Gambling on sports is a practice which has existed in the country for decades, be it people resorting to bookies to bet on the major sporting events taking place in the country, or a couple of friends making a friendly bet for a small amount on the next IPL game; irrespective, the practice plays a significant role in the entertainment culture of India.

In the past few years, the betting industry has received a significant boost with the introduction of online platforms which facilitate an easy, sit at home opportunity for enthusiasts to engage in the practice. However, there is still a certain degree of ambiguity or lack of clarity when it comes to the governance as well as the legality surrounding these laws.

Current Laws Related To Betting In India

Majority of the nation is subject to the Public Gambling Act of 1867. This Act has been derived from the Gaming Act of the United Kingdom which came about in 1845 and outrightly prohibits any games that involve the use of cards , dice, tables or other instruments when they are used with the purpose of earning a sum of money. It prohibits the practice of running gaming houses and also bans the practice of public gambling. However due to the date of its inception, there is no particular provision that specifically deals with the concept of online betting or outrightly prohibits it.[1]

This Act is a nationwide statute however the 7th Schedule of the Constitution of India explicitly allows the States to make their own policies and laws related to gambling, thus the option of adopting the provisions of the Act or not, lies with the States. For eg. The Sikkim Government in 2009 issued a memorandum known as Sikkim Online Gaming (Regulation ) Rules, 2009 which laid down the rules and regulations to be followed for online gaming licensing. In addition to this, there is also the Information Technology Act of 2000 which regulates any online activity within the nation.

However, even here, there lies no specific regulation which even has a mention of the practice of online betting. While bookmarks themselves are illegal, nothing prohibits an individual customer from placing a bet on a sporting event online with a bookmark which is based outside the territory of India. Such loopholes in the legal system are exploited by betting companies at large to indulge the Indian audiences and attract them towards placing bets in a simplified, digital manner.

In addition to this, there is a lack of a statutory definition which differentiates a game of skill from a game of chance, wherein while the former is distinguished from gambling and is allowed, the latter at the same time is prohibited. A certain degree of clarification in this area has been provided by the Supreme Court in the case of Dr. K.R. Lakshmanan v. State of Tamil Nadu[2] wherin it was stated as to what would constitute as a game of skill.

The court in this case had determined that horse racing requires a certain degree of skill, judgement and discretion of the players involved and thus must be considered a game of skill. The apex court further elaborated that the question whether a particular game is a "game of skill" depends on the extent of skill involved in the said activity. If there is a significant amount of skill involved, the game would be considered one of skill even if there is an element of chance involved in the activity itself.

It further elaborated with the help of examples of games such as rummy. While the distribution of cards does involve an element of chance, a significant portion of the game requires skill in the sense that the fall of cards is to be memorised and the activity of holding and discarding cards requires a lot of deliberation. Thus such an activity while involving an element of chance, would still primarily be a game of skill.

In furtherance of this, there is no provision which clearly distinguishes gambling from betting where the two are often considered to be synonymous, however that's not the case in reality. In gambling, the stakes or the wager is placed on an event whose outcome is almost unpredictable and is based solely on a single event such as the flipping of a coin or the drawing of a card i.e. only a game of chance. On the other hand, betting can be considered a sophisticated version of the same wherein bets are placed on a sporting event, whose outcome is directly influenced by the skill and performance of the players involved and thus has a greater element of skill than of chance.

The case of DREAM 11 and online fantasy sports:

Over the past few years, the world of fantasy sports has gained immense popularity in the world with DREAM11 coming out to be a front runner in the industry. It is an online interface which allows its customers to create fantasy teams in multiple sports which then compete on the basis of how well the selected players have performed in the real life scenarios. Simultaneously, those who are able to accumulate a fair amount of points are subsequently awarded prizes based on the amount of money they had bet initially. As of 2020, the app reached 100 million users on its platform and had a compound annual growth rate of close to 32 percent.[3]

While talking about the legal compliance of the app in particular in light of the current gambling laws, its legality is fundamentally based on this very difference between a game of chance vs a game of skill. The selection of teams in fantasy sports require extensive research, sense of judgement and an in depth analysis of the sport itself and cannot solely be restricted to a random selection of luck in case a person wants to succeed. A player's success is directly dependent on the level of understanding he has of the sport and is subsequently awarded for his experience and expertise in carefully putting together the best team of players.

