event are not certain and involve transaction of money or any property or documents and this arrangement may be arrived face to face or via virtual means. Despite the prevalence of gambling in various ancient and international texts, often a sceptical approach is taken towards it as it is considered to be a risky activity which can lead not only to self-harm but also has evidenced self-destruction. The whole arena of gambling saw two revolutionary changes, firstly, the invention of telephones and telecommunication revolution and secondly, the rise of internet technology. Both these inventions, most importantly the latter has created a global market for the industry. After the penetration of internet and telecom revolution in the mid-1990s, internet-based models have gained popularity. With the evolution of the digital economy, the gambling industry has witnessed a paradigm shift in its modus operandi. The Digital India initiative of the Narendra Modi Government has led to the improvement of digital infrastructure. Post demonetization and GST, the digital payment and online banking systems received a boom with a larger part of the population being incentivized and compelled to use the same. These turn of events due to the regulation of economy and internet banking has supported the gambling industry altogether. The most common forms of gambling in India, from time immemorial, are the many versions of card games like teen patti, poker, rummy, and bridge, as well as sports betting. Most revenue earning online gambling sites in India are card games sites hosting Rummy and Poker tournaments. Despite these developments, ‘skill’ or ‘chance’ is still a conclusive factor in determining the legality of gambling and betting in India. The pre-independence legislation regulating gambling was enacted when digital media and internet were uncommon and its presence was minimal. Therefore, when these gambling legislations are read in the context of online and digital gambling, their interpretation and applicability get complex, raising questions on their credibility and reliability. The undoubted potential of the gambling market in India has led to a rapid expansion of online gaming over the past few years. This impact is evident by the rise in demand for quality game content, game developers, game developing companies and the gaming industry in general. Gambling by its very nature is gaining significance as a major source of income and a profitable business venture worldwide. Taking into consideration the basics of public policy, regulating gambling would require a three-pronged strategy to Reform – Regulate – Develop i.e. reforming the existing market, regulating the illegal market and introducing stringent and overarching regulation by means of legislation.
Historical Development of Gambling in India
“If gambling cannot be stopped in the kingdom, it shall be regulated. Gambling should be allowed to be carried on openly in the gambling hall (the hall licensed for the purpose). The gambling hall should be provided with an ornamental arch to indicate that it is a gambling hall, so that respectable men may not mistake the nature of the place. The King should impose a tax on gambling and make it a source of income. Gambling could be carried on openly after payment of tax to the King.” (Katyayana Smriti, verses 935 to 939) [iv]
The Greek and Roman civilisations were amongst the first to practise gambling, and the Greek mythology shows that Zeus, Hades, and Poseidon played dice to divide the Universe amongst themselves.[v] Even before the six-side dice was invented, Indians used the nuts of the Bibhitaki tree as dice. The mythological story of Nala and Damayanti narrates that gambling existed in ancient Bharat. There are historical evidence that recount, laws were framed in ancient India to regulate it.[vi] Insinuations to ‘dicing being an art’ are found in Mahabharata and other Indian lore and folklore. A perfect example would be the story of a king who was considered to be a master in the art of dicing in Jataka tales. He could predict the result of the throw before the dice struck the board and in case of an unfavourable result, he would catch the dice before it landed and would make his opponent repeat the throw. Despite the prevalence of gambling in India, the ancient texts like Manu Smriti, Narad Smriti and Arthashastra reflects a skeptical approach towards it, as it is considered to be a risky activity which can usher not only to self-harm but also self-destruction both financially and emotionally. The 19th century saw the arrival of Casinos in Europe while in the United States of America informal gambling houses were more prevalent.[vii] In the case of State of Bombay v. RMD Chamarbaugwala,[viii] the Supreme Court cited Brihaspati, dealing with gambling in chapter XXVI, verse 199, which recognises that though gambling had been proscribed by Manu, other law-givers allowed it when conducted under the regime control providing the King, a share from every stake. In the case of Kishan Chander & Ors. v. State of Madhya Pradesh,[ix] the Supreme Court observed that “Considering the fact that gambling is evil and it is rampant, that gaming houses flourish as a profitable business and that detection of gambling is extremely difficult. Such a law must of necessity provide for the special procedure but so long as it is not arbitrary and contains adequate safeguards it cannot be successfully assailed.” It has always been debated whether gambling and betting are games of skill or chance. “Chance or Skill test” is considered to be the scrutiny test in India to determine whether a game amounts to gambling or not. Where the result of the game is entirely uncertain and a person is unable to influence the result of the game by his mental or physical skill and when the winner is predominantly determined by luck, it falls under the ambit of the game of chance. In a game of skill, the result is influenced by the expertise, knowledge, and training of a person. According to Indian jurisprudence, games of chance falls under the bracket of gambling and are forbidden by law, while games of skill are exempted. With the emergence of global telecommunications, internet, and bank transfers the methodology has shifted from primeval techniques to linked networks. In spite of this, the pertinent question is the interpretation of “skill” and “chance”.
