Gambling

This article is written by Ritika Sharma, a law graduate from the University Institute of Legal Studies, Panjab University. The article explains meaning and types of gambling and examines its legality under central and state laws in India. It also provides insights into the legal nature of gambling around the world and then highlights the merits and demerits of legalising gambling. 

It has been published by Rachit Garg.

Table of Contents

Introduction 

Humans are social animals, and for the purpose of entertainment and increasing the number of social interactions with other people in society, they play games, and participate in sports. With creativity and technological development, numerous games have been invented by mankind. Today, an endless  number of offline and online games exist, gambling being one of them. It is one of those leisure activities for the public and its origin is considered to be extremely ancient.  People engage in games like gambling to fulfil their financial as well as social needs. The wins and losses may rely both upon knowledge or skill and a stroke of luck. This leads to huge ambiguities around the legality of these games in India. The recent uproar around online gaming and its regulation has created further concerns regarding the legal stance of these games. 

This article encapsulates everything regarding the legality of gambling in India. From its meaning to the discussions around central and state legislations, the existence and validation of gambling in India are examined.

What is gambling

Before delving deeper into the topic of legality, it is essential to understand what is actually included within the ambit of gambling. The term has a wide extent, and its legality differs from one type of gambling activity to the other. 

Definition of gambling

According to the Merriam-Webster Dictionary, gambling can be defined as “the practice of risking money or other stakes in a game or bet”. Moreover, the Black’s Law Dictionary defines ‘gamble’ as “to play, or game, for money or other stake; hence to stake money or other thing of value on an uncertain event. It involves not only chance, but a hope of gaining something beyond the amount played”

These definitions highlight that the intrinsic element of gambling is taking a risk or putting something at stake. It is pertinent to note that any activity that falls under the term ‘gambling’ could be legal as well as illegal depending upon the jurisdiction within which it is carried on.

Game of skill and games of chance 

The criteria of skill and chance is applied by most states to circumscribe the extent to which these games are considered legal or illegal. Games of skill can be defined as games that involve a factor of skill in winning money. Examples of games of skill can be card games like poker, bridge, dartboard, and carom, and sports like golf, chess, etc. These games are mostly valid in the Indian states, except for a few.

On the other hand, winning in games of chance is based on a stroke of luck and probability. These do not involve any mental or physical skills of the players. These games are generally declared illegal by the state governments. Games of chance include casinos, betting in sports, etc.

Furthermore, in the case of State of Andhra Pradesh v. K. Satyanarayana and Ors. (1968), the Supreme Court held that the game of ‘rummy’ requires skill, as building up rummy needs competency, while success in three card games like flush is completely based on chance. 

Gambling in the international arena

It is interesting to note that the websites related to international gambling are not restrictive for Indian citizens. However, the exchange of money poses issues on these sites. Each country adopts a different approach toward legalising gambling. Some countries consider gambling as a means of trade and business and allow it within their geographical limits, while others impose a complete ban on these games, putting them in a bracket of activities that are against morality. The following are a few definitions of gambling under some legislations around the globe:

Gambling Act, 2005 of the United Kingdom

According to Section 3 of the Gambling Act, 2005, ‘gambling’ has been defined as including gaming, betting, and participating in a lottery. According to Section 6 of the Act, “gaming” means “playing a game of chance for a prize”. It also lays down the meaning of the ‘game of chance’. It states that a game of chance would include any game that has an element of luck, irrespective of the fact that there is the presence of superlative skill or not. However, it specifically excludes sports from its ambit. Betting is defined under Section 9 as making or accepting a bet on the likelihood of anything occurring or not occurring, whether anything is true or not, or on the outcome of a race, competition, or any other event.

National Gambling Act, 2004 of South Africa

National Gambling Act, 2004 regulates gambling in South Africa, and it defines the term ‘gambling machine’ as any electrical, mechanical, or video device which is played upon the payment of consideration or is used as a medium of payment between the players or operators. Also, the term “gambling games” under the Act refers to the activities that are played upon the payment of consideration, and the player either wins or loses money after the game. The win or loss depends upon the player’s skill or chance or both. 

The Interactive Gambling Act, 2001 of Australia

According to this Act, ‘gambling service’ includes services related to betting, lotteries, lottery tickets, and gaming where it involves money or consideration and the success depends upon either chance or skill. 

Types of gambling activities in India

Gambling consists of several games. In India, the following categories of games define the scope of gambling:

Lotteries

Lotteries are one of the most traditional forms of gambling. The state governments hold lotteries at regular intervals, and all these states, more or less, legalise them. The lottery events are regulated by the Lotteries (Regulation) Act, 1998. According to Section 2(b) of the Act, the lottery can be defined as “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”. The Central and state governments can make rules for the conduct of lotteries under this Act.

Betting on horse racing

Winning the bet in horse racing events is considered a game of skill and, therefore, is legal in India. In several states of India, like Bangalore, Hyderabad, Mumbai, etc., horse racing is a popular event. It is conducted by groups organised in the form of clubs. 

