Commentaries on recent legal events
Authors: M. Hossain, Founder, LLC & Reshmi Hossain, IP & Commercial Law Specialist, LLC
“Money won is twice as sweet as money earned.”
Betting or gambling is known to have illicit connotations in most of India, despite that there does not exist a categorical legislation making online betting an illegal activity. Offshore betting companies are habitually seen to utilize this apparent loophole to allure Indians to bet online. The Indian Premier League for instance, appears high on such lists and some websites even collaborate with offshore betting agencies, in turn enabling Indians to place online bets. In fact, some advisory websites of the likes of indiabet.com have even come up with ways to circumvent direct liability by fashioning an arrangement, enabling people to connect with international online bookmakers with the option of choosing from the listed bookmakers. The chosen link by the users then redirects them to such bookmaker’s direct website. It is possible to bet on every aspect of an IPL match, from the toss to how the bowlers will fare and the odds on a batsman scoring a hundred. The websites further suggest the names of online betting agencies such as William Hill, Ladbrokes and Betfair for placing bets.
Interestingly, websites contain distinct disclaimers to avoid legal issues by pre-empting questions of law that can arise on the legitimacy of such websites in the Indian landscape. Such disclaimers categorically mention how and why such websites facilitate online betting e.g., “The question of whether it is legal to bet from India using an international bookmaker is not clear in law. While bookmakers in India are illegal, there is no specific law in India which bans an individual customer from placing an online bet with a bookmaker based outside India,”.
According to the Public Gambling Act (1867), all kinds of gambling in India are illegal, however, unlike in the US where there is the American Internet Gambling Prohibition Act, no specific laws exist in the Indian system that bar online gambling. It is challenging to bust Internet gambling offenders if for instance, the website on which such gambling is executed, is hosted by servers located in offshore countries where betting is legal. The Public Gambling Act is the general law governing gambling in India. However, the state legislatures under the Constitution of India have been entrusted with significant regulatory leeway to form state specific gambling laws. Most of the Gambling Legislations have been enacted prior to the advent of virtual or online gambling and hence these gambling legislations primarily refer to gaming/gambling activities at the physical premises.
The betting scene in the United Kingdom
The betting landscape in UK is not half as grim as its Indian counterpart. The Gambling Act 2005 established the Gambling Commission, which has been put in place to regulate commercial gambling in the UK. All operators of remote gambling, i.e., online gambling or telephone gambling are required under the Gambling Act 2005 to be licensed. The license does not depend on whether the operator is providing gambling online but is in relation to the specific activities that they provide online. A separate license will be required for each of the following activities like betting, bingo, casinos, gambling software and lottery games. Gambling websites which do not have their remote equipment based in the UK will not have to be licensed by the Gambling Commission. If the online gambling products from websites based outside of the UK are being advertised within the UK, the website must be based in one of the whitelisted countries or a country mentioned in the Gambling Act 2005.
Offshore Gambling within India
More recently, during the UEFA European Football Championship 2021, Sony LIV streamed the tournament in India and listed Betway, a Malta-based online betting site, as a partner. Betway is a sports betting app, and is one amongst many others that are advertising its services in India, despite sports betting and advertising thereof, being banned in most Indian states. Another major sports betting site that advertises on Indian sports live streams is Dafabet, a website that emphatically mentions on its terms and conditions that its governing jurisdiction is limited to England and that users in countries with betting bans must take note of it. It states, “You irrevocably and unconditionally represent and warrant, without reservation or limitation, to the Company that you will not access or register an Account at any time […] from within a jurisdiction that prohibits the access or use of the Website and/or the Services for any reason whatsoever.”
Such disclaimer then brings up the discernible question as to why websites like Dafabet advertise its services at all in India, where most states ban its core activity. However, the company advertises an associated brand, DafaNews, as a surrogate advertising strategy to skirt around these legal questions. The material question thus is: since these websites are based outside India, is it legal for Indians to bet on them?