With the evolving potential of gambling, both online and offline, various foreign entities and institutions exploring this potentiality are setting up operations in India. To understand the economics of gambling in India, it is imperative to analyse the global gambling industry and understand it’s working. The global perspective towards gambling has been a three-dimensional approach. Nations which give primacy to religious morality, have taken the view that the role of government is to protect its citizens from the negative effects of such activities. These countries often impose a complete ban on gambling, while others view gambling and betting as a fruitful industry to drive trade and derive revenue; and encourage tourism and employment. The liberal economies balance between these two extremes, striking a balance and permit gambling in a controlled and regulated environment, whereby, they earn substantial revenue from the tax imposed on such activities. The amount can be used for promoting sports, cultural, charitable activities or any other activity aimed at economic growth or development. To comprehend these international activities, it is salient to declassify both judicial and legislative methods.
The legislative system of the United States of America is very liberal, the gambling and betting as an independent legal area is governed by three sets of regulations – Local, State and Federal. The European Union’s gambling market is valued at around €84.9 billion with a 3% growth rate every year according to the European Commission. The European Gaming and Betting Association (EGBA) is the Brussels-based industry, body co-funded by the European Commission which represents the leading online gaming and betting operators established, licensed and regulated within the European Union. It works together with national authorities, EU authorities and other stakeholders providing a well-regulated and attractive offer to EU citizens. The primary focus is transparency and integrity by protecting the interest of the consumers by providing a reliable, safe and secure digital environment to ensure consumer protection while keeping in mind consumer demand. The United Kingdom Gambling Industry is one of the biggest and ever-increasing ventures, with a Gross Gambling Yield (GGY) of £13.8 billion between October 2015 and September 2016. Online gambling generated a gross gambling yield of £4.5 billion that amounts to 33% of the total gambling in Britain [x] and the National Lottery contributed £1.6 billion towards social causes. This industry is totally under the control of law and United Kingdom Gambling Act, 2005 regulates gambling and betting practices in the country. The Act establishes a body corporate called the “Gambling Commission”, which regulates gambling and betting activities through licensed operators. In France, the Code de la sécuritéintérieure or the domestic security code, section 320-1166 and Law No. 2010-476 of 12 May 2010 regulate gambling and betting. Betting is not legal in France with the exception of horse-racing, which is available through the Pari Mutuel Urbain (PMU).[xi] This Industry in France generated a Gross Gaming Revenue of €9.75 billion in 2016 (against €9.53 billion in 2015). Tax revenue collected on the online gambling activity accounted to €429 million for the year 2016.[xii] In South Africa, the National Gambling Act of 2004 was introduced with a primary objective to include provisions with greater precision and therefore to co-ordinate activities relating to the concurrent exercise of legislative competence and to provide for the licensing and regulating of interactive gambling by the National Gambling Board.
