A general introduction to gambling law in India

All questions

Overview

i British India and gaming

Prior to the promulgation of the Constitution of India, gambling in India was governed by the Public Gambling Act 1857. The Public Gambling Act 1857 was likely derived from the Gaming Act 1845 and the Betting Act 1853, enacted by the Parliament of the United Kingdom. The British Acts of 1845 and 1853 sought to make wagering contracts unenforceable but repealed the Unlawful Games Act 1541, where games of skill such as bowling and tennis were deemed unlawful. This approach seems to be reflected in the Indian Public Gambling Act 1857, which prohibited public gambling and the keeping of common gaming houses but made an exception for games of skill.

ii Independent India and gaming

After the promulgation of the Constitution of India and its coming into effect on 26 January 1950, the issues pertaining to gaming were divided. Betting and gambling were listed under Entry 34 of the State List (i.e., List II of the Seventh Schedule). This means that only the state legislature has the power to make laws pertaining to betting and gambling. Lotteries are mentioned in Entry 40, List 1 of the Union List, meaning that the Parliament of India is the appropriate body to make laws pertaining to lotteries. In addition, the state legislature has the power under Entry 62 of the State List to make laws pertaining to taxation of betting and gambling.

After the Constitution of India came into effect, most states adopted the principles of the Public Gambling Act 1857 with certain amendments, and each state has its own act on gambling.

iii The Indian gaming market

The gaming industry in India is estimated to be worth more than US$90 billion² – this includes regulated and unregulated gaming. The gaming industry of India can broadly be classified into the following:

1. lotteries;
2. horse racing;
3. prize competitions;
4. sports betting;
5. games of skill; and
6. games of chance.

Lotteries

The Lotteries (Regulation) Act 1998 regulates lotteries within India. On 1 April 2010, the Government of India issued the Lotteries (Regulation) Rules 2010, further regulating, among other things, the number of draws and the minimum prize payout.

Horse racing

Most states have adopted the Public Gambling Act 1867 with an amendment pertaining to horse racing, whereby it has been specifically excluded.

In the case of Dr KR Lakshmanan v. State of Tamil Nadu,³ the Supreme Court of India recognised that horse racing, football, chess, rummy, golf and baseball are games of skill. It further held that betting on horse racing was a game of skill as it involved judging the form of the horse and jockey, and the nature of the race, among other variables.

The states and union territories that allow horse-race betting are Andhra Pradesh, Assam, Delhi, Haryana, Karnataka, Maharashtra, Meghalaya, Nagaland (virtual via licence), Punjab, Sikkim (virtual via licence), Tamil Nadu, Telangana, Uttar Pradesh, Uttarakhand and West Bengal. However, active horse racing currently takes place at the turf clubs in Bangalore, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, Mysore, Ooty and Pune.

Prize competitions

Prize competitions in India are regulated under the Prize Competitions Act 1955. 'Prize competition' has been defined under Section 2(d) of the said Act:

'Prize competition' means any competition (whether called a cross-word prize competition, a missing-word prize competition, a picture prize competition or by any other name) in which prizes are offered for the solution of any puzzle based upon the building up, arrangement, combination or permutation, of letters, words, or figures.

The Prize Competition Act's applicability extends to the following states: Andhra, Bombay, Madras, Orissa, Uttar Pradesh, Hyderabad, Madhya Bharat, Patiala and East Punjab States Union, and Saurashtra, all erstwhile Part C States, and Pondicherry, Dadar and Nagar Haveli, Goa, Daman and Diu.

Sports betting

The status of sports betting, whether it is a game of skill or a game of chance, has not been clarified by the Supreme Court of India or a high court of a state. The state of Sikkim took the initiative of legalising online sports betting within the state, with the promulgation of the Sikkim Online Gaming (Regulation) Act 2008. Under this Act, a licence for placing bets on sports games such as football, cricket, lawn tennis, chess, golf and horse racing can be issued.

