Is the game involving betting or gambling legal in India? Is online gambling, betting or lottery legal in India? Lets understand the stand by studying laws on online gambling.
Written by: Swati Shalini
Published on 25-Jul-18
Most of us know how the game of Chausar ended for the Pandava prince Yudhisthira. What we do not know is what kind of a game Chausar would amount to in modern India. It was a game of dice but was it also a game of strategy or skill? Is the game that involves betting or gambling legal in India? Throw the internet into the mix, is online gambling, betting or lottery legal in India? MyAdvo answers these burning questions!
Gambling has existed in India since times immemorial. With technological innovation and evolution of the internet as well as telecom, online gaming in India has become an extremely popular mode of entertainment in an as yet nascent market. Online games and lotteries are new entrants to the otherwise offline industry of gambling, betting and wagering in physical gaming houses that have been strictly regulated in India.
The Public Gambling Act, 1867 is a central legislation that prohibits all games of chance except lotteries and games of skill. Entry 34 in List II in Seventh Schedule of the Constitution of India gives powers to States to make their own betting laws and gambling laws and policy within their territories. Such power includes the power to legislate on lotteries other than State Lotteries. Only the Central Government is allowed to legislate on lotteries organized by the Government of India or by a State Government. At present, various forms of gambling and betting, including setting up of casinos, are legal in Goa, Daman and Sikkim.
Most of the legislation pertaining to lotteries and gambling were enacted at a time when the online medium was almost non-existent and online gambling was not envisaged. There exists a lacuna that leaves room for ambiguous interpretations and, therefore, presents both opportunities as well as legal risks for online gaming and lottery companies.
Two latest Supreme Court judgements- the Mahalakshmi lottery Case and Kerala Case were expected to provide clarity on the issue of the legality of online gaming and lotteries. Gambling has been held by the Supreme Court in the case of Dr K.R. Lakshmanan vs State Of Tamil Nadu (Lakshmanan Case) as wagering or betting on games of chance, excluding games of skill such as horse betting.
In State of Andhra Pradesh Vs. Satyanarayana (Supreme Court judgement on rummy), the game of rummy was held by the Supreme Court to be a game of skill on the ground that unlike ‘three cards’ games of ‘flush’, ‘brag’, etc., which are games of pure chance, rummy primarily involves the preponderance of skill because the fall of cards needs to be memorized and considerable skill is required in holding and discarding cards for building up rummy.
In all games entailing shuffling and dealing out of cards, there is an element of chance because the distribution of the cards is not according to any set pattern but is dependent upon how the cards find their place in the shuffled pack.
A game could be either a game of chance, game of skill or entail both. In Lakshmanan case, the Supreme Court, referring to the cases of State of Bombay v. R. M. D. Chamarbaugwala and Satyanarayana case, noted that competitions, where success depends on the substantial degree of skill, are not ‘gambling’ and irrespective of any element of chance, a game would be a game of ‘mere skill’ if it is primarily a game of skill.
Although the element of chance cannot be ruled out, success in a game of skill depends principally upon the superior knowledge, training, attention, experience and adroitness of the player and ‘therefore, the expression ‘mere skill’ would mean the substantial degree or preponderance of skill.
Therefore, the question is rummy legal in India has it answer in negative.
Online Gaming in India
Sikkim is the only state to have a law on online gaming- the Sikkim Online Gaming (Regulation) Act, 2008 under which licenses may be obtained for conducting online gambling in India viz. Roulette, Blackjack, Pontoon, Punto Blanco, Bingo, Casino Brag, Poker, Poker dice, Baccarat, Chemin-de-for, Backgammon, Keno and Super Pan 9. The state of Sikkim amended this law and restricted online gaming activities to physical gaming parlours in Sikkim through the internet.
The premises of a Rummy Club, Mahalakshmi Cultural Association was raided by police on the ground that rummy was being played for stakes there. The Madras High Court held that Rummy played for stakes would constitute gambling and Mahalakshmi Cultural Association appealed against this order in the Supreme Court.