It is imperative to note that in most such cases, an analogy to pornography is drawn wherein officials tend to focus more on the people facilitating the activity than the ultimate consumers, or in the case of betting apps, the bettors. So, what happens when the facilitators are based or operating from abroad?
Regardless of the mounting popularity and the revenue generated by gambling and betting in India, the Indian laws and the Courts in India have been averse to any ‘game of chance’ and probability, except in States of Goa and Sikkim. Since the advent of the British colonial rule in India, many Indian states have enforced the Gambling Act prohibiting all forms of gambling and betting in their respective states. Goa and Sikkim are the only exceptions that have allowed gambling and betting in their state, subject to regulation of their respective State Governments. List II of Seventh Schedule of the Constitution of India endows the state governments with the power to legislate on matters concerning gambling and betting.
It is pertinent to mention that in 2009, the Government of Sikkim (Finance, Revenue and Expenditure Department) issued a memorandum known as Sikkim Online Gaming (Regulation) Rules, 2009. This outlines the rules and regulations for online gambling licensing within that State. With several states updating such select laws to regulate gambling websites and online apps, legal experts weigh in on what it means for international platforms and whether the government can take action. The State of Goa has allowed gambling by enacting the Goa, Daman and Diu Public Gambling Act, 1976 and was subsequently amended to allow card-rooms in offshore vessels and slot machines in five star hotels subject to prior approval and authorisation of the State Government on payment of a specified recurring fee.
The Sikkim Online Gaming (Regulation) Act, 2008 was passed with a dual objective of controlling and regulating online gaming through electronic and non-electronic formats and to impose tax on the same within its territory. Initially, the language of the Sikkim Online Gaming (Regulation) Act, 2008 envisaged that the license should allow the licensee to offer its games across India without restricting it to the territory of Sikkim. However, the Sikkim Online Gaming (Regulation) Rules, 2009 was subsequently enacted and the same had been amended to restrict the offering of ‘online games and sports games’ under the licenses to the physical premises of the game parlours within the geographical boundaries of the State of Sikkim through intranet gaming terminals. Except for the Sikkim Online Gaming (Regulation) Act, 2008 and Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Act, 2016, none of the other Central or State gambling legislation specifically mentions online gambling which puts online gambling involving 'game of skill' in a grey area.
In many states, the facilitation of gambling and betting is carried out by regulated establishments called common gaming houses, and whether a foreign betting website is considered a ‘common gaming house’ is yet to be tested before the Indian courts.
A number of states have explicitly included websites and apps in their newly amended gambling and real money gaming laws.
This gives us an overview of the gambling laws in India and it is clear from the same that there are restrictions on any kind of gambling or wagering activities in India. However, all the gambling legislations in India have excluded 'games of skill' from the purview of gaming activities in India, as 'gambling' is not defined under the gambling legislations. The dictionary meaning of gambling is "to stake something on a contingency; take a chance". The gambling under the gambling legislations does not include (i) betting on a horse race (subject to the legal regulations); (ii) games of skill (excluded under the Gambling Act and by the Court's judgments); and (iii) lotteries (regulated by lottery laws of India). There have been numerous debates all over the world as to which games or activities can be considered as 'games of skill' and which games or activities are based predominantly on luck in which a person's intellect has a limited role to play.
The problem with regulating international betting sites is that the Internet itself is regulated by the Central Government, while gambling is regulated by the State governments. As such, an individual State cannot really get a delinquent website or app blocked within its borders. Andhra Pradesh, for instance, through the Hon’ble Chief Minister, YS Jagan Mohan Reddy, tried asking for assistance in blocking access to real money gaming websites that the State had just outlawed. These websites however have remained accessible, as it has been subsequently reiterated that in matters of blocking such sites, the Centre lacks the legislative powers to take action against what is essentially a State subject.
