Why Gambling Is Illegal In India

10.03.2021by

The Public Gaming Act made it illegal to operate a venue where gambling took place. It also made it illegal to visit such a venue. While this is clear enough, there’s no precise definition of gambling within the act which makes it hard to determine, for example, whether betting on a game of cricket is illegal online in the same way as betting on the roll of a dice might be. We have further examined the laws pertaining to online gambling below in order to ascertain its legality and if investments can be made within the same or not.

Another form of legal gambling in India is the lottery. The Lotteries Regulation Act of 1998 gave each state the right to authorize lotteries if they choose to. There are some rules, including a once-per-week limit for draw games. Horse race betting and lotteries are the only two legal forms of gambling in India.

  • Gambling is totally illegal in most states and central administrated territories except Sikkim,Daman and Goa.The gambling is prohibited in India mostly due to moral characters as well as to curb corruption and money laundering.’’.
  • Public Gambling Act, 1867. According to a report by KPMG, the overall gaming market (majority of which is considered to be unaccounted and illegal) is said to be around US $60 billion or Rs. This constitutes nearly 3.5% of India’s GDP.
  • In India gambling is considered an illegal activity where a person is wholly depending on his luck by betting a certain amount in games, sports, poker or in other activity. As per the India Contract Act, 1872 if any loss is incurred by performing parties the court of law.

Online Gambling Legislations:

The Public Gaming Act of 1867 makes no reference to online gambling. This is no surprise, given that the internet was a long way from being invented when it was introduced. It can be ascertained that a gambling website in India is deemed illegal under the terms of this act, given its wording.

There’s also another act which could be considered to relate to online betting and gaming: The Information Technology Act of 2000. This makes provisions for various offences relating to online activity. Even though investments in online gambling is profusely prohibited by foreign investors, it does give the Indian government the power to block any foreign websites.

The government has used this power to instruct Internet Service Providers to prevent Indian residents from accessing certain foreign betting and gaming sites. On a state level, there are two states which have introduced legislations relating specifically to online gambling. In Maharashtra, it’s completely prohibited, while in Sikkim the government has now provided the authority to issue licenses to operators wishing to provide online gambling services within the state and under the guidance of the law. This is a notable step forward for regulated gambling in India, provided it is strictly in adherence to the specific law mentioned above.

How Online Gambling Laws can affect us:-

In every sense of the way, the legal situation relating to the usage of online gambling sites in India is decidedly complicated but can be made clear through an analysis. Many of the major gambling sites welcome Indian customers readily, but since these sites are operated overseas they aren’t governed by Indian law and can be deemed as illegal under the present law, if found in contradiction to any provisions relating to the same.

With that being said, with the exception of Maharashtra, there are no such laws which clearly state that it is illegal for an Indian resident to gamble online. Even though gonline gambling may be banned in most parts of the country, if one wishes to indulge in this activity one may only do so through a site which is reputable and trustworthy and which accepts Indian customers and complies with the state governed laws with regards to gambling.

The Foreign Exchange Management Act (FEMA) 1999 was introduced within India in 1999 in order to govern the exchange of foreign currencies. Technically, depositing to a gambling site in a currency other than rupees could be considered an exchange of foreign currencies and thus be covered by the act however, no direct provision for the same has been made clearly available till date.

Why Gambling Is Illegal In India Government

This is why many Indians find it difficult to deposit at sites from their bank or by using a credit card.

Changes within the Indian Online Gambling Legislation:-

It’s not unreasonable to expect that in the coming years, the gambling legislation in India will be updated and amended in order to provide a clearer idea of what’s illegal and what’s not however, the latest changes, if any have been elaborated below:-

October, 2014

The Sikkim state government issues its first license for an online gambling operator; Future Gaming Solutions Private Limited. Future Gaming will now be able to legally offer real money for online betting and gaming services within the state.

LEGAL POSITION OF ONLINE GAMBLING IN INDIA

Game of Skill v. Game of Chance:

There has been a substantial discussion by Supreme Court and High Court on what constitutes a ‘game of skill’ and a ‘game of chance’. What is adduced from the judgments is that a game where there is preponderance of skill over chance is a ‘game of skill’ and vice-versa.

By taking the above ratio into account, SC in the matter of State of AP v. K.Satyanarayana(1968) held the game of Rummy to be a ‘game of skill’. However, the Court in its judgment had indicated that if there is gambling or if the gambling house is making any profit whatsoever from the game of rummy, then it could amount to an offense under the laws of AP. It was further observed by the SC that the three card game which goes under different names such as flush, brag, etc. is a game of pure chance. This was relied upon by SC in another its other judgments viz. M.J.Sivani v. State of Karnataka (1995) and Dr. K.R. Lakshmanan vs State Of Tamil Nadu And Anr (1996).

Why Gambling Is Illegal In India

The issue of whether rummy if played with stakes amounts to gambling or not has not been decided by Supreme Court. However, Andra Pradesh High Court in D. Krishna Kumar And Anr. vs State Of A.P.(2002) (Annexure-2) relying upon the SC decision of 1968 held that till such time the state gambling Act is amended to lay down that playing Rummy with stakes is 'gaming', playing Rummy with stakes is not 'gaming' within the meaning of the Act and is therefore allowed.
Delhi District Court: Gaussian Network Pvt. Best casino affiliate. Ltd. Vs. Monica Lakhanpal

The issue of Online Gaming/gambling laws in India was discussed in detailed in the above case when the issue was put up before the Court under Order 36 Rule(1) of CPC by the parties. The Court held the following:

  • Game of skills, if played with stakes does not amount to gambling;
  • Playing games of skill for money is only legal in the real form, online games cannot be compared to real games;
  • Attracting business or enticing players by alluring them with prize money is illegal;
  • Gaming sites partaking a slice on the winning hand are illegal as they amount to a virtual gambling house.