In Meghalaya, the sport of teer (a form of archery) has been excluded from within the ambit of the state's Gambling Act, and betting on it is licensed. The state government of Meghalaya promulgated the Meghalaya Regulation of Gaming Act, 2021, followed by the Meghalaya Regulation of Gaming Rules 2021. In the said enactments, inter alia, the process for issuance of licence for placing bets on various sports games as well as horse races has been laid down. In Nagaland, betting on virtual sports and team selection sports can be offered under a licence.

Games of skill

Games of skill are identified as a separate category because various states in India (excluding Assam,⁴ Odisha (Orissa),⁵ Andhra Pradesh,⁶ Tamil Nadu⁷ and Telangana)⁸ have gambling acts that exclude games of skill from the ambit of gambling. In the absence of a legislative definition of a game of skill, the Supreme Court in Dr KR Lakshmanan v. State of Tamil Nadu;⁹ State of Andhra Pradesh v. K Satyanarayana;¹⁰ and State of Bombay v. RMD Chamarbaugwala¹¹ has laid down that a game of chance is where the element of chance predominates over the element of skill, whereas a game of skill is where the element of skill predominates over the element of chance. The card games of rummy and bridge, along with other sports like golf and chess, have been classified as games of skill. In R Shankar Creation Association v. State of Karnataka,¹² the Karnataka High Court classified poker, darts, carom and chess, among others, as games of skill. The Punjab and Haryana High Court, the Bombay High Court and the Rajasthan High Court have classified daily fantasy sports, in the format offered by India's leading operator, Dream11, as a game of skill. However, the applicability of the Bombay High Court judgment was stayed by the Supreme Court of India on 6 March 2020.

The government of Nagaland under the Nagaland Prohibition of Gambling and Regulation and Promotion of Online Games of Skill Act 2015 (the Nagaland Act) has defined games of skill.

All games enumerated in Schedule A of the Nagaland Act will be classified as games of skill. Schedule A includes games such as chess, sudoku, quiz, bridge, poker, rummy, nap, virtual sports, virtual games (such as monopoly or racing) and virtual fantasy games. A similar definition exists in the Meghalaya Regulation of Gaming Act, 2021.

Games of chance

Games of chance for stakes fall within the ambit of the gambling acts of the states and are largely prohibited. Some states, such as Goa, have created exceptions within their gambling acts, allowing for authorised gaming. Thus, licences are issued in the State of Goa for games of chance in casinos, which are operated on land as well as offshore. The Meghalaya Regulation of Gaming Act, 2021 provides for licensed businesses to offer the games of chance, as listed in Schedule A. The State of Sikkim has also promulgated the Sikkim Casino Games Act 2004, which allows for casino operations within the state.

iv State control and private enterpriseLotteries

Under the Lotteries (Regulation) Act 1998, it is the state governments that have the power to organise, conduct and promote lotteries, subject to the conditions prescribed. The lotteries department of each state, generally established under their revenue departments, are in charge of running lotteries. States have appointed agents that are private companies, to operate and promote lotteries on their behalf within the state and to other states. Lotteries in India¹³ are permitted in the following states: Arunachal Pradesh (paper lotteries only), Assam (in Bodoland Territorial Council¹⁴), Goa, Kerala (paper lotteries only), Madhya Pradesh, Maharashtra, Meghalaya, Mizoram, Nagaland, Odisha, Punjab (paper lotteries only), Sikkim and West Bengal.

In addition to the above, the national lottery of Bhutan is also sold in India. This has been allowed through the Trade, Commerce and Transit Agreement between the Republic of India and the Royal Government of Bhutan.¹⁵

Horse racing

Horse racing in India is primarily controlled by the six turf clubs.

These turf and race clubs lay down the rules of racing, as well as control their enforcement. The licences to conduct horse races were issued to them by their respective state governments. The totalisator and the bookmakers at these race clubs, including for off-course betting, were licensed under the respective state's act on entertainment and betting tax. Recently licences for online betting on horse races has been issued to the RCTC, RWITC, MRC, BTC and HRC.

Prize competitions

Prize competitions in India are offered under a licence issued by states under the Prize Competition Act 1955. A prize competition can be offered by a person who has procured the licence from the state, provided that the maximum prize that can be offered in such a competition does not exceed 1,000 rupees and there are not more than 2,000 entries.

