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Wednesday, December 08, 2021

Karnataka gambling law: Ambit and the High Court challenge

An FIR was registered on October 7 under the amended law against the creators of the online fantasy sports platform Dream 11 for running a gaming house as defined in the new law.

Written by Johnson T A | Bengaluru |
Updated: October 30, 2021 7:20:52 am
karnataka news, karnataka gambling lawOne of the primary grounds on which the new gaming laws in Karnataka, Kerala and Tamil Nadu has been challenged is that games of skill have been clubbed along with games of chance in the definition of gaming, if the games of skill are played for prizes or bets. (Representative Image)

On September 21, the Karnataka legislature passed a legislation to amend the Karnataka Police Act, 1963, making all forms of gambling, including online, a cognisable and non-bailable offence. The Karnataka Police (Amendment) Act , 2021 was notified and came into force on October 5

It was passed in Karnataka despite similar laws introduced in Tamil Nadu, Kerala and Telangana having faced legal challenges for broadening the scope of gambling beyond what has been defined by law. On August 3, the Madras High Court struck down the Tamil Nadu Gambling and Police Laws (Amendment) Act, 2021 as being ultra vires. And on September 27, the Kerala High Court, relying on the Madras HC order, struck down an amendment to the Kerala Gaming
Act, 1960 which imposed a ban on online rummy.

Since the new law came into effect, several online gaming firms have geo-locked their apps and sites in Karnataka to prevent attracting police action if customers access the sites. An FIR was registered on October 7 under the amended law against the creators of the online fantasy sports platform Dream 11 for running a gaming house as defined in the
new law.

What are the legal issues raised by these amended laws?

One of the primary grounds on which the new gaming laws in Karnataka, Kerala and Tamil Nadu has been challenged is that games of skill have been clubbed along with games of chance in the definition of gaming, if the games of skill are played for prizes or bets.

Gaming companies have argued — successfully in Tamil Nadu and Kerala — that as per the law laid down by the Supreme Court in as 1957 (Chamarbaugwala cases) — competitive games of skill are business activities protected under Article 19 (1) (g) of the Constitution.

Rummy and horse racing have been classified by the courts as games of skill that do not come under the purview of gaming laws, going by the yardstick of whether skill or chance is predominant in the outcome. It has been argued that states do not have “legislative competence” to prohibit games of skill and that only games of chance can be regulated for gambling and betting.

Why has Karnataka amended the law?

Among the reasons cited by the government is an order by the Dhanwad Bench of the Karnataka High Court (Vageppa Gurulinga Jangaligi vs Kagwad police, December 2019) that police cannot raid gambling dens without a formal written order from a magistrate, since gambling is a non-cognisable and bailable offence.

The order by Justice P G M Patil said in non-cognisable offences, the “SHO of the police station has no authority of law unless the jurisdictional magistrate permits the police officer for investigation of the non-cognizable
offence”.

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Recent public interest litigations seeking a ban on online gaming and betting, too, have been a trigger for the amendments.

According to the statement of objects and reasons, the new law is needed to make gambling a cognisable and non-bailable offence (gambling in public streets remains cognisable and bailable). The new law has also been introduced to “include the use of cyberspace including computer resources or any other communication device as defined in the Information Technology Act 2000 in the process of gaming to curb the menace of gaming through internet, mobile app”.

What forms of gambling does the new law cover?

The amended law covers all forms of wagering or betting “in connection with any game of chance” with the exception of horse racing and lotteries. It also puts betting on the skills of others in the category of gambling. It provides an exception only to any pure game of skill and not to “wagering by persons taking part in such game of skill”.

According to the amended law, “all forms of wagering or betting, including in the form of tokens valued in terms of money paid before or after issue of it, or electronic means and virtual currency, electronic transfer of funds in connection with any game of chance”, will be considered gambling. The new law views gaming websites in the same light as physical gambling houses.

The new law enhances maximum punishment for owners of gambling centres from one year to three years of imprisonment and fines from Rs 1,000 to Rs 1 lakh. The minimum punishment proposed is six months instead of the current one month and the fine is Rs 10,000 instead of Rs 500.

For aiding or abetting gambling, the punishment has been enhanced to six months and a Rs 10,000 fine. A first offence of managing a gaming house will attract a minimum sentence of 6 months and a fine of Rs 10,000, a second offence 1 year and Rs 15,000, and a third 18 months and Rs 20,000.

Will these amendments stand the test of law?

As mentioned, a similar law in Tamil Nadu was struck down by the Madras High Court as being ultra vires after it was challenged by online gaming firms.

The court ruled on August 3: “It is true that, broadly speaking, games and sporting activities in the physical form cannot be equated with games conducted in virtual mode or in cyberspace. However, when it comes to card games or board games such as chess or Scrabble, there is no distinction between the skill involved in the physical form of the activity or in the virtual form.”

The HC said both rummy and poker are games of skill. “Poker may not have been recognised in any previous judgment in this country to be a game of skill, but the evidence in such regard is apparent from the American case that even convinced the Law Commission to accept the poker as a game of skill in its 276th Report,” it observed.

What is the status of the new law?

The All India Gaming Federation and several online gaming companies have approached the Karnataka HC challenging the amendments and the extension of the law to cover games of skill such as rummy. The HC has not ordered a stay, but the government has told the court that it would not take any precipitating action against gaming firms under the new law during the pendency of cases filed by the Gaming Federation and gaming firms.

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