In the case of Dr. K.R. Lakshmanan v. State of Tamil Nadu and Anr. (1996), the question that arose was whether horse racing is a game of chance or a game involving substantial skill. The Supreme Court concluded that these games require a lot of training and the chances of winning depend heavily upon the stamina and speed of horses. Moreover, the jockeys are experts. All this supports the argument that this game is based on skill. 

Online gaming

In the past few years, the excitement around online gaming has increased by leaps and bounds. Digital games such as poker, teenpatti, etc. have become quite popular in India. However, it is still contentious whether the gambling laws are applicable to online gaming in India. Various states have enacted proper rules to regulate online gaming, while others still have not formulated any such laws.

Prize competitions

Prize competitions refer to the solving of puzzles, which consist of applying skills for building or arranging a set of letters, words, or figures. These competitions are regulated by the statute called the Prize Competitions Act, 1955, which is applicable to several parts of India. The Act lays down the rules with respect to licencing, penalties, and offences committed in the area of prize competitions. In the case of R.M.D. Chamarbaugwalla v. Union of India (1957), the Supreme Court, while laying down the intention behind the formulation of this Act, stated that the legislators made this provision to regulate and control prize competitions of a gambling nature, and since some competitions substantially depend on the skills of those who do not harm the public in any manner, these are not to be regulated.

Sports betting

Sports betting is mostly prohibited in India. In our country, the immense fan following of the Indian Premier League is not hidden, and a lot of people like betting on IPL matches, which is prohibited. However, in some Northeastern Indian states, sports betting is considered purely legal. India’s legislation for cyber laws, i.e., The Information Technology Act, 2000, does not contain any provision on sports betting, and only a few states, such as Sikkim, Meghalaya, and Nagaland, provide for laws that authorise sports betting. These are discussed further in detail.

History and origin of gambling in India

The reference to the dice games in the Mahabharata is a noteworthy incident that makes people believe in the presence of gambling activities in ancient times. These have always been considered to be elements of human history. The regulation and licencing of gambling are relatively new aspects. Before that, gambling was an unrestrained means of earning money and a source of entertainment. Even the hymns of Rig Veda and Atharva Veda and the verses of Manu Smriti contain traces of gambling. In these scriptures, gambling is shown as a cause of destruction and a burden for the family of the gambler. Various archaeological surveys highlight the presence of gambling among cavemen. Gambling was also a famous activity in Rome, where the first gambling chip was developed. Gambling activities and the laws surrounding them have undergone a massive change. 

Today, people can easily gamble and bet via phones or computer systems. From centuries-old means of entertainment to online gaming, gambling has evolved tremendously, and is still developing. Now, states are enacting separate legislation to regulate online gaming. The Nagaland Prohibition of Gambling and Regulation and Promotion of Online Games of Skill Act, 2015, is one such example. 

Wagering 

Wagering is generally considered a generic term that includes betting and gambling. According to the Cambridge Dictionary, the term ‘wager’ means “to risk money by guessing the result of something.” Generally, it is considered to be synonymous with ‘stakes.’ An essential element of wagering is the payment on the occurrence of a certain event. It is included in both betting and gambling, as both include wagering money. 

Wagering has always been considered taboo in society, and the intention of the legislators behind the framing of Section 30 of the Indian Contract Act, 1872, was to prevent these activities. This provision renders all wagering agreements void, and no claim related to the recovery of money won on any wager can be  accepted. The objective is to encourage people to engage in productive activities instead of earning money by mere chance or luck. However, wagering money is still permitted in sports like the IPL, online rummy, or the lottery. 

Constitutional legality of gambling

The Constitution of India, 1950, empowers the state governments to legislate on the legality or illegality of gaming policies. The offence has been entrusted to the state governments under Entry 34, read with Entry 64 of  List II of the Seventh Schedule. This implies that only state governments can make laws around ‘betting and gambling’ unless the Parliament exercises its power under Article 249 or Article 250. Furthermore, Entry 62 empowers the state governments to legislate in the matter of imposing taxes on gambling and betting. 

There are always huge controversies around the prohibition or regulation of gambling activities. Various people or companies that favour gambling and make money out of it oppose the restrictions that have been imposed on these activities by the Central and state laws. These are considered to be against the spirit of the fundamental right under Article 19(1)(g), i.e., the right to practice any trade or business. 

The State of Bombay v. R.M.D. Chamarbaugwala (1957) is a landmark case in which the constitutionality of prize competitions was in question. The petitioners argued that the Prize Competitions Act, 1955, is violative of the fundamental right enshrined under Article 19(1)(g) of the Indian Constitution and that prize competitions and lotteries are entitled to the protection of Article 301. The contention raised by the State of Bombay was that since the prize competitions and lotteries were opposed to public policy, they were covered under the exception of Article 19(6), and hence, the Act could not be considered to be ultra vires

The Supreme Court held that the prize competitions are of a gambling nature and cannot be regarded as trade or commerce; therefore, the petition was dismissed.

