Indian State High Court strucks down ban on online gambling

Online gaming in India got a boost when the High Court of Karnataka state struck down key amendments to the Karnataka Police Act, 1963, to ban all forms of gambling in the state.

High Court deemed the move to ban gambling unconstitutional

On 21 September, 2021, the state legislature of the Indian State of Karnataka passed a bill to amend the Karnataka Police Act, 1963 with a view to enforce a blanket ban on gambling in the state. The amendment came into effect on 5th October which resulted in the Police filing an FIR on 7th October against founders of an online gaming app called “Dream 11”, Bhavit Sheth & Harsh Jain seeking their arrest for flouting the new ban. The High Court extended the stay on any possible coercive action by law enforcement authorities in response to their petition.

On 22 December 2021, All India Gaming Federation and Gaming companies file a petition in the Court opposing the ban with bracketed online games such as Rummy with gambling. In the latest ruling a division bench of the Karnataka High Court Monday struck down key amendments to the Karnataka Police Act, 1963 declaring, “The provisions are declared to be ultra vires under the Constitution and struck down”.  “ultra vires” translates as “acting or done beyond one’s legal power or authority”.

Justice Krishna S. Dixit pronouncing the order also stated, “However, nothing in the judgment shall be construed to prevent an appropriate legislation from being brought about concerning the subject that is betting and gambling in accordance with the provisions of the Constitution,”.

The Karnataka Police Act, 1963 was amended by the Karnataka State Legislature despite similar Acts in the neighbouring states of Kerala and Tamil Nadu were recently struck down by their respective state High Courts. Tamil Nadu Gambling and Police Laws (Amendment) Act, 2021 was struck down by the Madras High Court on 3rd August, 2021 as being “ultra vires”. The Kerala Gaming Act, 1960 amendment to impose a ban on online Rummy was also struck down by Kerala High Court on 27 September, 2021.

Games of Skill vs Games of Chance

One of the main grounds of challenge on the new gaming laws was that games of skill and games of chances were clubbed together in the definitions of the new laws. The petitioners argued that competitive games of skill are business protected under Article 19(1)(g) of the Indian Constitution as laid down the Supreme Court of India in 1957.

The Karnataka Police (Amendment) Bill, 2021, which, among other amendments, has banned “any act of risking money, or otherwise on the unknown result of an event including on a game of skill.”

The arguments are that games like Rummy and Horse Racing are classified as games of skill and therefore cannot be subjected to gaming laws where the distinction lies if the predominant outcome is based on skills or chance. Another argument is that States do not have the legal authority to prohibit games of skill.

Online Gaming industry in significant growth

A report by the All India Gaming Federation (AIGF) and EY states that there is significant growth in the online gaming industry in India during the Covid lockdown, from 360 million gamers to 510 million by 2022. It also shows that 85% are gaming on mobile devices. It is also estimated that online real money game players are expected to grow from 80 million in 2020 to 150 million by 2023.

The Indian State of Karnataka is known for being the leaders in technology is stated to account for 15% of the country’s online gaming market. Internet and Mobile Association of India (IMAI) records 92 gaming companies are registered in the state capital Bengaluru, employing 4000 people, attracting more than Rupees 3000 Crores in investments.

 

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