Role of Judiciary
In the United States of America, with some States having detailed gaming laws that go back more than two centuries, other States are yet to address its key dimensions. It was the historic case of Philip D. Murphy, Governor of New Jersey v. National Collegiate Athletic Association etc.,[xiii] decided by the Supreme Court of the United States which is said to have a rippling effect across global economies in regulating and legalising Gambling. In the present case, the Professional and Amateur Sports Protection Act 1992 was under scrutiny, as to whether it was in conflict with the Federal Constitution or not. The Act provided that neither the States nor any private actors could indulge in the activities of sports gambling. It curtailed all the activities surrounding sports gambling, such as sponsorship, promotion, advertisement and licensing the same. The SC in considering this issue held that “The legalization of sports gambling is a controversial subject. Supporters argue that legalization will produce revenue for the States and critically weaken illegal sports betting operations, which are often run by organized crime. Opponents contend that legalizing sports gambling will hook the young on gambling, encourage people of modest means to squander their savings and earnings, and corrupt professional and college sports.” The Court while making its observations left the task of policy making to the Congress and in case the Congress did not wish to do so, the States were at liberty to exercise their legislative dynamism. Analysing the judgment’s rippling effect on India is a constitutionally weak argument, taking into consideration the basic tenants of Indian jurisprudence. The Constitution of India is quasi-federal in nature, but with the centre exercising a stronger role in comparison to the states. So, the anti-commandeering principle is not completely in accordance with the basic structure of the Constitution of India as it does follow the federal model of the American Constitution.
The Canadian case of Rex v. Fortier,[xiv] made a comprehensible and intelligible distinction between the game of chance and game of skill as, “A game of chance and a game of skill are distinguished on the characteristics of the dominating element that ultimately determine the result of the game.” The Supreme Court of Russia, in the case of Deputy State Prosecutor for the Pskov Region v. Rostelecom,[xv] mandated Internet Service Providers to block Russian users from accessing certain gambling websites and held that even the act of providing access to restricted information on gambling amounted to the dissemination of information. The European Court of Justice in the case of Carmen Media Group Ltd v. Land Schleswig-Holstein and Innenminster des Landes Schleswig-Holstein[xvi] while interpreting the characteristics of Online Gambling observed that, “…the characteristics specific to the offer of games of chance by the internet may prove to be a source of risks of a different kind and a greater order in the area of consumer protection, particularly in relation to young persons and those with a propensity for gambling or likely to develop such a propensity, in comparison with traditional markets for such games. Apart from the lack of direct contact between the consumer and the operator… the particular ease and the permanence of access to games offered over the internet and the potentially high volume and frequency of such an international offer, in an environment which is moreover characterised by isolation of the player, anonymity and an absence of social control, constitute so many factors likely to foster the development of gambling addiction and the related squandering of money, and thus likely to increase the negative social and moral consequences attaching thereto, as underlined by consistent case-law.”
CONSTITUTION OF INDIA AND OTHER STATUTORY PROVISIONS
Man was born free, and is everywhere in chains. Classical political philosophy distinguished between nature and convention or law; Plato and Aristotle argued that a just city had to exist in conformity with man’s permanent nature and not what was ephemeral and changing. Thomas Hobbes, John Locke, and Jean-Jacques Rousseau developed this distinction and wrote treatises on the question of the state of nature, seeking to ground political rights in it.
