Gambling Laws: Balancing the Odds

30th May, 2024 - 7:02 am Categories: Online Gaming 0 Comments

INTRODUCTION

It is a well-known fact that gambling is illegal in India and is barred by The Public Gambling Act, 1867. For a legislation eighty years older than the independence, it sure stands up to its standards. The Public Gambling Act of 1867 draws its inspiration from the British Gaining Act, 1845 and the Betting Act, 1853. The Act lays down what constitutes “gambling” and what would be its punishment. It states that any person who is found playing stakes and betting with cards, dice or money, inside a ‘gaming-house’ would be punished under the IPC, and any person owning such house or being in-charge of that house will also be punished. It also prohibits making animals fight in public and betting on them. The Gambling Act, however made one exception. It states that any game which is a game of mere skill, cannot be considered as gambling. The distinction was made saying that gambling is a game of chance and any game which require skill, cannot be termed as gambling.

The Act, now, has fallen too far behind and as it lies, there is no detailed legislation to govern gaming activities in India. Attempts have been made to set provisions in other Central Acts, such as:

1. Indian Contracts Act, 1872 under Section 30, declares void any agreement made by the way of wagering, except for some prizes for horse racing.
2. Indian Penal Code, 1860 restricts the working of lottery houses which are not authorized by the State, and punishment is granted with imprisonment for a term not more than six months.
3. The IT Rules, 2011 bars internet service providers from hosting any online gambling platforms or any content which directly or indirectly supports gambling.

There are other Central Acts, which contain provisions restricting gambling and owning ‘gaming-houses’. But what if such a house never existed in real life? The gaming houses in the modern world have now taken to the internet and claim that they are a game of skill rather than chance, thus exploiting the exception set by the Public Gambling Act. And thus, the need for a new and comprehensive legislation has a dire need.

MORALITY QUESTIONS LEGALITY

The question here is, Why is Gambling wrong? If a person wants to go sit in a casino and spend all his life’s savings on a game of poker then why can’t he? Well, the state doesn’t want you to do exactly that. Such games are considered unfair and immoral as it require no skill at all. A four-year-old can go all in on round one and win a hand of poker. That doesn’t take any skill but rather a stroke of luck. Such games have been termed immoral as they are considered against the moral values of human beings and thus lead to degradation of morals and eventually the fall of humanity. The states have levied such restrictions to protect the social as well as national development and not letting you go insolvent over a game of luck. There are many states in India having their own legislation to regulate such activities, for example, The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skills Act, 2015. The Act prohibits games of chance and provides a list of games considered as games of skills such as poker, chess, rummy, etc.

Another well-known state famous for gambling is Goa. The Goa, Daman, and Diu Public Gambling Act, of 1976 prohibited owning gaming houses and gambling in public. The Goa legislation by amending the Act in 1992 and 1996 authorized setting up of casinos and other games of chance and installing slot machines in 5 Star Hotels and permits setting up games such as poker and roulette offshore. Though it is a fact that most of the Casinos in Goa operate on water, there are casinos which are permitted to operate on land as well. The state of Sikkim has similar guidelines wherein it states that such gaming houses may operate on obtaining a license from the Government. The main reason for allowing such operation is to generate revenue and increase tourism in such small states and territories. Though casinos are allowed to operate legally, the government does not go easy on them. They are kept in the highest tax bracket of 28 per cent levying heavy charges on them. The state government earned more than 411 crores in taxes from casinos on land and waters and the number has been rising. This amount helps the government when their funds are low, and aid in the development of low-income states such as Goa.

The age of digitization has however changed the wind slowly and has taken the gambling world online, making it more accessible for everyone. Online platforms such as RummyCircle, Pokerstars, Dream 11 for fantasy sports, and many others provide a stage for people to bet their money and multiply it quickly in the short term. Making money is however not that easy. One wrong move and you have nothing left in your hand. So why doesn’t morality affect online gaming?

