Legality of Sports Betting in India: Explained

The Finance Act of 1994 defined “Betting or Gambling” under Section 65-B (15) as: means putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring. [i]Betting in sports is the act of wagering on the result of a sporting event. The term “betting” is generally considered synonymous with wagering; however, it alludes to antes in connection with events in the nature of races or matches between individuals or teams[ii]

SPORTS BETTING

Sport Betting is a type of gambling. According to the Black’s Law Dictionary, gambling is defined as “the act of risking something of value for a chance to win a prize”[iii] Sports betting entails making a bet on the results of sporting events. Numerous bets are put on the results of sporting events, including cricket, auto races, track cycling, and boxing, basketball, hockey, and other sports. Sports betting is done on both a professional and an amateur level. Betting and gambling essential is placing bets on the results of contests, races, or other unforeseen events. The Law Commission of India has provided the government with a legal framework to control these two activities—gambling and sports betting.

Legislation Governing Sports Betting

In the major parts of India, online sports betting is still illegal. Gambling is regulated in the nation based on the Public Gaming Act of 1867. Sports betting and casinos are therefore neither legal nor illegal based on the act alone. The Information Technology Act of 2000 is another piece of legislation that governs online activities in India. However, nothing about online gambling is mentioned in this either. Sports Betting in India currently lies in the grey areas of law, where it is neither legal nor illegal. In India, betting and gambling are largely outlawed and governed by various state laws. The Public Gambling Act of 1867 prohibits the operation of gambling houses, visiting a gambling house, as well as being in possession of a gambling device. It expressly excludes “games of skill,” though, where a player’s knowledge and skill can affect the outcome, as opposed to “games of chance,” where the outcomes are largely determined by luck, which are forbidden. This categorization has previously been used by the Supreme Court of India to declare games like rummy and horse racing to be legal because they are considered games of skill.

A Matter of State List

The Government of India Act, 1935 specifies betting and gambling as Entry 34 of List II of the Seventh Schedule, allowing states to enact their own regulations in this area. While most Indian states permit the distinction between skill and chance, there are a few states that do not:

1. Casinos and other games of chance are legal in Goa, Daman, and Diu under the 1976 Goa, Daman, and Diu Public Gambling Act. With the addition of Section 13A as a result of 1992 and 1996 Act amendments, the state is now allowing games of ‘electronic amusement/slot machines in Five Star Hotels’ and ‘such table games and gaming on board in vessels offshore as may be notified’.
2. The Sikkim Casinos (Control & Tax) Act, 2002, allows for the granting of licences for the establishment of casinos in the state. However, the locals of Sikkim are forbade from playing in these casinos as a part of an 2016 notification.
3. permits several online games, including sports betting. However, a 2015 amendment to the Act limits these games to the actual gaming parlour premises via through intranet gaming terminals within the geographical boundaries of the state.
4. Assam’s Game and Betting Act of 1970 and Orissa’s Orissa (Prevention Of) Gambling Act of 1955 both forbid any game for money or other stake, including skill-based games for stakes.
5. Telangana’s Telangana Gaming Act of 1974, which was amended in 2017, prohibits any risking of money on an uncertain event, including games of skill.

The states of Karnataka and Tamil Nadu took steps in 2021 towards a complete ban on online gaming. This is seen as a solution by both states to the growing gambling issues in their respective regions. The amendments that forbid online gaming had to be repealed by the High Courts because they view them as being unconstitutional. According to the Karnataka High Court, the legislative action governing online skill games violates Article 14 of the Constitution because it is “manifestly arbitrarily. However, nothing in this judgement should be interpreted to prevent the subject of betting and gambling from being properly addressed by constitutional provisions. “A writ of mandamus is issued restraining the respondents from interfering with online gaming business and allied activities of the petitioners,” the order said.

Law Commission Report

“The Law Commission of India (Chair: Justice B.S. Chauhan) submitted its report on July 5, 2018, examining whether betting may be legalised in India. The report follows a Supreme Court directive in 2016 where the Court asked the Commission to examine the possibility of a law to regulate betting. The Commission noted that while it is desirable to ban betting and gambling, it is difficult to prevent these activities altogether. Therefore, it recommended regulation of gambling and betting.

• Regulating gambling and betting: Betting and gambling is a state subject under the Constitution. Therefore, the Commission noted that state legislatures may enact a law to regulate betting and gambling. However, it stated that Parliament may enact a model law to regulate betting and gambling, which states may adopt. Parliament may also enact laws under Article 249 (in national interest) or Article 252 (if two or more states consent). With regard to online gambling and betting, it observed that Parliament has the competence to enact a law.
• Regulations governing gambling and betting: The Commission recommended that gambling and betting should only be permitted by licensed operators from India. For participants, it recommended that there should be a cap on the number of such transactions for a specific time period, i.e., monthly, half-yearly or yearly. It further recommended that transactions between operators and participants should be made cashless and penalties should be imposed for cash transactions.
• In order to protect the public from the ill-effects of these activities and to increase transparency and state supervision, the Commission recommended that all betting and gambling transactions should be linked to the Aadhaar/PAN Card of the operator and the participants. Further, any income derived from betting or gambling should be made taxable under the Income Tax Act (IT Act), 1961, the Goods and Services Tax Act (GST), 2017, and other relevant laws.
• Classification of gambling: The Commission recommended classifying gambling activities into two categories, namely ‘proper gambling’ and ‘small gambling’. “Proper gambling” would be characterised by higher stakes. Only individuals belonging to higher income groups will be permitted to indulge in “proper gambling”. Individuals belonging to the lower income groups will only be permitted to indulge in “small gambling”. The stakes for “small gambling” will fall below the bracket of of stakes permitted in “proper gambling”.
• Prohibited persons: The Commission recommended that certain classes of persons should be barred from participating in online or offline gambling platforms. These persons include: (i) minors, (ii) those who receive subsidies from the government, or (iii) those who do not fall within the purview of the Income Tax Act, 1961, or the Goods and Services Tax Act, 2017.
• Amendments to FEMA: The Commission recommended that the Foreign Exchange Management Act, 1999 and the Foreign Direct Investment Policy be amended to encourage Foreign Direct Investment in the casino/online gaming industry, and for other purposes. It felt that this would propel the growth of tourism and hospitality industry in such states, and would also lead to higher revenue and an increase in employment opportunities.
• Amendment to IT Rules: Under the Information Technology (Intermediary Guidelines) Rules, 2011, intermediaries are barred from hosting or transmitting content relating to or encouraging gambling. The Commission recommended barring only those intermediaries which illegally transmit or host content related to gambling. This will ensure that intermediaries are not held liable in states which license gambling.
• Match-fixing and sports fraud: The Commission recommended that match-fixing and sports fraud should be made criminal offences with severe punishments.”[iv]

Conclusion

Sports betting in India currently lies in a grey area of the law. While some states have legalized certain forms of gambling, others prohibit it entirely. The central government has yet to take a clear stance on the issue. The Law Commission of India has recommended that the government legalize and regulate sports betting to prevent illegal activities and generate revenue. However, until specific legislation is passed, individuals and businesses should exercise caution when participating in or promoting sports betting in India.

References:

[i] The Finance Act, 1994

[ii] Sethi, Sethi’s Law relating to Gambling, Betting, Lotteries and Clubs 47(Law Publishers(India) Pvt. Ltd., Allahabad, 3rdedn).

[iii] Bryan A. Garner, Black’s Law Dictionary, (8th ed. West Publishing Co.) 701, 2004

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