(The Wheel of Justice)
Pre- Constitutional History
The Constituent Assembly Debates on 02 September 1949, during which a motion was taken up to add an Entry dealing with betting and gambling, under List II of the Seventh Schedule was opposed swiftly across the spectrum by the members of the Constituent Assembly with a view that we must prohibit betting and gambling. The idea of taxation on gambling and betting revenue was unanimously rejected, due to its inconsistency with the lofty ideals of Mahatma Gandhi and the lessons learnt from the Mahabharata.[xvii] Dr. B.R. Ambedkar had a dissenting view and he stated that not mentioning betting and gambling would not mean that there will be no betting and gambling in the country at all, and he apprehended that if this entry was omitted, there would be absolutely no control over betting and gambling activities at all. His interpretation of Entry 45 under List II was, it would either be used for the purpose of permitting betting and gambling or for the purpose of prohibiting them and in the absence of such a provision the provincial governments would be absolutely helpless in these matters. Another consequence that the Drafting Committee Chairman pointed out was that in the absence of the proposed Entry 45 (Now 34) of List II, ‘betting and gambling’ will have to be included in List I under Entry 91. He clarified that the entry would act as a preventive measure and the States would have full power to prohibit gambling. This deliberation led to the inclusion of the Entry on ‘betting and gambling’ in the State list to empower the States to make laws either to prohibit betting or gambling or to regulate it, according to the socio-economic requirements of the State and to accommodate different notions of morality.
The Legislative powers are distributed between the Centre and the States under Article 246 of the Constitution of India, subject to various matters catalogued in three legislative lists of the Seventh Schedule. Entry 40 of List I empower the Parliament to legislate on ‘Lotteries organized by the Government of India as well as the Government of any State’. Article 249 of the Constitution empowers the Parliament to legislate on matters in the State List in the national interest and Article 252 empowers the Parliament to legislate for two or more States on a recommendation made by such states. So, when the Parliament legislates on the subject of gambling and betting, such a law will not stand unconstitutional on the ground of lack of competence or that it takes away the legislative powers of the States. The power of the State governments to make laws on gambling can be traced to Entry 34 and Entry 62 of the List II in the Seventh Schedule of the Constitution. Also, the Directive Principle of the State Policy under Article 38 of Constitution of India provides that the State shall secure a social order for promoting the welfare of its people by securing justice, social, economic and political. The jurisprudential doctrine of res extra commercium is imperative to interpret the fundamental right of freedom of trade in connection with gambling and betting businesses. It traces its conceptual roots to Roman law. Res in commercio are things capable of ownership and hence, the subject of property rights, while res extra commercium are things incapable of ownership. The doctrine of res extra commercium seeks to exclude certain activities from the ambit of freedom of trade and profession guaranteed under Articles 19(1)(g) and 301 of the Constitution of India. In State of Bombay v. RMD Chamarbaghwala, the SC harmoniously interpreted these two concepts as, “We find it difficult to persuade ourselves that gambling was ever intended to form any part of this ancient country’s 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.”
According to criminal jurisprudence, there are two kinds of wrongful conduct, malum in se, i.e., conduct that is inherently wrongful and malum in prohibitum, i.e., conduct that is wrong because it is prohibited. The supporters of regulations on Betting and Gambling, consider it to be against the principles of morality, since it disrupts the work ethic, leads to crime and is addictive. The Finance Act, 1994 defined “Betting or Gambling” under Section 65-B (15) as: means putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring. But the recent Finance Act finds no mention of Gambling and Betting.[xviii]
- The Lotteries (Regulation) Act, 1998: This central legislation lays down the conditions subject to which lotteries may be organised by State Governments, viz. the place of the draw should be located in the concerned State. According to section 4, sale proceeds to go to the State treasury, etc. and vide section 5 of the Act, 1998 the State Governments are given the prerogative to run lotteries, within their geographical territories, while prohibiting the sale of their lottery tickets in any other State.
- The Indian Contract Act, 1872 (Contract Act): Section 23 of the Contract Act, states that “the consideration or object of an agreement is lawful, unless – it is forbidden by law; or is of such a nature that, if permitted it would defeat the provisions of any law”. Section 30 states that an agreement by way of the wager is “void and unenforceable, but at the same time it is not forbidden by law and hence, cannot be termed illegal”. So, no suit can be brought to enforce any winnings accruing out of winning a bet or gamble. This provision also makes an exemption for betting on horse-racing, making them legally permissible under the Contract Act.