Central gaming laws

Evidently, the authority to formulate laws around gambling is with both the Central and state governments. Following are some of the noteworthy central gambling laws in India:

Public Gambling Act, 1867

The Public Gambling Act, 1867, is a hybrid version of the Gaming Act, 1845, of the United Kingdom, and the Betting Act, 1853, of Ireland. Section 1 of the Public Gaming Act, 1867, defines the ‘common-gaming house’ and the Act stipulates the punishment for the owner or occupier of the gaming house. This provision defines illegal forms of gambling. The playing of games that involve cards, dice, tables, or other gaming instruments is an offence when these instruments are kept or played for the purpose of earning profits. It lays down the penalties for public gambling. Moreover, any person in charge of gaming houses is also punished under this Act. Following are the penalties:

Penalty for owning or having a charge of a gaming-house

An occupier of the gaming-house or any person who is managing a gaming-house is punished with a fine up to Rs 200 or imprisonment of either description not exceeding 3 months. The categories of persons punished under Section 3 are:

  • Owner or occupier of the gaming-house,
  • Anyone who has the care or management of gaming-house,
  • Any person who invests money for such purposes.

Penalty for being found in a gaming house

According to Section 4, if any person is found in a gaming house, he/she will be punished with a maximum imprisonment of 1 month or a fine of up to Rs 100. Playing  dice, cards, counters, money, or other instruments of gaming is not permitted at gaming houses.  

Penalty for giving false names and addresses

If any person is found in a gaming house and, upon being arrested by a police officer, refuses to provide his/her personal details or provides false details, then the offender is made liable under Section 7 of the Public Gambling Act. The punishment stipulated for this offence is a fine of Rs 500 or imprisonment not exceeding one month. 

Penalty for gambling in public streets

Section 13 lays down the penalty of a fine of up to Rs 50 or imprisonment of up to one month for the following acts:

  • For playing with dice, cards, or playing any game which is not a game of skill for money or value on a public street,
  • For setting birds or animals to fight in a public place,
  • For betting or aiding in betting on such public fighting of birds or animals. 

As betting and gambling are the subjects of state lists, state legislatures can frame laws around them. Therefore, the state governments have the choice of whether to adopt the provisions of this Act in their state legislation or not. The states which have adopted the provisions of the Public Gambling Act of 1867 include Haryana, Punjab, Himachal Pradesh, Uttarakhand, Arunachal Pradesh, Chandigarh, Manipur, Mizoram, Tripura, Madhya Pradesh, Chhattisgarh, Lakshadweep, Dadra and Nagar Haveli, and Andaman and Nicobar. The state governments of other states, like Delhi, Goa, Maharashtra, etc., have legislated their own statutes on gambling. This is also discussed in the later sections of this article.

The Lotteries (Regulation) Act, 1998 

According to the Merriam-Webster Dictionary, a lottery is termed as “a drawing of lots in which prizes are distributed to the winners among persons buying a chance”. The Lotteries (Regulation) Act, 1998 empowers the states to regularise lottery systems, from conducting them in their state jurisdiction to collecting revenues in the state treasury. Some of the salient features of this Act include the following:

  • It defines lotteries as a scheme in which the prizes in lot or chance are awarded to the winners who are participants.
  • The print of the lottery tickets should reflect the authenticity of the tickets.
  • The state government should conduct the lottery events itself and the revenue is to be gathered in the public account of the state. 
  • The bumper draws should not exceed 6 in a year.
  • The state government of one state can impose a ban on the sale of tickets for lotteries conducted in every other state.
  • In case of contraventions to the provisions of this Act, an agent or promoter or trader will be committing a cognizable and non-bailable offence. The punishment stipulated for the same is rigorous imprisonment for a term which may extend up to 2 years or with a fine, or both.

Prize Competitions Act, 1955

The conditions for conducting prize competitions are specified under the Prize Competitions Act, 1955. This Act was enacted under Article 252(1) of the Indian Constitution, 1950.  According to Section 4 of the Act, the total prize money that is permitted is up to Rs 1,000 in a month, and it is open to a maximum of 2000 entries. Most states have separate regulations that cover this. Therefore, this Act is becoming redundant.

The Foreign Exchange Management Act, 1999

The Foreign Exchange Management Act, 1999, prohibits foreign direct investments for the conduct of lotteries in India. Foreign Exchange Management (Current Account Transactions) Rules, 2000, were enacted under the Foreign Exchange Regulation Act, and they impose limitations on outside gaming transactions. Drawls on foreign exchange with regard to the remittances of lottery winnings, lottery tickets, etc. are prohibited. Therefore, involvement in gambling in other countries is not permitted. 