Having said that, the said ruling was rendered infructuous as during the final arguments in the revision petition, parties sought to withdraw the petition. So the effect being there is no ruling which can be treated as a precedent as regards online gambling.
Gujarat High Court on Poker:

The issue of whether Poker is a ‘game of skill’ or a ‘game of chance’ was never discussed in detail by any Court in India until the recent decision/order dated December 4, 2017 passed by the Gujarat High Court in, “Dominance Games Pvt. Ltd. V. State of Gujarat”, wherein, the said issue was extensively pondered upon. The Court in its said decision held that poker is a ‘game of chance’ and hence amounts to gambling under the Gujarat Prevention of Gambling Act, 1887. While arriving at the aforesaid decision, the Court inter alia observed the following:

  • That the game of poker originated from ‘flush’ or ‘Indian teen Patti’ which has been observed by the SC as a game of chance in its 1968 judgment and consequently, as a corollary, the game of poker is also to be construed as a game of chance;
  • The game of poker involves a process wherein the players have no control or say over the cards received by them and the final outcome is based upon mere luck or chance depending upon how the cards are received by the player. Poker-face to bet, would be a part of bluffing or deception and the so-called strategy, cannot be considered as a skill. The outcome also depends upon the ability of a player to spend money and how deep his pockets are. It is a game of deceiving, bluffing and duping other players;
  • The game of Rummy is different from the game of Poker. While poker involves betting or wagering, rummy has nothing to do with stakes and betting or wagering is not essential to the game of rummy;
  • The Court while noting the ills of gambling and the impact of gambling on the moral fibre of society noted that ‘one must not overlook the ground realities in India or a country like India, where the majority of the population is struggling for the basic necessity and there is a lack of awareness amongst the people as to, if they are permitted to bet at all, in the craze of earning easy money and hence do not know what to do if the things go wrong.’

Why Should Gambling Be Illegal

Mr. K.N Suresh, Secretary of Indian Poker Association has filed an appeal against the said order, being Letters Patent Appeal No. 2625 of 2017 before the Division Bench of Gujarat High Court. The bench after hearing the matter briefly on December 28, 2017 issued a notice to the state government and other respondents and till date the matter is not heard finally. Having said that, since no ad-interim/interim reliefs are granted presently, the Single Judge order stands valid and enforceable.

Is Gambling Is Legal In India

Though the order does not specifically make any observation on Poker, if played as a sport and/or without stakes, however, while differentiating between rummy and poker, the Hon’ble Court makes a presumption that wagering or betting is an inseparable part of the game of poker and therefore would involve stakes higher than imagined. The Court while holding poker to be a ‘game of chance’ has also predominantly relied upon moral religious and social grounds. In the absence of the said order being overruled and the issue being addressed specifically, the game of poker, even if played as a sport and/or without any stakes, remains a grey area which is then left at the discretion of police authorities.

POSITION:

Though the issue of poker was considered by the Gujarat High Court in view of the provisions of the Gujarat Prevention of Gambling Act, 1887, in arriving at the decision of poker being a ‘game of chance’, the court made several observations as to how the game is played, the origin of the game, reference to ancient Indian literature, moral and religious grounds, etc. which may be applied by other states/state machineries having similar gambling laws. The issue is likely to be clarified by the Division Bench of the Gujarat High Court, once the appeal is finally heard.

In view of the above, it is clear that if a game is considered to be a ‘game of chance’ under the state laws and rulings by the Courts and is played with stakes, it would constitute as gambling under the respective state laws with exceptions pertaining to a few states as mentioned above. If an entity is able to show that a particular online game or a particular on-ground gaming activity has preponderance of skill over chance and/or is played as a sport without stakes, it may fall within the exception of gambling under the state gambling laws. It is pertinent to note however that if online gambling is illegal in any state, the promotion of the same in such a state would amount to violation of ASCI Code as well as Cable TV Network Regulation Act, 1994.

FDI and Online Gambling in India:

The law in India very strictly and straight forwardly bans Foreign Direct Investment in the gambling sector in India. There has been a clear and consistent policy decision that no foreign investment is allowed in Indian gambling businesses. No foreign company or subsidiary of such a company can directly or in joint venture with Indian companies participate in legal gambling businesses in India. Even foreign holding of securities is not allowed in an Indian venture, even if such shareholding is minority or marginal.

Taking capital in the form of debt from foreign investors is also not an option since Indian entities must toe the lines drawn by External Commercial Borrowings (ECB) Guidelines. Automatic route under the current ECB rules do not allow borrowing for the gambling sector

FDI is prohibited in the following activities/sectors:

Is Online Gambling Illegal


(a) Retail Trading (except single brand product retailing)
(b) Atomic Energy
(c) Lottery Business including Government /private lottery, online lotteries,etc.
(d) Gambling and Betting including casinos etc.
(e) Business of chit fund
(f) Nidhi company
(g) Trading in Transferable Development Rights (TDRs)
(h) Real Estate Business or Construction of Farm Houses
(i) Activities / sectors not opened to private sector investment.

Why Gambling Is Illegal In India Right Now

Besides, foreign investment in any form, foreign technology collaboration in any form, including licensing for franchise, trademark, brand name, management contract etc., is also completely prohibited for Lottery Businesses and Gambling and Betting activities.

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