- Foreign Exchange Management Act, 1999: Remittances of Income from lottery winnings, racing/riding, sweepstakes etc. are prohibited under the Act, 1999 read with Rule 3 and Schedule 1 of the Foreign Exchange Management (Current Account Transaction) Rules, 2000.
- The Information Technology Act, 2000 (IT Act): The Act makes provisions for various offences relating to the online activity, although there is no specific mention of online gambling being illegal. However, it does give the Indian government the power to block foreign websites and the government has used this power to instruct Internet Service Providers to prevent Indian residents from accessing specific foreign betting and gaming sites. But the effectiveness of this regulation is unclear and its implementation is ambiguous. “Publishing and transmitting material which is lascivious or appeals to the prurient interest or if its effect is such as to tend to deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it”, in electronic form is prohibited and a violation thereof is punishable under section 67 of the IT Act.
- The Cable Television Network Rules, 1994: The Cable Television Network Rules, 1994 prohibit the advertisement of gambling activities. Rule 7 provides that, the advertisement of games of skills, such as horse racing, rummy, and bridge, is not prohibited.
- The Consumer Protection Act, 1986: Section 2(1)(r) of the Act, defines the term “unfair trade practice” to mean a trade practice which, for promoting the sale, use or supply of any goods or services, adopts any unfair method or unfair or deceptive practice. Section 2 (1)(r)(3)(b) includes the conduct of any contest, lottery, a game of chance or skill, for the purpose of promoting, directly or indirectly, the sale, use or supply of any product or any business interest in the ambit of unfair trade practices.
The Indian Penal Code, 1860 (IPC); the Foreign Exchange Management Act, 1999; Prize Competitions Act, 1955; Payment and Settlement Systems Act, 2007; The Prevention of Money Laundering Act, 2002; The Young Person’s (Harmful Publications) Act, 1956; The Indecent Representation of Women (Prohibition) Act, 1986; Telecom Commercial Communications Customer Preference Regulations, 2010 are some of the legislations adopted by the Central Government to regulate gambling and betting. With the inclusion of Entry 34 and Entry 62 in the List II of the Seventh Schedule, the State legislatures are empowered with the competence to make laws pertaining to betting and gambling and laws on its taxation. Due to which the Public Gaming Act of 1935 after the adoption of the Constitution of India ceased to be a Central Legislation and is no longer applicable to the whole of the territory of India. The National Sports Ethics Commission Bill of 2016 is still pending in the Lok Sabha and the Prevention of Sporting Fraud Bill, 2013 is yet to be introduced in the House, both dealing with measures to criminalise frauds arising out of regulated gambling. Sikkim was the first Indian state to expressly regulate online gaming by legislative means by introducing the Sikkim Online Gaming (Regulation) Act, 2008. The Act is followed by rules which permit and legalise online gaming under a license obtained from the State Government. The casinos are regulated by the Government by granting licenses under the Sikkim Casinos (Control & Tax) Act, 2002. The State of Nagaland recently introduced the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015 and defines games of skill and games of chance. The Goa, Daman and Diu Public Gambling Act of 1976 with its recent 2012 Amendment introduced new provisions to enable the State to appoint a Gaming Commissioner to match the technological advancements. The state of Telangana has amended the law applicable to Telangana as an amendment to the existing gambling legislation, which among other things, expands the ambit of offences to apply to the online medium as well. The Indian residents in other states are not eligible to avail the services of the websites, but there is no legislation prohibiting online gambling.