Sports betting

The only states where sports betting can be offered are Meghalaya, Nagaland and Sikkim. Licences have been issued to private operators to offer sports bets under the respective state legislation.

Games of skill

Games of skill are outside the ambit of states' gambling acts. Whereas games of skill for stakes, like horse racing and teer, require a licence from state governments, other games of skill like rummy and bridge can be offered without a licence in most states.

Nagaland and Meghalaya have sought to regulate and license games of skill through the Nagaland Act and The Meghalaya Regulation of Gaming Act, 2021. A licence can be procured by a person, firm, company or limited liability company incorporated in India that is substantially held and controlled in India.

Games of chance

Games of chance like casino games can be offered in the states and union territories of Dadra and Nagar Haveli and Daman and Diu, Goa, Meghalaya and Sikkim under a licence. Licences have been issued to private entities within these territories.

v Offshore gambling

Under FEMA, the Foreign Exchange Management (Current Account Transactions) Rules 2000 (the Current Account Rules) were framed to impose reasonable restrictions for current account transactions. The Current Account Rules provide that transactions included in Schedule I are prohibited. Remittance from lottery winnings, racing or riding, purchase of lottery tickets, football pools, sweepstakes, etc., are included within Schedule I, which essentially means that all foreign exchange gaming transactions are prohibited. Thus, an offshore gaming operator is unlikely to be able to offer his or her services from outside India within India.

Legal and regulatory framework

i Legislation and jurisprudenceLottery

The Supreme Court of India in BR Enterprises v. State of UP¹⁶ has held that a lottery is a game of chance and is not a business or trade; rather, it is in the nature of res extra commercium. The Supreme Court also held, while interpreting Section 5 of the Lotteries Act 1998,¹⁷ that a state could not exclude other states from its own lottery. Either the state had to declare itself as a lottery-free zone or permit lotteries from other states. In a subsequent judgment, in All Kerala Online Lottery Dealers Associations v. State of Kerala,¹⁸ the court distinguished from the principle of the earlier judgment (the BR Enterprises case) and held that paper lotteries and online lotteries fell in different classes. Therefore, a state would be permitted to ban online lotteries and allow paper lotteries or vice versa, without violating the provisions of Section 5 of the Lotteries Act 1998.

Horse racing

Horse racing and betting on horse racing is permitted in licensed premises. Licenses have been issued to Indian turf clubs. In 2021, the turf clubs in Mumbai, Pune, Bangalore, Hyderabad and Kolkata were provided with approvals to conduct and operate 'online betting or wagering' on horse races within their states.

Prize competitions

In News Television India Ltd v. Ashok Waghmare,¹⁹ the Bombay High court held that prize competitions do not include skill games, and even popular TV quiz shows like Kaun Banega Crorepati (a version of Who Wants to be a Millionaire?) are excluded from its ambit.

Sports betting

The Supreme Court had directed the Law Commission of India to consider whether betting on sports can be regulated in India. The Law Commission of India published a report titled 'Gambling and Sports Betting including Cricket in India'.²⁰ The Commission made recommendations regarding the power of the legislature at the Centre, to regulate sports betting and gambling along with recommendations on the structure of the said proposed regulations while observing the advantages of the same and noting that said regulations would serve to regularise an existing, thriving and rampant unofficial industry.

Games of skill

The issue of games of skill for stakes, and whether they fall within the ambit of a state's gambling act, has not been adjudicated upon by the Supreme Court. In the absence of an express judgment of the Supreme Court, contrary opinions exist among the High Courts and legislatures of the states.

The Punjab and Haryana High Court, in Varun Gumber v. Union Territory of Chandigarh and Ors,²¹ held the fantasy game format offered by one of the fantasy game operators to be a 'game of skill'.

The High Court of Judicature at Bombay (Division Bench), in Gurdeep Singh Sachar v. Union of India and Ors,²² observed and held that the Online Fantasy game of the fantasy game operator does not involves 'betting', 'wagering' and 'gambling' activities respectively and that online fantasy is a 'game of skill'. The decision of the Bombay High Court was appealed, and the Supreme Court of India – see its order dated 6 March 2020 – stayed the applicability of the Bombay High Court judgment and issued notice to all the parties.