State-wise rules and regulations on gambling in India

As discussed in the previous parts of this article, some states have adopted the Public Gambling Act, 1867, while some have formulated their own statutes by following the model of the Act of 1867. Several states such as Maharashtra, Gujarat, Telangana, Nagaland, etc. have enacted their own separate laws on gambling. These are discussed below:

Gambling laws in Maharashtra and Gujarat

Bombay Prevention of Gambling Act, 1887, contains laws on gambling that are applicable in Maharashtra and Gujarat. This statute prohibits gaming within the boundaries of these two states. Section 3 defines gaming as betting and wagering, excluding betting on horse races or dog races. The Act imposes a ban on common gaming houses, and Section 4 penalises the offenders with a fine along with imprisonment of up to 2 years. 

  • Horse-racing- In Maharashtra, the rules for horse-racing are mentioned under the Bombay Race Courses Licensing Act, 1912. It is considered a game of skill and thus, is legal. This activity leads to the generation of huge revenue in the state.
  • Lotteries- The Lotteries (Regulation) Act, 1998, covers the rules around lotteries, and these are completely legal in these states.

Other games like rummy, poker, and betting on cricket are illegal.

Gambling laws in Telangana, Arunachal Pradesh, and Karnataka

The Telangana State Gaming Act, 1974, has illegalized both online and offline gambling activities. It defines gaming as the activity of playing games for prizes or winnings and includes wagering, betting, and online gaming within its ambit. Section 3 stipulates the punishment for the following activities in the state of Telangana:

  • Gaming on a horse race,
  • Gaming on the price or price variation of commodities like cotton,
  • Gaming on the market price of shares or stock,
  • Gaming on any transaction of wagering or betting where the success depends upon chance,
  • Gaming in any other form in places where there are instruments of games and the person in charge can earn profit out of it.

The following table highlights the penalties as mentioned under Section 3 of the Telangana State Gaming Act, 1974.

Offences SectionsPunishments
A person who conducts business and uses any common gaming house or online gaming.Section 3First offence: Imprisonment, which can extend up to 1 year and a fine up to Rs 5,000.For every subsequent offence: Imprisonment which may extend up to 2 years, and a fine up to Rs. 10,000.
A person who is found in a common gaming house for the purpose of gaming.Section 4With imprisonment extending up to 6 months or with a fine extending up to Rs 3,000.
A person who is found gaming or setting birds or animals to fight in a public street or place.Section 9Imprisonment for a term extending up to 6 months or with a fine up to Rs 5,000. 

Furthermore, the Telangana Gaming (Amendment) Act, 2017 was introduced with the objective of abolishing gambling practices that are detrimental to the public interest in terms of financial status and general welfare. Therefore, it acts as a policy of zero-tolerance. The Amendment of 2017 has modified the gambling law of Telangana to include online gaming within its ambit. The term ‘common house gaming’ has also been extended to include cyberspace within its ambit.

Gambling laws in Sikkim, Meghalaya, and Nagaland

Sikkim, Meghalaya, and Nagaland are the only states in India where sports betting is permitted. Other gambling laws in these three states are regulated by separate statutes.

Sikkim

Under the Sikkim Regulation of Gambling (Amendment) Act, 2005, the government can frame rules for gambling activities with respect to the following:

  • Place, time, days or area of gambling,
  • Procedure for issue and cancellation licence for gambling activities,
  • Category of persons who can apply for licence, and
  • Rate of fees for the issue and renewal of licences.

Furthermore, for online gambling, recently new legislation has been enacted which is the Sikkim Online Gaming (Regulation) Act 2008. Section 2(k) of this Act has defined the term ‘online gaming’ as any game in which a player participates and negotiates or bets via a telecommunications device and acquires a chance in the game or lottery. Some of the games that are legal include Black Jack, Pontoon, Roulette, Poker, Casino Brag, etc. The State has legalised online sports betting within its jurisdiction and is allowed to the ones to whom licence is granted. The ones who want to be involved in online gaming can apply for a one-year licence according to the procedure and formalities specified under this Act of 2021. 

Meghalaya

The Meghalaya Prevention of Gambling Act, 1970, is the fundamental gambling law in the State of Meghalaya. By the virtue of Section 13 of this Act, games of skill are legal. Section 2 defines gambling as “a play or game for money, including betting and wagering, by which a person intentionally exposes money to the risk or hazard of loss by chance”. However, this definition specifically excludes lotteries and the acts of wagering and betting on horse races, thus making them legal. The penalty for owning or keeping a charge on a common gaming house, as specified under Section 3 of this legislation, is a fine extended up to Rs 1,000 or six months imprisonment. 

Section 13(2) of the Meghalaya Prevention of Gambling Act, 1970, empowers the State Government to legalise sports activities. Meghalaya Regulation of Gaming Act, 2021 regulates betting on various sports. Also, betting on the sport of teer (archery) is permitted within the state. 