There are certain key differences between conventional betting and Dream11:

• Dream 11 is a game of skill and thus does not attract the application of the Public Gambling Act.
• Dream 11 is a founding member of The Federation of Indian Fantasy Sports, which has now paved the way for several other platforms such as MyCircle11, Gamezy, etc.
• On any of the winnings of more than Rs 10,000, a TDS at the rate of 30% is deducted under Section 194-B of the Income Tax Act, 1961. In addition to this, GST at the rate of 18% is also paid by Dream 11 on its respective supplies.
• The selection of the players requires a certain degree of research and expertise to be applied and thus cannot solely be considered a game of luck.

This opinion has been reaffirmed by the courts of India in several Case Laws:
The initial case which particularly dealt with the issue of the legality of Dream 11 as an app was the case of Varun Gumber Vs. Union Territory of Chandigarh[5]. Herein, the petitioner Varun Gumber was a registered user of the Respondent app and had transferred a sum of Rs 50,000 with the intention of participating in the matches offered by the platform itself.

After using up his respective credits in a cricket and football match, the petitioner incurred an overall loss of Rs 24000. Aggrieved by the loss caused to him, the person filed a petition before the Punjab and Haryana Court alleging that online fantasy sports are games of chance and must be prohibited within the ambit of the Public Gambling Act.

In addition to this, the court made certain observations as to the functioning of the app and elaborated as to how it could not be considered just as a game of chance:

• The court stated that while drafting a fantasy sports team, an inherent use of skill, judgement, and personal discretion was involved without which the game could not be played.
• The process required the customer to categorically assess the value of one player he selected and subsequently compare this worth with that of the other players.
• The court added that while executing the team, there were certain rules of the game which are also to be complied with by the user which would ensure that there are checks on the teams which are selected and everybody starts on an equal footing irrespective of the amount of money you put in.
• The ultimate selection of the squad would also involve the evaluation of the statistics and past performances of the players which are involved.
• There is also a certain degree of extended research which users might undertake in order to gain an extra advantage over their competitors, e.g., an analysis of the pitch, taking into account which team is playing at home and which team is away, etc.

All these factors indicate that the process involves a degree of expertise, skill and knowledge with which it is to be played and thus cannot just be blatantly equated to a game of luck such as a lottery. The court even cited the case of K.R. Lakshmanan v. State of Tamil Nadu and thereafter established it to be a mere game of skill and thus not falling under the conventional term of "gambling" under the Public Gambling Act. A subsequent SLP was filed in the Supreme Court which was dismissed.

Another such case is that of Ravindra Singh Chaudhary v. UOI[6]. This was a writ petition filed in the nature of a PIL alleging that Dream11 and similar platforms which allow fantasy sports must be declared as games of chance and thereby must be subsequently declared as illegal acts of gambling, betting under the Public Gambling Act. It was further alleged that instead of paying the GST rate of 28% under the standard classification, the platform only pays at the rate of 18% and thus must be brought under the correct compliance requirements.

The court in this case introduced a test in order to determine whether a practice would fall under the definition of gambling under the definition of gambling under Section 65(B) (15) of the Finance Act, 1994 which reads as under " Betting or gambling means putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring."

Thus the test in order to determine the applicability of this definition would depend on whether the result of the game is determined merely by chance or accident or on the likelihood of another event occurring. While referring to case of Varun Gumber, the court reiterated that after delving into the process which the app requires and the extensive detail with which teams are assembled and points are accumulated, the outcome of the fantasy game cannot just be attributed to chance or luck but the skill and judgement of the customer who has picked the team.

Finally in the case of Gurdeep Singh Sachar v. UOI[7], the court further clarified that a fact which is often overlooked when it comes to the cases of online fantasy sports is that the outcome of the game is not necessarily just dependent on the winning or losing of one particular team, but dependent on the performance of the players which have been selected after extensive research and due diligence.

Thus while the existence of these platforms and their subsequent functioning does have the backing of the Indian courts, there is still an absence of any substantive statutory support which full recognises the area of online sports betting or fantasy sports but also lays down specific rules and regulations to ensure the effective functioning of such services which is also in compliance with the obligations of the local law.

While such activities can be addictive and can further cause a financial risk if a person is not careful, some form of statutory backing would in fact rectify such issues. Some advantages which one would associate with the introduction of a legislation that governs online betting or fantasy sports are-

1. Increased State revenue through tax - As per the report published by the International Centre for Sports Security, the betting industry in India is estimated to be worth around 130 billion US dollars[8]. If this industry is regularised, i.e., falls within the ambit of the government, a substantial amount of tax revenue can be generated from it. This revenue can, in turn, be used to fund other public benefit endeavors and infrastructure development. Since most betting rackets in India are illegal or have to be based outside India due to the illegality of bookmakers, the money generated is either black or taxable in another country, which harms the nation.
    