Online gambling in Singapore
Gambling in countries like Singapore is regulated under stricter provisions in comparison to India as it has been outlawed in Singapore in 2014, however an exception was made for local operators Singapore Pools and Singapore Turf Club in 2016. In 2014, the Remote Gambling Act was enacted owing to which it became illegal for Singaporeans to engage in any form of remote gambling, which includes any type of gambling that takes place on the Internet, over the phone, via TV or radio, or any other kind of communications technology. Singapore-based remote gambling services are illegal, not just for the bookies but also for customers. It is also illegal to be betting on overseas-based remote gambling websites and services. Anybody who used to engage in online soccer betting or was an avid poker fan would have noticed that in 2014, all popular online gambling sites got blocked in furtherance of the Remote Gambling Act as it rendered it illegal to use foreign remote betting services no matter where they were based.
Game of Chance & Game of Skill:
The traditional form of gambling is understood in the context of its brick-and-mortar format, whereas modern gambling consists among other things, of computers connected offline or online, mobile phones and the Internet. The gambling legislations exclude 'games of skill' from the purview of gambling and hence does not attract the penal provisions.
In State of Andhra Pradesh v K. Satyanarayana and Ors[1], the Court held that:
"The game of Rummy is not a game entirely of chance like the 'three-card' game mentioned in the Madras case to which we were referred. The 'three card' game, which goes under different names such a ‘flush’, brag etc., is a game of pure chance. Rummy, on the other hand, requires certain amount of skill because the fall of the cards has to be memorized and the building up of Rummy requires considerable skill in holding and discarding cards. We cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill. The chance in Rummy is of the same character as the chance in a deal at a game of bridge."
In Manoranjitham Manamyil Mandram v State of Tamil Nadu[2], the Court held that:
"Therefore, while it is the right of the appellant to have recreational activities which are not prohibited, the respondent's right to take appropriate proceedings against illegal games of betting, wagering, etc. is also provided for under the Act. Therefore, there cannot be a blanket direction as prayed for by the appellant. The question whether a particular game is a game of skill or chance is to be decided on the facts and circumstances of each case. As and when proceedings are; initiated against the appellant in accordance with law, the appellant shall always have the right to question the same or challenge the action of the respondents if it is not in accordance with law."
The Public Gambling Act, 1867 by virtue of Section 12, excludes 'game of skill' from the purview of law. The Hon’ble Supreme Court, in Dr. R. K. Lakshmanan v. State of Tamil Nadu[3], defined 'game of skill' as "one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player". The Court pointed out that a game of chance is one in which the element of chance predominates over the element of skill and similarly a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element – "skill" or "chance" that determines the true character of the game.
The Supreme Court in Dr. R. K. Lakshmanan (supra) held that horse racing is a game of mere skill within the meaning envisaged under the Madras City Police Act, 1888 and Tamil Nadu Gaming Act, 1930. The Court explained through various instances how horse racing can be considered a game of skill as the betting in horse races are based on evaluative skills and various other factors like skill and management of the jockey.
A recent question that arose in relation to the game of Ludo and whether this popular game relies on skill or luck may soon be decided by the Hon’ble Bombay High Court - at least in the case of gaming application Ludo Supreme. This development is in relation to a petition that has been filed in the Hon’ble Bombay High Court against the makers of Ludo Supreme, alleging that the online game promotes gambling and deviates from the original board game, which is a game of chance.
Popular online fantasy gaming applications in India
Fantasy gaming apps of the likes of Dream11, Mobile Premier League, My team 11, operate on a very simple premise as fans assemble a virtual team from a list of real players who they think will excel in the upcoming real-life games. Once the gaming app user picks his team, one can enter a contest by paying a small fee. The entry fee is pooled together and the fantasy app promises to distribute the proceeds to the winners. If the chosen players in the team score a lot of runs, take wickets or claim a few catches in the real matches, the user will earn points and the highest ranked users on the fantasy app would emerge as winners of various prizes.
The format of making easy money can be construed as gambling as it comprises all the features of a potential gambling site — small entry fee, big payouts, a bet on real-life players playing in competitive games. And yet, they are still legal. The question is on what basis?