Nagaland

In Nagaland, the Nagaland Prohibition of Gambling and Regulation and Promotion of Online Games of Skill Act, 2015, applies to regulate online games. According to this statute, gambling refers to betting and wagering on games of chance and excludes betting and wagering on games of skill. Furthermore, betting and wagering have both been defined as the staking of money or virtual currency. The Act also defines games of skill and chance. The former includes “card based and action/virtual sports, adventure or mystery and calculation, strategy or quiz based games”, while the latter refers to “the games where there is a preponderance of chance over skill”. Games of skill are separately specified under Schedule A to the Act. Therefore, the games which are legal in the state of Nagaland include  chess, sudoku, quizzes, bridge, rummy, spades, binary options, poker, nap, solitaire, virtual golf, virtual fighting, virtual racing, virtual wrestling, virtual combat games, virtual adventure games, virtual mystery and detective games, virtual monopoly games, virtual team selection games, virtual sports, and virtual sports fantasy league games. 

Gambling laws in Goa, Daman, and Diu

Like most state legislatures, the Goa, Daman and Diu Public Gambling Act, 1976 penalises gambling and the keeping of common gaming houses. However, it does not ban casinos or games of chance. Common gaming houses in Goa, Daman, and Diu include the places where the following events take place:

  • Gaming on market price or price variations of commodities like cotton, opium, etc,
  • Gaming on the market price of shares or stocks,
  • Gaming on occurrence or non-occurrence of any natural event like rain, or the quantity of rainfall.

Section 4 of the Goa, Daman and Diu Public Gambling Act, 1976, stipulates punishment for gaming in common-gaming houses. Anyone who is found in a common gaming house is punished with imprisonment, which may extend for up to 3 years, and a fine extending up to Rs 5,000. 

Gambling laws in Rajasthan

Gambling in Rajasthan is prohibited when the games are played within the common gaming house. Rajasthan Public Gaming Ordinance, 1949, stipulates punishment for gambling and keeps the gaming houses within the territory of Rajasthan. Gaming includes wagering and betting. However, participating in the lottery system is legal. The penalty for owning or keeping a common gaming house as specified under Section 3 of the Ordinance is imprisonment of up to 6 months or a fine of up to Rs 500, or both.

Gambling laws in Tamil Nadu

The acts that regulate gambling in Tamil Nadu are the Tamil Nadu Gaming Act, 1930, and the Tamil Nadu Prize Schemes (Prohibition) Act, 1979. The former penalises the owning and keeping of common gaming houses, while the latter imposes a ban on the conduct of prize competitions. 

Section 11 of the Tamil Nadu Gaming Act, 1930, makes games of skill legal. In the case of Dr. K.R. Lakshmanan v. State of Tamil Nadu (1996), betting on horse races was considered a game of skill as the performance of the horses depends upon many factors such as their training, diet, etc. Therefore, betting in these games is more dependent upon skills than a mere stroke of luck. 

Gambling laws in Delhi

In Delhi, games of chance are prohibited, and the legislation that regulates gambling in the capital city is the Delhi Public Gambling Act, 1955. Section 2 of this law  prohibits gaming other than wagering or betting on horse races. According to Section 3, punishment for owning or keeping a gaming house is imprisonment, which is extendable up to 6 months, and a fine, which could extend up to Rs 1,000. 

Other states like Uttar Pradesh, West Bengal, Odisha, Assam, Pondicherry, and Kerala have also enacted their own gambling laws, which prohibit all games of chance, except horse racing. The statutes on gambling in these states are:

Gambling laws in Uttar Pradesh

Uttar Pradesh, being the most populated Indian state, is also a hub of gambling activities. There are several underground casinos in Uttar Pradesh that operate illegally. Apart from this, games like poker, rummy, and flush are not allowed in the state. However, horse racing is legal and the ‘Lucknow Race Course’ which is the largest horse racing turf in India, is situated in Uttar Pradesh. 

Gambling laws in West Bengal

The West Bengal Gambling and Prize Competitions Act, 1957, is the state legislation of West Bengal that regulates gaming houses and other gambling activities. It keeps horse racing and lotteries outside the scope of illegal gambling. Section 3 of the Act lays down the punishment for keeping or using the common gaming house, which is maximum of 3 years of imprisonment and a fine that can extend up to Rs 2,000.

Gambling laws in Odisha

In Odisha, the Orissa Prevention of Gambling Act, 1955 is the gambling law, and the state lotteries are governed by the Orissa State Lottery Rules, 1939. The Orissa Prevention of Gambling Act, 1955, does not make any distinction between games of skill and games of chance. According to Section 2(b) of the Act, betting, wagering, and other games that involve stakes or money are included within the term ‘gambling’. It expressly excludes ‘lottery’ from the definition of gambling. Section 4 of the Act stipulates punishment for gambling, which is imprisonment extendable up to 1 month or a fine of Rs 100 or both. The penalty for owning or keeping a common gaming house is a maximum of 6 months’ imprisonment or a fine up to Rs 1,000.

Gambling laws in Assam

According to the Assam Game and Betting Act, 1970, the operation of betting houses is illegal. Section 2(a) of the Act defines ‘bet’ as staking money or valuable security on the happening or determination of any uncertain event, except staking money on a lottery. It also excludes betting on horse racing when it is done by a licenced bookmaker in the racing club on the day on which the race is to be run. 