2. Consumer Protection - If betting is regularised in India, a system of rules and regulations would be established to supervise ethics and ensure that companies engaged in the activity act with fairness. This regulation could also eliminate unlawful practices, such as match-fixing and underage gambling.
    
3. Reducing organized crime - A large number of illegal betting rackets are run by organized crime syndicates, and statutory governance of the process would deal a direct blow to these organizations.
4. Job creation - The betting industry involves various roles, such as bookmakers, analysts, and handicappers. In a country where job opportunities are already limited, the legalization of betting would lead to the creation of several new job opportunities for the public.
    
5. Increased engagement of sports fans - Fans are more invested in the outcome of matches when they place bets, which could attract customers who would normally skip the game or only check the score at the end. Betting can engage fans throughout the duration of the game.
    
6. Analysis - The introduction of betting could increase the practice of data collection and analysis of the game, benefiting sports teams, broadcasters, TV shows, and other stakeholders involved in the sports industry.

Regularization of the practice of betting was first addressed in the Mudgal Committee Report. This committee was instituted in 2013 by the Supreme Court of India aiming to investigate issues surrounding corruption and mismanagement in Indian cricket. The purpose was primarily to conduct an independent enquiry into the allegations of match fixing and fraud against several names involved in the functioning of the Indian Premier League, namely Gurunath Meiyappan and Rajasthan Royals owner Raj kundra[9].

The Committee concluded that the investigative agencies were incompetent and lacked the adequate tools to effectively combat the influence and control which the bookies exercised over the industry at large. The Committee also recommended that the legalization of the betting industry as a whole would not only bring down the influence of the crime syndicates and the flow of black money, but would also aid the authorities in conducting effective enquiries and investigations. Certain recommendations were also made by the Committee-

1. Agents which are representing players must be formally registered and should not be allowed to travel with the players. Thus, a more stringent control of the people in charge of the players and their representation.
2. Special courts or agencies that primarily deal with investigations into match-fixing.
3. A separate statute that specifically governs betting activities within the nation as well as on online platforms.

The idea of regularization or to some extent give formal recognition to the practice of betting in sports was discussed in the Lodha Committee Report[10], which followed Mudgal Committee's findings on corruption in Indian sports, especially cricket.

This committee too was appointed by the Supreme Court of India on 23 January 2015 as a means of assessing the degree of punishment to be allotted to Gurunath Meiyappan and Raj Kundra who were involved in the IPL betting scandal and also make recommendations to the Board of Control for Cricket in India (BCCI) in order to improve its functioning.

In Chapter IX of the Report, the Committee addressed how several of the respondents believed that it would serve both the game as well as the economy of the country good if betting were regularized similar to what had been done in the United Kingdom. The Committee stated that the fact that the betting industry around the world was worth more than 400 billion dollars was a fact that could not be overlooked by anyone.

While it established that legalizing betting was a valid consideration, the Committee also recommended certain safeguards to be employed which would accompany the regularization of betting in case it happens-

• Any entity which would be closely associated with the sport, be it the players, the coaches, referees, and other administrators, would disclose their incomes and assets to the relevant authorities in order to ensure transparency and prevent foul play.
• Certain regulatory authorities must be employed which would closely monitor the functioning of the online betting platforms, the betting houses, bookmakers, etc., and introduce the pre-condition of a formal registration or licensing process, which is also susceptible to revocation.
• Those placing the bets must have proof verifying their age and identification details.
• The introduction of strict penal provisions against those who fail to comply with these statutory obligations.
• The option of betting would obviously not extend to the players, referees, coaches, and administrators who, if caught, would run the risk of debarment.

Despite the Committee providing a certain baseline as to how the regularization is to be conducted and repeatedly emphasizing on the benefits of incorporating betting on sports as a legitimate industry, little to no action has been taken to implement such recommendations.

The future of Sports Betting in India

The industry of sports betting has constantly been innovating, with the introduction of new engaging features and services such as in-play betting, minute to minute detailed statistics etc, the industry has got the entire Western world in its grip. With the advancement in technology and the constant demand for new entertainment channels from the Generation Z, the future of sports betting seems somewhat promising.

While the Public Gambling Act is still applicable throughout the nation, certain states have rejected the provisions of the Act and decided to formulate their owns rules which give recognition, regularization and protection to the betting activities within that particular state. Sikkim was one of the first states which attempted to legalize and began accepting applications regarding the licensing of online betting platforms. This was followed by Nagaland and Meghalaya coming up with their own gaming laws and licensing regimes[11].

