Author: Rusheetulya Subramanyam, ICFAI Law School, Hyderabad
ABSTRACT
As amusing as Gambling, Betting, and all other Wagering activities can be; they can equally be as detrimental as the stake’s levels. The stringent regulations on these activities give the ones addicted to them an excessively hard time. The inculcation of these games into people’s minds has been growing periodically thereby causing a devastating effect on their financial stability, ultimately causing an unfavourable repercussion on their mental health. This article elucidates what games fall within the scope of gambling and Wagering. This will further clarify regarding the laws and regulations revolving around the same. By surveying numerous legal precedents and relevant historical developments, it comprehensively pursues the total fuzzy concept of the extent of regulations towards the said games.
INTRODUCTION
One of the easiest ways to win or lose money in the contemporary world is through the Stock Market. Giving this position a very close margin is through Gambling, Betting, and other wagering activities which are considered immoral in India. Considering the cut-throat competition for advancements in the job market, people are given a larger window of opportunity to indulge in the said activities. Adding to this, the adrenaline rush is what gets a fraction of indulged people going into the sector. Although the United States shows a revenue of $23.03 billion, statistics portray that India is projected to be a world leader in online gambling in 2024, with an estimated revenue of around $2.90 billion. India has had a well-documented relationship with gambling right from ancient times and even claims to the very origins of gambling. It is said that the earliest recorded mention of gambling anyplace in the world is a gambling activity in Rig Veda, an ancient Indian text dated between 1700 and 1100 BCE. Gambling and betting in India operate within a complex legal framework that is ancient and historical, cultural, and economic. Though the activity is nurtured in Indian history with references going on as early as the ones found in the aforementioned texts, most modern regulations reflect a cautious and restrictive approach to the activities, mostly due to fears about its societal effects, such as addiction and monetary risks. Gambling’s popularity persisted in India through the medieval era into colonial India and continues to this day. In the immediate period, the regulations regarding these activities are state-centric. The Constitution of India lays down the division of powers between the Union government and the State government to legislate on entries enumerated under Schedule VII of the Constitution. ‘Betting and Gambling’ form part of the ‘state list’ and therefore each state legislature is entitled to make its laws with regard to the mentioned matter. There is no single legislation that is followed by all the states. However, most of the states uniformly abide by the Public Gambling Act of 1867.
LEGAL PERIMETER
Enacted during the Pre-independence era, The Public Gambling Act of 1867 is a central legislation that prohibits any games of chance and probability except lotteries. The Act prohibits owning, keeping, and being found in a common gaming house however, the Act excludes ‘game of skill’ from its ambit. A three-judge bench of the Hon’ble Supreme Court in the case of Dr. K.R Lakshman v. State of Tamil Nadu (AIR 1996 SC 1153) regarded horse racing as a game of skill. They stated that betting on horse races requires immense evaluation of numerous factors including and not limited to the jockey’s physical capacity and training limits of the horse. They further added that horse racing sport itself is not illegal and winning any concerned wagering aspect requires special training. States like Maharashtra, Delhi, Tamil Nadu, Karnataka, West Bengal, and Assam exempt horse racing activity from the definition of gambling activity. Additionally, the apex court in the case of Andhra Pradesh v. K. Satyanarayana (AIR 1968 SC 825) stated that ‘the three card game’ with different names including but not limited to Flush, Brag, etc is a game of pure chance. However, considerable skill is needed in Rummy, as the fall of cards has to be memorized, and considerable skill in holding and discarding cards builds the game up. The bench thus concluded that while Rummy cannot be considered wholly a game of chance, it is indeed, predominantly, a game of chance. So far as this is concerned, West Bengal is the only state in the whole of India which has exempted Poker or Rummy from the gambling cover along with other Card games.
There are many legislations in India that are against the said matter. The Lotteries (Regulation) Act, 1998 is a central enactment. According to the act, lotteries have been generally excluded from the definition of betting and gambling. The Act contains several provisions for the states. It provides that the place of withdrawal has to be within the concerned state, the proceeds of sales should go to the state treasury, and the state sells lottery tickets. The Prize Competitions Act of 1955 states that these competitions do not fall under gambling. It details the conditions under which a license must be obtained as a prerequisite for offering prize competitions and also provides a detailed mechanism for the grant and revocation of such licenses. The remittances of earnings from lottery winnings, racing/riding, sweepstakes, etc., are also disallowed under the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Current Account Transaction) Rules, 2000. According to the Prevention of Money Laundering Act, 2002, the reporting entities (a person carrying on activities associated with a casino) maintain records of transactions and documents showing the identity of their clients according to the 2005 rules.
The Law Commission of India chaired by Justice B.S. Chauhan submitted its report on July 5th of 2018. The Apex Court of India has asked this Commission to look into the possibility of a law to regulate betting. The recommendations of this Commission are as follows:
- Although the states of the country have their own power to enact a law to regulate betting and gambling, Parliament may enact a model law to regulate the same under Article 249 i.e., in National Interest, or Article 252 i.e., if two or more states consent to the matter.
- Gambling and betting should only be permitted by licensed operators from India. Additionally, a certain magnitude of cap must be imposed on the participants. This means that only a number of transactions for a specific period i.e., monthly, yearly, etc.
- All betting and gambling transactions should be linked to the Aadhar/PAN Card of the operator and the participants. Additionally, the income earned must be taxed as per the Income Tax Act, The Goods and Service Tax, and other relevant legislations.