As we have witnessed earlier, gambling laws at the central level have not been amended to address Internet related apps and most States have their own take on gambling. For instance, lotteries are legal in 13 states. Casinos are legal in Goa and Sikkim. Moreover, the country’s primary gambling law, The Public Gambling Act, 1867 is a byproduct of the colonial enterprise and hence such legislations cannot obviously be interpreted to address activities on the Internet. It is thus unsurprising that, when fantasy gaming apps like Dream11 started making the rounds in India, people were certainly confused as there was a palaver around the legality of such businesses. The matter was brought up before of the Hon’ble Punjab & Haryana High Court to rule on the issue of whether Dream11 promotes gambling or not.
To comprehend the nuance here, it is imperative to distinguish between a game of chance and a game of skill. Now a game of chance involves an individual betting on an uncertain outcome/contingency where an outcome has no bearing on the skill of the player and is as uncertain as it gets.
A game of skill however, depends on the player’s training, experience, environment, acclimatizing process and adroitness. However, even a real-life game of cricket has a certain amount of chance involved. A simple coin toss can have a massive bearing on the result in a game of cricket. And so, courts have relied on the “skill test” to separate the two. If it can be proven that a game is preponderantly a game of skill and not of chance, then the game is said to have passed the “skill test”. The component of skill must vastly outweigh the component of luck. Then, such a game cannot be classified as a gambling activity. However, it is challenging to distinctively separate the two. For instance, Poker has obvious elements of skill based on the ability to read people. On the other hand, the game is based on the shuffling and dealing of cards, involving an element of randomness that is a consistent feature of a game of chance.
However, after meticulous consideration, some courts have decided to side with the likes of fantasy apps like Dream11. Dream11 succinctly states on its website — The Court, in its ruling, stated that playing the Dream11 game involves considerable skill, judgment and discretion. And that success on Dream11 arises out of users’ exercise, superior knowledge, judgment and attention. The Court also held that ‘the element of skill’ had a predominant influence on the outcome of the Dream11 game, which follows the following format: Participants have to choose a team consisting of at least the same no. of players as playing in a real-life sports team (e.g., 5 in basketball, 7 in kabaddi and 11 in cricket/football). All contests are run for at least the duration of one full sports match. No team changes are allowed by participants after the start of the sports match. On this basis, the Court adjudged that playing on Dream11 constitutes a ‘game of mere skill’, which makes the Dream11 game exempt from the provisions of the Public Gambling Act, 1867 (PGA).
In fact, the company itself drove the point by branding the game with a tagline “Khelo dimag se”. So, as it stands, fantasy gaming apps are a game of skill and unless this issue is finally decided by the Hon’ble Supreme Court of India, they will continue to remain legal.
It is however pertinent to mention that Dream11 is currently facing a police case in Karnataka for alleged violation of a new local law that prohibits online gaming. The State law, which came into force rather recently, bans online games involving betting and wagering and "any act or risking money, or otherwise on the unknown result of an event including on a game of skill". A case has thus been registered in India’s tech capital against Dream11's founders following a complaint of the gaming app being operational after the ban came into force.
The Karnataka ban has intensified concerns that growing state regulations, hefty fines and prison terms on violators could hit the gaming sector in India, where foreign investors have invested a big sum in the recent months.
Conclusion
In the present world where almost everyone seems to be connected through the Internet, a person sitting in India could easily bet through a foreign owned website. There is no law at present which directly regulates or prohibits such activities in India. In the absence of any specific law directly regulating the online gaming/gambling through a server located outside India, these can be regulated through the internet intermediary compliances, cyber law due diligence requirements prescribed under The Information Technology Act, 2000, restrictions on foreign exchange earnings and outgoings and strict enforcement of anti-money laundering laws. The ambiguity on the application of state gambling laws on digital platforms/foreign websites is why India should enact a central law on gaming which addresses these issues consistently and is better equipped to enforce the law on foreign websites.
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