BROADENING HORIZON OF GAMBLING IN A TECHNOLOGICAL WORLD: ONLINE GAMING
“Technology is a useful servant but a dangerous master”– Christian Lous Lange
Casinos in India are regulated by gambling legislation. Laws of Goa, Daman & Diu and Sikkim allow gambling to a limited extent, under a license granted by the State Government in five-star hotels. In Goa, the regulations also permit casinos on board an offshore vessel. Lotteries have been expressly excluded from the purview of these legislations and are governed by the central law, Lotteries (Regulation) Act, 1998 under which the Lottery (Regulation) Rules 2010 and other specific rules have been framed for the State Government to be adopted by them in policy formulation. With the dawn of technology, these games have effectively extended their audience and popularity via the virtual medium. While carving out betting on horse racing from the purview of ‘gambling’ as a game of skill, most legislations provide certain conditions that are required to be met as a prerequisite. With the rise of automation and technology, online gaming has seen unparalleled growth. According to the American Gaming Association Report, there are nearly 3000 internet gambling sites in the USA alone, offering to wager on sports, casino games, poker, bingo, lottery, and other games. A recent study by KPMG India and Google, suggests that the Indian online gaming industry is set to become $1 billion industry by 2021.[xix] The rise of technology has 5 major trends which need to be capsulised by legislations to regulate the technological advancements – virtual reality, augmented reality, artificial intelligence, modular technology and cloud-based architecture. These modern improvements have been used to revamp and redesign the ‘instruments of gaming’. According to existing legislations, “Instruments of gaming” means ‘any article used or intended to be used as a subject or means of gaming, any document used or intended to be used as a register or record or evidence of any gaming, the proceeds of any gaming, and any winnings or prizes in money or otherwise distributed or intended to be distributed in respect to any gaming.’ According to modern jurisprudential schools, there is a school of thought that conjectures that computer terminals used for gambling and servers on which gambling takes place and related e-records that are preserved also represent “instruments of gaming”. India is operating towards improved age and gender parity among online gamers, with the number of bets placed on mobile devices, is accounted to have hit $100bn, with 164 million people using telecom devices to visit a mobile and online casino to place a bet or purchase a lottery ticket.[xx] It can be estimated that the mobile gambling industry is set to take 40% of the total online gambling market. The advent of India’s online gaming industry can be dated back to 2000s when console and PC gaming brought middle-income group Indians on digital gaming platforms. During the mid-2000s, online gaming comprised of most social games.[xxi] As compared to 31 percent in 2018, penetration of internet is expected to reach 53 percent of the population by 2021. Smartphone users are projected to be 470 million by 2021 with the rise of internet penetration.[xxii] Availability of affordable smartphones with the availability of data is expected to prompt a shift from the current feature phone users to smartphones. The surge in volumes of mobile internet users is likely to be complemented by five times rise in data consumption and 1.6 times increase in disposable income of our country. The virtual gaming market is expected to be fuelled with a young population, high internet volumes, engaged online users and improved paying propensity by 2021.[xxiii] With a background of such developments, the industry is expected to gain momentum and reach a market value of USD one billion and 310 million online gamers by 2021.[xxiv] This growth is further strengthened by the comprehensive rise in digital payment user base, the launch of new innovations at affordable rates and focus on the development of content with local themes, Indian languages and global standards.[xxv] The need for introducing an all-inclusive legislation to accommodate these changes has to be done on both national as well as state level by involving all the stakeholders in policymaking.