Gambling laws in Pondicherry

The gambling laws of Pondicherry resemble the Public Gambling Act, 1867. The Act that regulates gambling in Pondicherry is the Pondicherry Gaming Act, 1965. The Act prohibits all types of gambling activities, excluding horse racing and lotteries. However, the UT does not conduct local lotteries. Since there is no mention of online gaming in the statute, all the games such as casinos, card games, sports betting, and lotteries are played openly on digital platforms.

Gambling laws in Kerala

Kerala is one of the first Indian states to legalise lottery. The conduct of the lottery is regulated by the Kerala Paper Lotteries (Regulation) Rules, 2005. It contains all the instructions as well as detailed information about the lottery events. Furthermore, the Kerala Gaming Act, 1960,  regulates other gambling activities. Horse racing and games based on skill are legal, while games of chance and those involving money or stakes are strictly penalised under state legislation. 

Licencing restrictions on gambling activities

The gambling activities that require licencing in India are as follows:

Licence to conduct horse racing

Horse racing was declared a game of skill in the landmark case of Dr. K.R. Lakshmanan v. State of Tamil Nadu and Anr. (1996). Therefore, several states organise horse racing events.

These are conducted by the turf clubs, which have to obtain licences. The licences are issued by the state governments under the respective state legislation. The Bombay Race Courses Licencing Act, 1912, is one such law. Similarly, in West Bengal, Section 2C of the West Bengal Gambling and Prize Competitions Act, 1957, stipulates the conditions upon which the licence is granted to the owner or occupier of a race course. Other states also have similar licencing rules and regulations containing provisions with respect to the procedure of obtaining licences, penalties, exclusions, etc. 

Licence on the provision of casinos

In Goa, Sikkim, and Daman and Diu, casinos are allowed in five-star hotels for tourists. The laws that provide licences to casino operators include the Goa, Daman and Diu Public Gambling Act, 1976, and the Sikkim Electronic Entertainment Games (Control and Tax) Act, 2002. These Acts stipulate all the provisions regarding the issue and renewal of licences, penalties, and suspension of licences. If any licence holder fails to comply with the conditions on which the licence was granted to him/her, then a penalty for breach is also imposed. Under the Sikkim Electronic Entertainment Games (Control and Tax) Act, 2002, the penalty for the breach of any condition of a licence is a fine that can extend up to Rs 15,000. 

Licence for the conduct of lotteries 

As discussed before, the lotteries are organised by the state governments who hire the operators i.e., the private companies for conducting such events. The States where lotteries are permitted are Madhya Pradesh, Odisha, Maharashtra, West Bengal, Sikkim, Arunachal Pradesh, Nagaland, Mizoram, Meghalaya, Kerala, and Goa.

Licence for sports betting

Sports betting is permitted in Sikkim, Meghalaya, and Nagaland. In Sikkim, the application for the issuance of a licence is made to the Secretary to the Government of Sikkim (Finance, Revenue, and Expenditure Department). After the submission of the form and application fee of Rs 1,00,000, a provisional licence is issued, which becomes a regular licence after compliance with all the licencing terms. Similarly, in Meghalaya, an application for the provision of a licence is submitted to the Commissioner of Taxes, the Government of Meghalaya. The game of arrow shooting and the sale of teer tickets are regulated by the Meghalaya Regulation of the Game of Arrow Shooting and the Sale of Teer Tickets Act, 2018. In Nagaland, all games of skill are considered legal, and Section 7 of the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015, lays down the terms and conditions for the issue and termination of licences for the conduct of such games. 

Licence for online games

Online skill-based gaming is not expressly prohibited in India. Consequently, the licencing requirements are not mandatory. However, obtaining a licence for such games is always advisable to get the following benefits:

  • The licence ensures that the respective game is a game of skill.
  • It aids in the regulation of gambling activities.
  • The licencing of online games verifies their authenticity and increases participation.
  • The games of skill are permitted on both mobile and web platforms.

In Nagaland, the law that contains rules and procedures for licencing is the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015. According to Section 9 of this Act, the decision on the issue or refusal of a licence has to be taken within 6 months from the date of the application for the licence. In Sikkim, there is the Sikkim Online Gaming (Regulation ) Act, 2008, under which an application for a licence for online gaming is submitted. Section 11 of this Act has empowered the state government to suspend the licence of any licence holder upon breach of the conditions framed by the government. Furthermore, the Telangana Gaming (Amendment) Act, 2017, has amended the Telangana Gaming Act, 1974, by including online gaming within its sphere. There is also an attempt to introduce a central law that can regulate online gaming in India. The Online Gaming (Regulation) Bill, 2022 aims at establishing a robust law that prevents misuse and fraud in the online gaming industry. It makes the licencing of online gaming mandatory and imposes a ban on online gaming except when it is played on an online gaming website. 

Compulsory taxes on gambling activities

Income Tax

Income from gambling activities is included in the annual taxes and, thus, is taxable under the heading ‘income from other sources’. The Income Tax Act, 1961, consists of separate provisions that deal with the application of income tax on gambling activities. 