Some online Rummy companies intervened to be impleaded in the matter as banks refused to process their loans and a judgment on the legality of offline rummy club game could impact them prejudicially. However, the matter was dismissed as the club was acquitted by the trial court on the grounds that the proceedings were initiated for other gambling activities on the premises and not for rummy.
When asked by Supreme Court, whether internet rummy was a game of skill, the Central Government states that it had not formed an opinion in that regard. The Supreme Court, thus, declined to rule on the applicability of Indian gambling laws with regards to rummy club online.Consequently, the current position is the same as before the ruling i.e. games of skill with or without stakes would not be covered by online gambling legislation and there is no definite answer yet to the question of the status of online Rummy vis-à-vis state gambling legislation.
In the 2013 case of Indian Poker Association v. the State of Karnataka, the Bangalore High Court held, “In respect of the game of poker, if played as a game of skill, the license is not contemplated”. The judgment neither subjects Poker to the skill test nor delves into the question of the legality of Poker laws for stakes or profit.
Nevertheless, the judgment is a step in the direction of recognition of Poker laws and Poker as a game of skill and is also expected to impact the decision in the case of Gaussian Network Pvt. Ltd. Vs. Monica Lakhanpal and Anr, pending in the High Court of Delhi, on the question, inter alia, of whether there is any restriction on playing games of skill with stakes on the websites making the profit. Judgment in this latter case, though binding only on parties in question, is eagerly awaited for the reasoning and arguments that would shape the decision.
Lottery in India
Ironically, lotteries which are entire games of chance are permitted in many states, albeit strictly regulated and looked upon by law and courts as a disastrous ‘evil’. In terms of the Lotteries (Regulation) Act, 1998, which is the lottery law in India states may organize, conduct or promote lotteries subject to prescribed conditions.
Online Lottery in India
While the state of Madhya Pradesh has banned lotteries, the government of Punjab has recently announced that it intends to start online lottery schemes with the aim of generating Rs. 150 crores annually through the sale of online lottery tickets. Observations by the Supreme Court about online lotteries in case of All Kerala Online Lottery Dealers Association Vs. State of Kerala in which selective banning of online lotteries by the state of Kerala was the subject of dispute, have not discouraged the government of Punjab.
In the Kerala Case, the Supreme Court held that it was constitutionally valid to discriminate between online and paper lotteries as two distinct classes of lotteries in terms of the Lotteries (Regulation) Act and therefore, a state government may ban online lotteries regardless of the fact that it may be conducting paper lottery schemes. The Supreme Court observed that as long as a state does not itself conduct a particular class of lotteries, it may ban within its territory that class of lotteries conducted by other states.
While there is no specific legislation with respect to online gaming, there are other laws such as cyber laws, tax laws, anti-money laundering laws, exchange control regulations, etc. that affect gambling industry. For instance, in terms of the Information Technology Act, 2000 and the rules framed thereunder, an intermediary is obligated to observe ‘due diligence’ in the discharge of duties.
As per Circular No. 15 of 2015 issued by the Central Board of Direct Taxes, e-wallets or virtual card accounts maintained with offshore online gaming/ poker websites being akin to bank accounts with inward and outward movement of cash, the valuation and declaration of such accounts must be made as in the case of a bank account. Under extant Foreign Direct Investment (FDI) Policy of India, FDI in lotteries and gambling is prohibited.
Online Gaming continues to be a grey area. There are interesting variations in the world of gambling in India. For instance, wagering on horse racing is legal because it is a game of skill but wagering on the game of cricket is not and lottery, which is pure gambling, is regulated but legal whereas online Texas Hold’em Poker, which many argue is a game of skill, may or may not be legal in every state.
Regardless, Indians are gambling in large numbers and the online gaming industry is only growing. Extant laws are not sufficiently keeping up with this change. Worldwide, the online gambling sector is becoming increasingly regulated. Creating a regulatory framework and providing much needed legislative clarity with respect to online gaming would not only help curb underground activity but also create new sources of tax revenue.
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