EXIGENCY OF REGULATING THE GAMBLING INDUSTRY
A total ban on gambling and betting activities would not completely eradicate the problem. Rather, it would drive it straight to the black market.[xxvi] Considering the basics of public policy and morality, the gamblers suffer from a psychological problem of an illusion of control, which leads to a situation like a drug addiction. Dr. Luke Clark in his research paper on the psychology of gambling identified that gamblers also experience cravings and withdrawal symptoms when deprived of gambling. With the advent of online gambling, more people are engaging in it, and people are even hired to play or gamble online. Another indicator of the flourishment of online gambling is the increase in the prize money in tournaments, which has risen from Rs.3 lakhs in the past two years to Rs.1 crore today. To implement a policy which can curb illegal gambling in toto is an unachievable task, but it is the duty of a welfare state to protect and promote the economic and social well-being of its citizens and act affirmatively to protect the vulnerable sections. The Law Commission of India in Report no. 276 suggested the linkage of PAN/ Aadhaar of people belonging to the below poverty line section to keep a check on their gambling activities and to prevent misuse of money. Illegal gambling and betting have certain severe after effects, the major problem being the exponential growth of illegal trade and commerce, and corrupt practices such as spot-fixing and match-fixing in sports-related activities. Illegal betting causes substantial monetary loss to economic development, with profits escaping the purview of taxation, and also increases the circulation of black money in the market and empowers crime syndicates, loan sharks and crime lords. With the rise of online gaming, it has become practically impossible to control this parallel economy. Gambling and betting have a negative impact on various sporting activities, promoting corruption at the grassroots level and administrative inefficiency at the top. The Ministry of Youth Affairs and Sports, Department of Sports enforced the “National Sports Development Code of India, 2011”, which aims at preventing betting and gambling in sports. The Ministry has recently appointed a committee to draft an updated version of the Code, which is expected to be published next year.[xxvii] The Federation of Indian Chambers of Commerce and Industry (FICCI), in a report titled ‘Regulating Sports Betting in India’, highlighted various advantages of regulating rather than completely prohibiting sports betting. It noted that the greatest advantage of regulating sports betting would be the accountability for large amounts of money which is otherwise transferred through illegal channels leading to the reduction of national revenue/funds primarily due to match-fixing, money laundering and crimes. With the changing times, there should be an option of periodical review to have a relook at the earlier approach of a complete ban considering the possible gain of revenue and employment generation that regulation could bring about.
Conclusion and Recommendations
The greatest challenge the global economies are facing is monitoring this anonymous online gambling to curb the unregulated illegal industry. The size of this global order has grown multi-fold in the past few years and unless they are regulated, there would be no transparency in the market and will authorise underworld’s control over the unregulated market. The Law Commission while making its legal recommendations on gambling argued that, “…had gambling been regulated at the time of the Mahabharat, Yudhishtir could not have staked his wife and brothers in a gamble. On the other hand, the argument made for ‘revenue over morality’ lacks merit. States such as Gujarat, Bihar, Manipur, Nagaland, and Lakshadweep, prioritising societal morality over revenue collection, have put legislative embargos on the sale, storing and consumption of liquor; considering its ill-effects on the society. Therefore, keeping in mind that the Indian society has always frowned upon gambling, considering its self-destructing capabilities and pernicious nature, it is most likely for the Indian people to choose morality over revenue in matters of gambling too.” The unregulated industry of gambling is filled with inherent greed and corruption trickling down increased criminal activity. Widely interpreting Entry 31 of List I of the Constitution of India which covers telephones, wireless, broadcasting and other forms of communication, which are the medium through which gambling and betting are offered and advertised, the Parliament has the legislative competence to enact legislation to deal with the same. The legislature should also do a periodic review to analyse and identify other skill-centric games like horse racing and exempt them from gambling prohibitions. As followed by major international economies, gambling and betting should be offered by licensed operators authorised by the Government authorities who shall be liable for producing accounts of the transactions as and when required by the competent authority. To avoid illegal loans and potential contribution to the black-market economy, all transactions of regulated gambling should be made via internet banking or accounted banking or cashless method by an account linked with PAN/ Aadhaar Card. There should be a strict age limit (above 18) to be eligible to participate in these activities, and all vulnerable groups shall be disallowed to gamble for higher stakes by keeping caps on the amount in accordance with the economic status. The advertisements of these activities should be pre-censored to ensure that there is no objectionable or pornographic content. The most important part is to make the gamblers aware of their rights, duties, and responsibilities while gambling which is only possible via social conditioning. Information regarding the risks and regulations should be properly displayed. With the emergence of India as a powerful economy, the inflow of FDI can be pumped up by amending the foreign exchange regulations to allow hospitality industries to start in India, but this should be supplemented with strong laws to prevent money laundering. A proper gambling registration number may be provided to each player to keep a statistical and moral check on the players. Gambling being a sensitive issue, can never be tackled or regulated by legislative measures alone. It requires an equal participation from all the pillars of the democracy including Judiciary, Executive and Media, to curb this social evil of illegal gambling and to protect the economy and cultural morality of the nation. As the law exists to serve the needs of the society governed by it, the ultimate responsibility is on the society as a whole to analyse and act according to the active regulatory and legislative framework laid down by the Government.
