Overviewi History of gaming in India
India has a complicated and lengthy history with gaming. Archaeologists have found dice made from cubes of sandstone and terracotta that date back to the Indus Valley civilization in 3300 BC, and there is evidence that the Indus Valley people engaged in cockfighting and betting. Some of the ancient Indian mythologies also have a strong reference to gaming.
Gambling during Diwali (an Indian religious festival) has religious connotations and is considered auspicious. The courts in India recognise gambling on Diwali, provided it takes place among friends and not in a public place. In the case of Nimmagadda Raghavalu & Others v. Unknown, the Madras High Court held that:
Gambling is not an offence and it becomes one only when it takes place in a common gaming house or a public place. The mere fact that occasionally people used to play cards and perhaps for money does not necessarily make it a common gaming house. The presumption of gambling on Diwali is not so strong as the gambling at other times . . . . A person simply allowing the use of his house to gamblers during Diwali festival without any idea of demanding rent etc, cannot be said to be keeping a common gaming house. Gambling on Diwali day should not be considered to be an offence.ii 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 The British Acts of 1845 and 1853 sought to make wagering contracts unenforceable but repealed the Unlawful Games Act 1541, where games of skill such as bowling and tennis were deemed unlawful.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 the common gaming houses, but made an exception for games of skill.
Prior to the promulgation of the Constitution, horse racing in India was licensed in the Bombay Presidency under the Bombay Race-Courses Licensing Law 1912. Similarly, in the Bengal Presidency, Act VIII of 1867 allowed for subscription, prizes and staking on horse races.
Besides this, the British government in India used to run lotteries and used funds from them to develop towns. It can thus be stated that while public gambling was prohibited during the British rule in India prior to the Independence of India, horse racing and lotteries were largely permitted.iii 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.iv The Indian gaming market
A perception exists worldwide that gaming in India is illegal or unregulated. However, this is not true. The gaming industry in India is estimated to be worth US$60 billion – this includes regulated and unregulated gaming. The gaming industry of India can broadly be classified into the following:
- horse racing;
- prize competitions;
- sports betting;
- games of skill; and
- games of chance.
Lotteries are specifically excluded from the ambit of gambling through the states' gambling acts. Until 1998 there was no law with respect to regulation of lotteries. Parliament enacted the Lotteries (Regulation) Act 1998 with the object of regulating lotteries, and to provide for matters connected therewith and incidental thereto. On 1 April 2010, the government of India issued the Lotteries (Regulation) Rules 2010, further regulating the lotteries in the country with regards to number of draws, minimum prize payout, etc.
'Lottery' has been defined in the Lotteries (Regulation) Act 1998 under Section 2(b), as follows: 'lottery' means a scheme, in whatever form and by whatever name called for distribution of prizes by lot or chance to those persons participating in the chances of a prize by purchasing tickets.'Horse racing
Most states have adopted the Public Gambling Act 1867 with an amendment pertaining to horse racing, whereby it has been specifically excluded. Under the amended gambling acts of the states, the following definition of gambling is given:
'Gaming' includes wagering or betting on any figures or numbers or dates to be subsequently ascertained or disclosed, or on the occurrence or non-occurrence of any natural event, or in any other manner whatsoever except wagering or betting upon a horse-race when such wagering or betting upon a horse-race takes place:
(a) on the day on which such race is to be run; and
(b) in any enclosure where such race is to be run, and sanction of the Provincial Government set apart from the purpose, but does not include a lottery.
In the case of Dr KR Lakshmanan v. State of Tamil Nadu, 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 exception created in the gambling acts and the Supreme Court case of Dr KR Lakshmanan v. State of Tamil Nadu have crystallised the legal position of horse racing and wagering on horse racing. The 11 states that allow horse race betting are Andhra Pradesh, Assam, Delhi, Haryana, Karnataka, Maharashtra, Meghalaya, Punjab, Tamil Nadu, Uttar Pradesh and West Bengal. However, active horse racing currently takes place at the turf clubs in Bangalore, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, Mysore, Pune and Ooty.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 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. In the absence of a judgment on this, a grey area exists pertaining to the legal status of sports betting in India. Sikkim has taken 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.Games of skill
Games of skill are identified as a separate category because various states in India (excluding Assam, Odisha (Orissa) and Telangana) 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; State of Andhra Pradesh v. K Satyanarayana; and State of Bombay v. RMD Chamarbaugwala 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, the Karnataka High Court classified poker, darts, carom and chess, among others, as games of skill.