The Jaipur Bench of the High Court of Rajasthan in Ravindra Singh Chaudhary v. Union of India²³ held that fantasy sports games offered online is not a part of wagering contract, since they depend on skill of participant and not merely on chance and thus, the business offered by the platforms operating online fantasy sports has protection under Article 19(1)(g) of the Constitution of India. It also observed that the fantasy sports offered online are not operating in total regulatory vacuum and are subject to self-regulation by the industry body known as the Federation of Indian Fantasy Sports (FIFS), and rules and regulations of the charter of FIFS ensure that the games run by its members are 'games of skill' and are not in the form of any gambling or betting.Tamil Nadu promulgated the Tamil Nadu Gaming (Amendment) Act, 2021, which banned gaming by means of, inter alia, cards and dice (such as rummy and poker) in the form of betting or wagering in cyberspace using communication devices such as computers or mobile phones or any other device and also prohibited 'electronic transfer of funds' for placing bets, distributing the winnings of games and any other prize money related to online games (including rummy and poker) in the State of Tamil Nadu. The said Act was, however, challenged before the Madras High Court in the case of Junglee Games India Private Limited and Another v. State of Tamil Nadu and Others.²⁴ The Madras High Court, in its judgment dated 3 August 2021, struck down the said amendment, holding it to be ultra vires the Constitution of India Furthermore, the wording of the Amendment Act was held to be extremely arbitrary and unreasonable. Albeit the Madras High Court did not question the legislative competence of the state government of Tamil Nadu to enact laws in this area, the expansion of the field was held to be in complete disconnect to proportionality and reasonableness. It was reiterated that both rummy and poker are games of skill as they involve considerable memory, working out of percentages, the ability to follow the cards on the table and constantly adjust to the changing possibilities of the unseen cards. The Madras High Court also observed that competitions involving games of skill such as rummy and poker have to be regarded as business activities and would be protected under Article 19(1)(g) of the Constitution of India. A special leave petition, preferred by the state government of Tamil Nadu, is currently pending before the Supreme Court of India.²⁵

The Telangana Gaming Act 1974 amended by the Telangana Gaming (Amendment) Act 2017 dated 7 November 2017 prohibits the residents of Telangana to organise, provide, participate in and play games of skill (including online games of skill) in and from the state for stakes.

The Andhra Pradesh Gaming Act, 1974 amended by the Andhra Pradesh Gaming (Amendment) Ordinance, 2020 prohibits playing, opening, keeping, operating, using or permitting online gaming (including games of skill) for money or stakes in its territory. The Gujarat High Court, in its decision dated 4 December 2017 in the case of Dominance Games Pvt Ltd v. State of Gujarat and Ors,²⁶ held that poker is a game of chance, and hence prohibited in the State of Gujarat. However, an appeal captioned as Dominance Games Pvt Ltd v. State of Gujarat and Ors²⁷ is pending before the division bench of the same High Court.

The Home (F) Department of the Government of Kerala – see its notification GO(P) No. 26/2021/HOME dated 23 February 2021 in the Kerala Gazette Extraordinary – has banned 'online rummy played with stakes'. The High Court of Kerala in Head Digital Works Private Limited and Ors v. State of Kerala and Ors²⁸ quashed the Kerala notification issued by the government of Kerala under Section 14A of the Kerala Gaming Act, 1960, which sought to ban online rummy and declared the Kerala notification to be arbitrary, illegal and violative of the fundamental rights guaranteed under Articles 14 and 19(1)(g) of the Constitution of India.

In the case of Indian Poker Association & Anr v. State of West Bengal & Ors,²⁹ the Calcutta High Court (Circuit Bench at Jalpaiguri) in its order dated 29 August 2019 observed and held that since the game of poker is not included within the gambling activities under the West Bengal Gambling and Prize Competitions Act 1957, the police cannot interfere with such games.