[i] M.B. Majumdar, Commentary on the Bombay Prevention and Gambling Act, 1887 (Sweden Maxwell).
[ii] Law Commission of India: Report No. 276 “Legal Framework: Gambling and Sports Betting Including in Cricket in India”
[iii] The Public Gaming Act of 1867
[iv] Quoted in the case of Reeja v. State of Kerala, 2004 (3) KLT 599
[v] Gambling in ancient civilisations, available at: http://www.ancient-origins.net/ancientplaces Europe/gambling-ancient-civilizations-00931
[vi] Law and Sports in India: Development Issues and Challenges (LexisNexis, 2016)
[vii] The History of Gambling, available at: http://www.gambling.net/history/
[viii] AIR 1957 SC 699
[ix] 1965 AIR 307, 1964 SCR (1) 765
[x] Gambling Commission of UK, Industry Statistics – April 2013 to March 2016. Report available at: www.gamblingcommission.gov.uk
[xi] Available at: https://www.pmu.fr
[xii] ARJEL, Annual Report 2016-17, available at: www.arjel.fr/IMG/pdf/rapport-activite2016en.pdf
[xiii] Case Nos. 16-476 and 16477
[xiv] 13 Q.B. 308
[xv] Case No. 91-KGPR12-3
[xvi] In Case C‑46/08, REFERENCE for a preliminary ruling under Article 234 EC from the Schleswig‑Holstein isches Verwaltungsgericht (Germany), made by decision of 30 January 2008, received at the Court on 8 February 2008, in the proceedings
[xvii] Constituent Assembly Debates, Official Report, Vol IX, Sixth Reprint, Reprinted by Lok Sabha Secretariat, New Delhi, 2014.
[xviii] K. Rand and S. Righty, “Moral Policymaking and Indian Gaming: Negotiating a Different Terrain”, available at: https://www.bc.edu/content/dam/files/centers/boisi/pdf/f07/gamblingpapers/Rand-Light.pdf
[xix] Online Gaming in India: Reaching a New Pinnacle, A Study by KPMG in India and Google, available at – https://assets.kpmg. com/content/dam/kpmg/in/pdf/2017/05/online-gaming.pdf.
[xx] How Technology Has Influenced the Gambling and Casino Industry, available at: https://www.imageholders.com/insights/blog/post/how-technology-has-influenced-the-gambling-and-casino-industry/?v=c86ee0d9d7ed
[xxi] Online gaming in India: Reaching a new pinnacle: A study by KPMG
[xxii] United Nations, Department of Economic and Social Affairs, Population Division (2015)
[xxiii] Ericsson Mobility Report, Ericsson, June 2016
[xxiv] Ministry of statistics and programme implementation (MOSPI), Trading Economics, available at: www.tradingeconomics.com
[xxv] Indian Languages – Defining India’s Internet, A KPMG in India-Google report, April 2017
[xxvi] “Should Gambling Be Legalized?” The Hindu (Mar. 30, 2018), available at: http://www.thehindu.com/opinion/op-ed/should-gambling-be-legalised/article23385128.ece
[xxvii] Available at: www.espn.in/espn/story/_/id/20514748/coming-soon-new-sports-codetargets-vips-voting-lobbies and www.thehindu.com/news/national/Govt.-constitutes-panel-to-draft-National-SportsDevelopment-Code/article16993002.ece