- Classification of gambling must be practiced depending on the levels of stakes. The ones with higher stakes must be classified as ‘Proper Gambling’ wherein only the participants from higher income groups are allowed to indulge. Subsequently, ‘Small Gambling’ is where the stakes are significantly low.
- Certain groups of people such as minors, those who receive subsidies from the government, and those who do not fall within the purview of the Income Tax Act or the Goods and Service Tax are barred from participating in online or offline gambling platforms.
- The Commission recommended making amendments to the FEMA and the IR (Intermediary Guidelines) Rules 2011. Under FEMA, the amendment must be such that it attracts investments into the sector in a regulatory format wherein there is a boost to the income of the country. Additionally, Intermediaries under the IT Act must be barred from operating gambling platforms.
GAMBLING TYPES AND THEIR LEGALITY
- Gambling in Casinos
Gambling including slots and casino table games such as roulette and blackjack is regulated by the Public Gambling Act. Only two states in India have legalised casino gambling to a limited extent i.e., Goa and Sikkim. Only 5-star hotels approved by the state attain licenses. Goa has allowed casino gambling on board offshore ships as well. The Union Territory of Daman and Diu regulates casino games through the Daman and Diu Public Gambling Act, 1976. In India currently, there are 2 casinos in Sikkim and 10 in Goa.
- Poker
While some specific State Gaming Laws and courts in a few states have defined poker as a game of skill, others have categorized it as a ‘game of chance.’ For example, the West Bengal Gambling and Prize Competitions Act, 1957, specifically exempted poker from the definition of “gaming or gambling”. In the same respect, judicial pronouncements of the local High Court have gone further to assert that playing poker cannot come under the penal code neither would it attract the harassment of the police. Poker is expressly classified as a game of skill by the state of Nagaland. According to the Allahabad High Court verdict in September 2024, poker and rummy are both games of skill, not gambling. On the contrary, the High Court of Gujarat has stated that poker is a game of chance; however, this matter is currently before a larger bench of the High Court of Gujarat.
- Betting
Betting on horse races has been judicially recognised as a game of skill and most State Gaming Laws specifically exclude it from their prohibitions subject to certain conditions. There is no specific regulator or statutory language for most State Gaming Laws that govern online betting on horse races since most statutes are pre-internet in context. However, the horse race may have some conditions imposed by the race club organising the horse race. Online cricket betting adds another layer of difficulty. While it is technically illegal to bet on cricket, several international platforms allow Indians to participate in cricket betting. States such as Andhra Pradesh, Tamil Nadu, and Karnataka have attempted to ban online betting altogether, leaving the question of enforcement difficult due to the international nature of online platforms.
- Bingo
Though there can be different formats in which bingo is played, each of these formats (whether played online or land-based) would fall either in the category of lotteries or games of chance. In the case of the latter, they would be barred under most State Gaming Laws. For lotteries, only some states permit it under specific conditions, please refer to the corresponding row below on “Lotteries”.
CONCLUSION
Thus, no clear stance is taken by either side, i.e., legalizing gambling or continuing the current state status. It is true that legalization may generate huge revenues by way of taxes; however, there are many things to be considered before undertaking the most drastic policy change in India. Among these are testing any proposed changes in one or a few states on the way to enact change at the national level. This would facilitate in the management of gambling-related harm to afford evaluative research and measures. Further, local studies would help in any changes concerning the prevalence of gambling, the extent of both legal and illegal gambling, public health considerations, and so on. Thirdly, states need to formulate specific strategies for gambling, with an appropriate body for implementation and monitoring. Fourthly, ethical independence must be a condition laid down before the gambling industry is involved in the funding of research and treatment. Fifthly, discussions should include whether gambling should be monopolized by the government or open to the private sector. Last but not least, gambling prevention must also have a public health approach whether or not it is legalized.
Frequently Asked Questions
- Is Online Gambling Legal In India?
Online gambling operates in a legal gray area. While no specific central law governs online gambling, states like Sikkim and Nagaland regulate certain online games, and others like Tamil Nadu and Andhra Pradesh have banned online gambling entirely. Players and operators should consult local laws.
- Are there any taxes on gambling winnings in India?
Yes, gambling winnings are taxed at a flat rate of 30% under Section 115BB of the Income Tax Act, with no exemptions. Additionally, a surcharge and cess may apply, increasing the effective tax rate. Operators are required to deduct tax at source (TDS) before paying winnings.
- How does Indian law define a “common gaming house”?
A “common gaming house” is a venue where individuals assemble for gambling purposes, typically involving games of chance. Operating or visiting such a place is illegal under the Public Gambling Act, of 1867.
- Is cryptocurrency gambling allowed in India?
Cryptocurrencies are not recognized as legal tender in India, and their use in gambling is not explicitly regulated. However, engaging in cryptocurrency gambling could attract legal scrutiny under anti-money laundering or foreign exchange laws.
- Do Indian laws regulate online poker?
Online poker operates in a legal gray area. Courts have ruled poker to be a game of skill, making it legal in many states. However, states like Andhra Pradesh and Telangana have explicitly banned online games involving stakes, including poker. In states like Nagaland, poker is regulated under the Nagaland Prohibition of Gambling and Promotion of Online Games of Skill Act, 2016.