Income tax on lottery or crossword puzzles

Section 194B of the Income Tax Act lays down that the person responsible for paying the winnings on lotteries and crossword puzzles has to deduct income tax if the winnings exceed Rs 10,000. Currently, the tax-deducted at source of 30% is applicable on such winnings. However, after the application of the surcharge and cess, this rate becomes 31.2%. 

Income tax on horse race

According to Section 194BB, the payer has to deduct income tax from the winnings if they exceed Rs 10,000. The categories of persons who are responsible for deducting income tax under this Section are:

  • A bookmaker,
  • A licence holder for horse racing in any race course, and
  • A licence holder for arranging for wagering or betting in any race course. 

In horse races, too, the tax deducted at the source of 30% plus surcharges and cess is applicable.

Goods and Services Tax

The GST is an indirect tax that is applicable to all goods and services. The gambling activities, such as race events, casinos, etc., are included within the ambit of the entertainment industry, and hence, the rate of GST is 28% on such activities. However, the GST rate on online skill gaming is 18%. 

Equalisation levy

The equalisation levy is also one of the taxes that is imposed on online gaming transactions. It is a tax imposed on the payments received by non-resident e-commerce operators for the supply of goods and services by Indian e-commerce operators. This tax is also applicable when transactions are carried out between an individual and a company with an Indian IP address. The fixed rate of the equalisation levy is 2%. 

International perspective

Since gambling is not restricted to a physical space and online gaming is gaining traction, therefore, it is essential to understand the legality of gaming laws in other countries. The following sub-heads discuss the global or significant laws around gambling and the scope of gambling in foreign nations:

Gambling laws in the US

The Indian Gaming Regulatory Act, 1988, is a federal law in the US that regulates Indian gaming. The Act has set up the National Indian Gaming Commission for this purpose. It  is the basis of conduct for the operation and regulation of gaming by an Indian tribe. 

In the US, there are federal, state, and local laws that regulate gambling. There is a separate Act to regulate internet gambling in the US, which is the Unlawful Internet Gambling Enforcement Act, 2006. Under this Act, people engaged in the business of betting and wagering cannot accept payments related to unlawful internet gambling, which includes any activity that has been declared unlawful under the Federal or State acts.

Gambling laws in Canada

The Canadian laws have restricted gambling within its parameters with a few exceptions such as betting on lawful sports and games, government-run lotteries, etc.

Gambling laws in Europe

European gambling laws differ from country to country. The majority of European countries have prohibited online betting. However, there are countries like the UK that have introduced a structured regulatory system for the games and made them legal. A Gambling Commission has been set up for this purpose, and the provisions of the Gambling Act, 2005, aim to protect children and other vulnerable communities from the evils of gambling. Adolescents between the age groups of 16 and 18 years old can just play lotteries or get involved in private or commercial betting, while those under 16 are prohibited from getting involved in any of the gambling activities.

Most European nations have proper laws that regulate gambling, while others have not yet framed them. A prominent example is that of Germany, whose recent treaty, known as the Interstate Treaty on Gambling (2021), legalised gambling and sports betting and established several regulations for their functioning. Similarly, in France, there is the Code de la sécurité intérieure (The Internal Security Code), which makes gambling and betting activities legal if the operator can benefit from the operation of the law or can obtain the approval of the authorities. European countries have a relatively liberal approach toward legalising gambling. 

Gambling laws in Africa

There are fewer laws on gambling in African nations. Only South Africa has a proper regulatory body established under the National Gambling Act, 2004, which aims at creating uniform norms and standards with respect to gambling, casinos, betting, and wagering. This Act introduces a monitoring and licencing system for its citizens. 

Gambling laws in Oceania

In New Zealand, gambling activities are banned unless the Gambling Act, 2003, has legalised them. The Act contains four categories in the form of ‘classes’ according to which gambling is allowed. However, advertising overseas gambling is prohibited under Section 16 of the Act. On the other hand, the Australian Government has imposed severe restrictions by formulating exhaustive laws on gambling. Except for betting or lottery games, almost all gambling activities are strictly forbidden. According to Section 5, sub-section 1 of Australia’s Interactive Gambling Act, 2001, “prohibitive interactive gambling” includes any service provided within the course of a business that uses internet carriage service, broadcasting service, or datacasting service. This Act protects Australians from the harmful effects of online gaming, such as online casinos. 

Social responsibilities in the gaming industry

The enactment of regulatory laws for gambling activities is instrumental in decreasing this risk factor in the gambling industry. However, the provisions stating social responsibility requirements for the organisers and the public are still meagre. 

To address this problem, the organising groups or companies themselves introduce various rules that aim at promoting responsible gaming. Some of the ways in which the companies ensure the framing of such mechanisms include:

  • Introducing monitoring systems that can track the players so that any problem that arises could be identified easily.
  • Setting up systems for the identification of the problem gamblers.
  • The framing of rules that could regulate the content of advertisements.

