Should the Government Legalize Gambling in India?
The illegal gambling market in India by consensus estimates is valued at around US $200 billion. That figures accounts for almost 7% of the GDP of India. A noteworthy statistic at a time when the GDP growth rate has fallen to historic lows.
Gambling in India is governed by the archaic Public Gambling Act, 1867. An Act derived from the British Gaming Act, 1845 and Betting Act, 1853. Reading the act further emphasizes that it is now 152 years old.
The age-old law criminalizes operating a gambling house, assisting in the operations of a gambling house, visiting a gambling house regardless of whether one is gambling or not, financing gambling and having gambling devices. The penalty is a fine which cannot exceed Rs. 200 or up to three months in prison (note that Starbucks small café latte costs Rs. 217 and that all gambling now takes place online and not in someone’s house).
The Public Gambling Act also explicitly states “nothing in this Act shall apply to games of mere skill wherever played” which means, in absence of other laws against them, wagering on games of skill is legal.
Horse Racing and Games of Skills
This provision has created a very large grey area for those looking to circumvent the law as well as those looking to abide by it. Thanks to the enterprising lawyers of our country, horse racing, for example, is considered a game of skill, so is the card game of Rummy and the sport of Golf. Any wagering or betting on these games is not considered gambling. It was argued that it takes a lot of skill to assess the jockey and the horse and the equipment before placing bets in horse racing. One may argue that on this logic, cricket betting will require far more skill. But so far, no one has yet argued this.
In 1935, when states were conferred with the power to enact laws on “betting and gambling” the public gambling act ceased to be a Central Legislation, whereby it was no longer applicable to the whole territory of India. Currently, the only manner in which the Act can still be held applicable is if it is adopted by a state out of its own free will. 14 States/Union Territories including Haryana, Punjab, MP, Chhattisgarh have adopted the Public Gambling Act, 1867 as it is, while others have their own gambling legislation.
- Goa, Daman and Diu, for example, permit casinos and other games of “electronic amusement/slot machines in Five Star Hotels” and that “such table games and gaming on board in vessels offshore as may be notified”.
- Sikkim is the only other state in the country which allows for casinos. It is also the only state to address, permit and regulate online gambling. It permits a list of online games like blackjack and roulette to be operated after a license is obtained from the State Government.
- Nagaland’s Gambling Act which came to existence in 2015, clearly defines with a list of names, games which it considers are games of skill.
On the other hand, Telangana in 2017 introduced ordinances which prohibit gambling as a whole, both online and offline. Simply put the law is old, ambiguous and confusing since it differs from state to state.
The age-old British law on which our Gambling laws are based has been repealed in the very country which made it (i.e. Britain). Gambling is legal in Britain and is regulated by the Government. It is a thriving and growing industry and generated a Gross Gambling Yield of GBP 14.5 Billion between April 2017 and May 2018.
Lottery in India
Lottery in India is a state subject as well and hence suffers from the same disease as gambling. It is governed by the Lotteries (Regulation) Act, 1998. There is no blanket ban on lotteries in India. Currently, Lottery is permitted in only 12 states, including West Bengal, Punjab and Kerala whereas it is banned entirely in Tamil Nadu and Karnataka.
The Kerala government earned Rs. 7,300 crores in 2015-2016 from the sale of lottery tickets. Apart from the revenue generation, it is also estimated that selling lottery tickets is a source of livelihood for 2.5 Lakh people in the state. The state also runs lotteries of which the proceeds are spent on the welfare of the people in the state. The Karunya lottery, for example, was launched in 2011, proceeds from which are used for the treatment of cancer, diseases of the liver and dialysis for the poor. The lottery has contributed over Rs. 1200 crore for the same.
In recent years, online lotteries have also sprung up in the country. These lotteries offer players the convenience of betting from their home. “Playwin” which is backed by the Essel group is a major player in the industry. While the players must show presence in the state where the lottery is organized it is clearly impossible to assess this. This completely defeats the purpose of state control on lotteries. If this was not enough, the online sphere also offers avenues for several unregulated and fake lotteries which are run.
The lottery industry is on the decline though. There has been a reduction of lottery terminals and sales by up to 70%. This decline can be attributed to the introduction of GST after which the selling and distribution of lottery tickets has become very expensive. The tax incidence has increased by a whopping 300% as compared to the pre-GST era and has crippled the approximate Rs. 60,000 crore industry.
The Big Debate
The big debate when it comes to gambling laws in India is what constitutes a game of skill and what constitutes a game of chance. This distinction alone determines the legality of a wager.
The Indian courts consider Horse racing to be a game of skill since it involves an assessment of a jockey’s physical capacity and the condition, speed and endurance of the horse.
Similarly, in a 2015 judgement related to match-fixing, a Delhi district court called cricket a game of skill and did not charge the accused for betting on the game, though they were charged for fixing the match.
The above debate and regulation, in fact, is so unclear that it has resulted in a slew of online gambling websites, which are all legal unless declared otherwise. All Poker and Teen Patti websites are legal in those states which do not explicitly call gambling on Poker or Teen Patti illegal as they are considered to be games of skill. This basically means that while illegal, this kind of gambling is possible all over India, at least in the online world. All you have to do is to select that you are a resident of a permitting state and use an Indian credit card to get started.
Take for example, Dream11 – a fantasy sports startup (currently valued at US $1 Billion), which won a landmark judgement in 2017, a challenge to which was dismissed by the Supreme Court of India. The court ruled that the game involved skill and judgement of the user and since there was an element of skill involved it was legal under the Public Gambling Act, 1867.
I have always wondered why sports betting (particularly on cricket) is not allowed in India…imagine the amount of tax collection for the govt if you legalise something which is already so rampant. It will also reduce a large black market.
Positive + Positive = Positive
— Rajat Sharma (@SanaSecurities) September 16, 2019
Argument against Gambling and why legalize?
The argument against legalizing gambling is primarily based on morality. Naysayers believe it to be a cause of addiction, loss of livelihood and bankruptcy. Be that as it may, gambling is already a thriving industry in India. The seedy belly of the underworld is fed in a large part by gambling. The activity is pervasive and present across all strata of society.
For anyone living in Delhi (or any other metro city) it is common knowledge that many people indulge in betting in one way or another. Bookies are everywhere, casual Poker games are preferred over a night out and the month preceding Diwali is full of ‘card parties’. With an activity so popular, is it not better to legalize it and regulate it? Make it a cash cow for the Government and put a dent in the earnings of the underworld.
Is there a lack of will?
The effort involved in legalizing gambling and creating a new industry is so large that no one wants to take up. Changing the archaic laws, getting all states to agree, addressing all facets including online gambling, creating a framework to ensure the industry is regulated, ensuring that there is appropriate protection for those at risk etc. The task is herculean. The Law Commission of India published a report in 2018 which advocates for and lists the benefits of legalizing gambling in India. In any event, most HNIs in India can bet on cricket games one way or another on foreign websites. I think the Government is missing on a low hanging fruit.