The government of Nagaland under the Prohibition of Gambling and Regulation and Promotion of Online Games of Skill Act 2015 (the Nagaland Act) has defined games of skill as:
Games of skill shall include all such games where there is preponderance of skill over chance, including where the skill relates to strategizing the manner of placing wagers or placing bets or where the skill lies in team selection or selection of virtual stocks based on analyses or where the skill relates to the manner in which the moves are made, whether through deployment of physical or mental skill and acumen.
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 like monopoly or racing, and virtual fantasy games.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, for example 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 state of Sikkim has also promulgated the Sikkim Casino Games Act 2004, which allows for casino operations within the state.v 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 India are permitted in the following states: Maharashtra; Mizoram; Bodoland Territorial Council; Goa; Sikkim; Andhra Pradesh; Nagaland; Kerala (only paper lottery); Punjab; 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.Horse racing
Horse racing in India is primarily controlled by the six turf clubs, namely:
- the Royal Calcutta Turf Club;
- the Royal Western India Turf Club Ltd;
- the Madras Race Club;
- the Bangalore Turf Club Ltd;
- the Delhi Race Club; and
- the Hyderabad Race Club.
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, are licensed under the respective state's act on entertainment and betting tax. In Delhi it is the Delhi Entertainments and Betting Tax Act 1996, and in Andhra Pradesh it is the Andhra Pradesh (Telangana Area) Horse Racing and Betting Tax Regulation 1358F.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 legal status of sports betting (i.e., whether it is a game of skill or a game of chance) is not clear in India. The only state where sports betting can be offered is Sikkim. Licences have been issued to private operators to offer sports bets.
In Meghalaya, bets can be placed on teer (a traditional game of the state) under a licence. These licences are issued under Section 14A of the Meghalaya Amusement and Betting Tax (Amendment) Act 1982.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 has sought to regulate and license games of skill throughout India, through the Nagaland Act. The Nagaland Act contemplates the regulation and promotion of games of skill through the issuance of licences. 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. A licensee is allowed to offer games of skill across India, in states where such games are not classified as games of chance and in states where an exception for games of skill exists in the state's gambling act.Games of chance
Games of chance like casino games can be offered in Goa and Sikkim under a licence. Licences have been issued to private entities within these states.vi Offshore gambling
Foreign direct investment (FDI) in India is governed by the Foreign Exchange Management Act 1999 (FEMA) and the regulations made thereunder. FDI is subject to the Foreign Direct Investment Policy (the FDI Policy), as amended. The FDI Policy was formed by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, and is implemented by the Reserve Bank of India (RBI). The DIPP has a practice of issuing a consolidated version of the FDI Policy encompassing the contents of all the press notes, press releases, circulars and clarifications issued by it from time to time.
Under the FDI Policy, FDI remains prohibited in certain sectors, including lottery business, gambling and betting. Besides FDI, any form of foreign technology collaboration, such as licensing for franchise, trademark, brand name, management contract, etc., for lottery business, gambling and betting activities has also been prohibited under the prevailing FDI Policy. The rationale of prohibiting FDI and technological collaboration in the aforesaid sectors is to discourage foreign investments in lottery, gambling and betting businesses that have been judicially held to be mere 'games of chance', as opposed to 'games of skill'. Thus, while FDI for games of chance and lotteries is prohibited, there is a lack of clarity on whether the same prohibition applies for games of skill, sports betting, horse racing, teer and prize competitions.
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.
If the public has access to a foreign gaming website within India, then the courts would be able to exercise jurisdiction as per the principle in Banyan Tree Holding (P) Limited v. A Murali Krishna Reddy and Anr. This jurisdiction would be exercised on the basis that the site is an interactive website and seeks to target website users in India. The authorities could look at initiating action for violation of the applicable Indian laws (a website offering a game of chance would be in violation of a state's gambling Act). Under Section 69A of the Information Technology Act 2000, the government has the power to direct its agency or an intermediary to block access to the infringing website. Intermediaries under the Information Technology (Intermediaries Guidelines) Rules 2011 and the registrar accredited with the Internet Corporation for Assigned Names and Numbers have blocked access to gaming websites coming from outside India.