On 5 October 2021, the Karnataka government promulgated the Karnataka Police (Amendment) Act 2021, which amended the Karnataka Police Act, 1963, prohibiting gaming, gambling, betting (except betting and wagering on horse racing), games of chance and games of skill (with stakes), including online, in the state of Karnataka. The amendment was seemingly brought out of compliance with the directions given by the High Court of Karnataka to the state government of Karnataka in another pending case to introduce legislation to deal with various online forms of gambling. The vires of the Karnataka Police (Amendment) Act 2021 was challenged before the High Court of Karnataka by the self-regulating federation of gaming companies in India in the case of All India Gaming Federation v. State of Karnataka & Anr.³⁰ The High Court of Karnataka, through its judgment dated 14 February 2022, struck down the provisions of Sections 2, 3, 6, 8 and 9 of the Karnataka Police (Amendment) Act 2021, declaring the same to be ultra vires in relation to the Constitution of India in their entirety. The High Court of Karnataka did not bar the state government of Karnataka from bringing in appropriate legislation concerning the subject of betting and gambling in accordance with the provisions of the Constitution of India. However, the High Court of Karnataka, inter alia, observed that the impugned legislative action had clamped an absolute embargo on all games of skill, defying the principle of proportionality and was excessive in nature and was, therefore, in violation of Article 14 of the Constitution of India on the ground of 'manifest arbitrariness'. The High Court of Karnataka also directed the state government of Karnataka and the police authorities not to interfere with the online gaming business and allied activities.

ii The regulator

Lotteries are regulated by the Directorate of Lotteries under the Finance Department of each state. Horse racing and betting on horse racing is regulated by the relevant turf authority or club.

For prize competitions, states have formulated rules where the manner of procuring the licence has been laid down. Applications are to be made to the authorities designated by the states.

The licensing and regulator under the Sikkim Online Gaming Act 2008 is the officer designated by the Lotteries Department (government of Sikkim).

The regulator for casinos in Sikkim is the authorised officer, appointed by the Department of Tourism (government of Sikkim). However, in Goa, a gaming commissioner is to be appointed under Section 13C of the Goa Public Gambling (Amendment) Act 2012.

The regulator for the online games of skill under the Nagaland Act is the Finance Commissioner or any other authority designated and empowered on his or her behalf.

The regulator of gaming (games of skill and games of chance) in the state of Meghalaya is the Meghalaya Gaming Commission, nominated by the state government of Meghalaya by virtue of Section 27 of the Meghalaya Regulation of Gaming Act, 2021.

iii Remote and land-based gambling

Lotteries are offered in a paper format as well as online, across states where lotteries are permitted. Paper lotteries are generally offered through lottery shops and stalls. Online lottery in India means digital lottery and does not mean that lottery entries can be sold over the internet.

Horse racing and betting on horse racing was earlier permitted only at licensed premises and off-course betting shops. With the issuance of licences to take online bets, online betting on horse racing can now be offered in Maharashtra, Karnataka (in abeyance), Tamil Nadu, Telangana and West Bengal.

The Prize Competition Act 1955 does not make a distinction between paper-based and online prize competitions. These competitions are generally conducted through dailies and posts.

Online sports betting offered through parlours on an intranet network is permitted in Sikkim.

The principal law that governs gaming is the Public Gambling Act 1867. This Act does not make a distinction between premises-based and online gaming. The states that have permitted casinos allow the offering of casino games only at the premises, whether they are on land or on ships or cruises.

Online games of skill can be offered across India under the Nagaland Act.

iv Financial payment mechanisms

The payment mechanisms available depend on how a game is classified. Games of skill, usually have the entire gamut of payment mechanisms available to them, from banks to mobile wallets.

In casinos in Goa and Sikkim, again the entire gamut of payment mechanisms is available, subject to proper KYC verifications. However, for lotteries, banking and the online payment systems are not available. Tickets, whether paper or digital, are bought through payment of cash and a vendor's shop.

While cryptocurrencies are not banned in India, the Reserve Bank of India does not recognise them as legal tender. Therefore, cryptocurrency cannot be used as a form of currency for settling legal wagers.