A general introduction to gambling law in India
Overview
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 The British Acts of 1845 and 1853 sought to make wagering contracts unenforceable but repealed the Unlawful Games Act 1541, where games of skill such as bowling and tennis were deemed unlawful.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.
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.
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 more than US$90 billion – this includes regulated and unregulated gaming. The gaming industry of India can broadly be classified into the following:
- lotteries
- horse racing
- prize competitions
- sports betting
- games of skill and
- 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.
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 states and union territories that allow horse-race betting are Telangana, 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 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. 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. 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, Odisha (Orissa), Andhra Pradesh, Tamil Nadu 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 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 has been 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 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 such as 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, 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 State of Sikkim has also promulgated the Sikkim Casino Games Act 2004, which allows for casino operations within the state.
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, Nagaland, Kerala (only paper lottery), Punjab (only paper lottery), West Bengal and Meghalaya.
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 (RCTC);
- the Royal Western India Turf Club Ltd (RWITC);
- the Madras Race Club (MRC);
- the Bangalore Turf Club Ltd (BTC);
- the Delhi Race Club (DRC); and
- the Hyderabad Race Club (HRC).
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 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. In the State of Nagaland, bets on virtual sports and team selection sports can be offered under a licence.
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 license from state governments, other games of skill like rummy and bridge can be offered without a license 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 license. Licenses have been issued to private entities within these states.
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).
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.
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
Legislation and jurisprudence Lottery
The Supreme Court of India in BR Enterprises v. State of UP 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 commercial. The Supreme Court also held, while interpreting Section 5 of the Lotteries Act 1998, 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, 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, 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 The Commission made recommendations regarding the power of the legislature at the Center, 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 regularize 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 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, 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, 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 India 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