Merits of legalising gambling

Evidently, several nations have gone from being anti-gambling to regulating gambling laws around the world. A leading example is that of South Africa, where the Gambling Act 51 of 1961, which prohibited almost all kinds of gambling and betting, was in force before. However, the country evaluated the loopholes in the Act and the merits of licencing and regulating gambling. The present National Gambling Act, 2004, of South Africa was enacted with the following perceptions:

  • Gambling would increase employment opportunities.
  • It would foster economic growth.
  • It would help curb discrimination on the basis of race.

Similarly, new legislation in most countries has stressed the regulation of gambling rather than its prohibition. The following are some of the advantages of legalising gambling in a nation:

Curb money laundering

Gambling has been a significant source of activities like terror funding. When countries impose a ban on gambling activities, these are played in secret, and the money that is exchanged throughout this process is black money. This is one of the major reasons that countries around the world are enacting laws to licence and regularise gambling activities. The authorities are able to keep a check on the gambling activities of the agencies and formulate rules and regulations to prevent any illegal activities under the garb of gambling.

Generate employment

For the conduct of gambling activities, a proper management system is required. In India, there are separate clubs for this purpose that employ a lot of skilled people. Online gaming has furthered this trend by engaging youngsters, who develop gaming applications with their acumen and earn money. Britain’s gaming industry is considered to be one of the largest gaming industries in the world, employing lakhs of people. Therefore, the gaming industry has proved to be an excellent means for producing jobs and employment opportunities. 

Increase in revenues

Undoubtedly, the tax money from gambling becomes a huge source of revenue for the state and central governments. Not only do taxes increase, but gambling locations also act as great tourist spots, and the foreign exchange of a country increases. This revenue can boost the economic growth of the country. Consequently, a lot of developed countries, like the US, UK, Australia, etc., have adopted a regulatory framework for wagering.

Leisure activity

Gambling is a leisure activity for people around the world. The thrill of games attracts people and gives them a chance to take a break from their normal hectic schedule and try their hands on them. Therefore, it acts as a medium of relaxation and entertainment for the public.

Demerits of legalising gambling

Section 30 of the Indian Contract Act, 1872, was framed to deter people from engaging in wager-related activities. This distinctly proves that the legislators wanted to discourage it among the citizens. The following points reflect some of the reasons behind adopting this approach towards the gaming industry:

Immoral

Gambling and betting are considered immoral as they do not require hard work in earning money but rather a stroke of luck could help them win a lump sum amount. However, when they start losing bets, they become an economic burden for their families.

Game of greed

Regularising gambling gives a green signal to the public and makes it an inviting game. However, the more a person gambles or bets, the more he/she becomes greedy towards the game, and the temptation and fun of the game never allow that person to stop wagering money on it. If not completely, a ban on gambling could limit it in some ways and discourage people from entering into this vicious circle of money. Therefore, it is completely a game of greed and temptation. 

Affect the performance of players in sports

Betting in sports can affect the performance of the players, which could force them into unfair play. Moreover, the pressure of winning rises on the players, which could disrupt the healthy spirit of the game.

Increase in the overall crime rate

With the influx of people at gambling sites, there is a probability of an increase in crime rates. Crimes such as prostitution, drug trafficking, and other immoral practises are on the rise in the states that have liberal state laws on gambling.

Conclusion

So, to answer the question of whether gambling is legal in India, there’s no one-word answer. From the above discussion, it is apparent that the legal standing of gambling varies from the type of game to the state’s jurisdiction. The criteria of bracketing the games into a game of skill and a game of chance are also vital in deciding the legality of gambling activities, as most of the statutes validate the playing of games that involve skill and prohibit games based on luck. An appropriate licencing system with proper monitoring techniques could be instrumental in removing all the barriers that make gambling a menace to the public. The revenue that governments earn from gaming could be used for the development of the nation. 

Frequently Asked Questions (FAQs)

What are the key differences between gambling and betting?

In gambling, people do not have an idea of the outcome of the game, while in betting,  bets are made after judging the skills of the players. Both of these terms overlap each other in many ways. Gambling is considered more professional than betting. Examples of gambling are playing games like poker, roulette, bingo, etc., while betting includes wagering money on events like horse racing, sports matches, etc.

Which Indian states are more liberal regarding regulating gambling?

With the formulation of the Goa, Daman and Diu Public Gambling Act, 1976, the states of Goa, Sikkim, Daman and Diu have more liberal gambling laws, since these allow casinos and some other gambling activities, which are usually prohibited in the rest of India. Furthermore, sports betting is legal in Sikkim, Meghalaya, and Nagaland. 

What is the status of online gambling in India?

Owing to its harmful effects on the youth and difficulties in its regulation, online gaming is opposed by several people. The status of online gambling also varies from state to state. States such as Odisha, Assam, and Telangana have imposed a ban on online gaming in their territories, and the state of Maharashtra has prohibited online lotteries. On the other hand, there are a couple of states, like Sikkim and Nagaland, where online gambling is allowed, and these states have enacted separate statutes for the purpose of regulating online games. 

References


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