Subsequent to the Mudgal as well as the Lodha Committee Report, the Law Commission in its Report no. 276 in 2018 discussed the idea of incorporating gambling and sports betting within the legal framework of India. The Commission Report further listed out the advantages of having a regulated betting industry within the country:

• The substantial revenue it will generate for the country.
• The employment generated as a result of the industry being established.
• The potential tourism it might attract.
• Some protection being given to vulnerable sections of society.
• Protection of vulnerable and the underage from the addictive aspects of the industry.

The Commission also recommended the strategy of giving industries the autonomy of deciding their own standards and means of regulation while the Government is only restricted to a supervisory role with limited control. The advantages of the control primarily being with the industry bodies would be the following:

• State resources would not be exhausted as the responsibility of rule-making and supervision of the process would primarily lie with the industry bodies themselves.
• There will be a certain degree of transparency as the consumers themselves would be able to identify and choose their particular operators, i.e., one would have knowledge of who they are dealing with.
• The involvement of industry bodies would also ensure greater compliance with the law of the country since the responsibility of overlooking the functioning of the process would lie with the bodies themselves.

The Law Commission Reports clearly states that the advantages of the practice being incorporated as a legitimate industry clearly outweigh the stigma surrounding the practice or the question of whether it is morally correct or not. While the legalization of the said practice does prime facie seem attractive, the Commission also emphasised that it is imperative for certain safeguards to accompany the regularization process.

Betting services must only be offered by Indian licensed operators who function within the territory of India and have obtained their licenses from a legitimate established licensing authority. Certain restrictions or caps must be imposed either on the time period or the number of transactions that one is allowed to undertake at a time.

In addition to this, the practice must be categorised based on the amount of money involved in the bet i.e. it must be divided into "proper gambling" or "small gambling" with only persons who have a certain amount of sum in their bank be allowed to engage in the former which would involve larger sums of money. Any transaction must be linked to the consumer as well as the operator's Aadhar card and must be restricted to only people who are above the age of 18. In addition to this, standard disclaimers must be displayed at the game houses or the online betting platforms similar to how smoking kills disclaimers are displayed at cinema halls etc.

Warnings as to the risks involved in the process of betting and guidelines as to how one can engage in the practice responsibly must also be mandatorily displayed. Subsequently, all revenue made from the process would be subject to the Income Tax Act , 1961 and the Goods and Services Act, 2017. At the end the Commission highlighted that such activities have existed for thousands of years and would continue to exist, be it in a legal or an illegal manner, thus it is recommended that the Government regularize it even if it doesn't fully support its morality.[12]

Thus while the benefits associated with the regularization of the betting industry do seem really lucrative, the need of the hour first, is a detailed, exhaustive and all inclusive statute that specifically governs the practice of betting within the nation so that one can see the effective incorporation of the practice into the mainstream while also guaranteeing protection from its addictive after effects to the vulnerable and the underage. Article 21 guarantees a person a right over his personal liberty which includes his decision of how he wishes to spend his money.

While the downsides of such a practice have already been pointed out, if suitable measures can be employed to keep those in check, the regularization or the potential legalization of the practice in an economy like India would do far more good than it would do damage.

End Notes:

1. Rachit Garg, Is Gambling legal in India, accessed 1 May 2023
2. Dr. K.R. Lakshmanan vs State Of Tamil Nadu, 1996, 1996 AIR 1153 accessed 1 May 2023
3. Dream11 "Makes Sports Better" with 100 Million Users on AWS, accessed 1 May 2023
4. , accessed 1 May 2023
5. Varun Gumber Vs. Union Territory of Chandigarh, 2017, CWP No. 7559 of 2017 accessed 1 May 2023
6. Ravindra Singh Chawdhary v. UOI, 2019, D.B. Civil Writ Petition No. 20779/2019, accessed 2 May 2023
7. Gurdeep Singh Sachar v. UOI, 2019, CRIMINAL PUBLIC INTEREST LITIGATION STAMP NO.22 OF 2019, accessed 2 May 2023
8. Shreya, Sports Betting And Laws Relating To It, accessed 3 May 2023
9. Justice Mudgal Committee Report, 2014, accessed 4 May 2023
10. Lodha Committee Report, 2015, accessed 4 May 2023
11. The legality of Online Gambling in India: Current Regulations and What's Ahead, accessed 4 May 2023
12. Law Commission Report No. 276, 2018, accessed 4 May 2023

Award Winning Article Is Written By: Mr.Japman Singh, Law Researcher at the Delhi High Court
Email: [email protected].

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