DIGITIZATION CHANGING THE WIND

Morality and legality once again fight closely to determine the status of online gaming. On one side, no matter how you look at it, it closely resembles gambling. On the other hand, the gaming companies argue that playing such games requires logistics and builds serious analytical thinking. Multiple cases have been noted in many different states questioning the legality of games such as poker and rummy. Some states agree that these are games of chance while others are convinced that some skill is required to play these games. You could still lose all your money on online platforms if you are not careful.  The warning issued while advertising such platforms itself states that these games can be addictive and might not be good for mental health, but still no impositions apart from taxes are levied. The lack of an all India legislation, creates a huge wormhole where such platforms exists. Another reason the online gaming sector has not been questioned as much is because of its continuous and substantive growth.

[Image Sources: Shutterstock]

The industry has seen a tremendous growth since the pandemic. The restraints on public places led people to explore the online world and with it grew the online gaming industry. It is now part of the whole Digital India initiative. The online gaming sector in India has seen a tremendous growth rate of CAGR of 28% between 2020 and 2023 and projects a sustained growth rate of 15% till the year 2027. In recent events, Prime Minister Narendra Modi had a meeting with some of the biggest gamers in Indian industry and discussed problems faced by them. So it is safe to assume that a comprehensive legislation might not be far.

ISSUES

The online industry has huge potential in upcoming years and it can become a multi-billion dollar industry for startups. However, the lack of a regulatory body poses a problem for gamers. First and foremost, the issue regarding the status of some games being games of skills or chance needs to be resolved. Different states have given different opinions on the matter, for example, in Dominance Games Private Limited vs State of Gujrat (2018), the High court of Gujrat states that Poker is merely a game of chance. The Supreme Court in M. J. Sivani v. State of Karnataka (1955) stated that games like poker, double up, blackjack had no scope of using ones skill to arrive at a desired outcome. In Indian Poker Association v. State of West Bengal (2015), the high court agreed that poker is a game of skill and can be played without attracting attention. As to what qualifies as a game of skill is still unclear. A set of clear instructions are required from the Supreme Court to settle the matter.

Another issue is the amount of tax levied. Online industry earlier existed in the 18% slab but now it has been moved to the 28% tax. This poses a problem for new gamers as they have to pay a huge amount of sum from their winnings and this reduces their earnings considerably. Furthermore, though the industry is projected to be a trillion-dollar industry, it currently lacks the funds and attention it requires. The increased tax rates have slowed the growth and the lack of funds could slow it further.

One of the major issues that have been found is the addictive nature of online games. Because of its easy availability and access, not just adults, but kids as well have started enjoying such games. Some of these apps provide fake credits so you can play online but not with real money, but that does not change the fact that it may cause harm to the mental well-being of the person. There have been many such incidents reported during the pandemic, such as kids running away from home because their parents didn’t allow them to play PUBG, or kids getting in accidents while playing Pokémon-Go. An increase in anger issues amongst children and adults have been noted, especially because of playing competitive games like Valorant.

CONCLUSION

Though the industry has huge potential, it has its drawbacks as well. The main job of the legislation would be to find the balance between the two, i.e. regulating the industry without hindering it progress. Regulation of the young population getting access to such games is also necessary to avoid mental distress. It is also to be noted that many of the young ones have made good profits and are able to support their families and thus heavy restrictions might lead to a decrease in analytical reasoning and skill building among the population. The online industry is relatively new and there are a lot of areas which are left in the dark. These may slowly emerge on its own or it would be another task of the legislation to identify and answer them. Either way, since there is no regulation, many people may use it to their benefit or many people may end up losing a lot of money.

Author: Aaditya A. Khandelwal, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

REFERENCES:

1. Public Gambling Act, 1867
2. The Goa, Daman and Diu Public Gambling Act, 1976
3. https://www.drishtiias.com/daily-updates/daily-news-editorials/urgent-need-for-regulation-of-india-s-online-gaming-industry
4. Dominance Games Private Limited v. State of Gujrat (2018)IGLR801
5. J. Sivani v. State of Karnataka AIR 1995 SC 1770
6. Indian Poker Association v. State of West Bengal W. P. No. 13728 (W) of 2015