Multiple gaming websites and apps in Karnataka that gave public the opportunity to earn money from online games have been suspended as Karnataka bans online betting making it a cognizable and non-bailable offence in the State. Karnataka, is the latest Indian state to ban online games after Telangana and Andhra Pradesh. Many questions are being raised on the acts legality and impact on gaming industry. Karnataka presently has 91 gaming companies which are sure to suffer a severe impact in terms of revenue and job loss. Many fear that Bangalore which is a hub for star-ups and IT sector will have a cascading effect on its image after the ban.
Karnataka Police (Amendment) Bill, 2021
Karnataka Police (Amendment) Bill, 2021 passed by both the houses and has received Governor’s assent thereon. The bill which was introduced as an amendment to Karnataka Police Act, 1963 bans all forms of wagering or betting connected with any game of chance with an exception of horse racing and lottery. Betting on the skills of another is also put under gambling. The act includes the use of cyberspace including computer resources or any communication device under IT Act used for gaming. Any act involving risking your money on an unknown result of an event even if the event is a game of skill is considered as an offence under the Act. On the violaters of the law hefty fines and prison time may be imposed.
How far is the Act legal?
A section of gaming companies are planning to challenge Karnataka’s new law in courts on the basis of it being against the rulings of various courts which have allowed online skill games. However the government has taken the stand that the state amendments are aligned with constitutional provisions and court rulings and that it has allowed online skill games but banned only the betting or wagering component associated with them.
A similar law enacted by neighboring Tamil Nadu passed in February ,2021— the Tamil Nadu Gambling and Police Laws (Amendment) Act, 2021 was struck down by its High court.
The Supreme Court has observed that the games of skill are not gambling and is protected under the Indian Constitution. This has been reiterated by various high courts including Karnataka high court.
The Supreme Court has ruled in M J Sivani and Others vs State of Karnataka and Others on April 17, 1995 that games including video games are preponderantly based on skill and are therefore games of skill.
In the Satyanarayana case, the Supreme Court held that rummy is a game of skill where victory is dependent on considerable skill and memory power.
The Supreme Court in Dr K R Lakshmanan vs State of Tamil Nadu in 1996 further defined a game of skill as a game in which success depends primarily on knowledge, attention and experience of the player although there is an element of chance which cannot be entirely eliminated.
Apps like Mobile Premier League (MPL) and Dream 11, India’s major fantasy gaming apps- which have currently withdrawn services from Karnataka in the light of the ban have already established in various courts that they are game of skill and not chance. However since the amended law puts a ban on betting on the skills of others including any act of risking money on the unknown result of an event including game of skill, these gaming apps should once again get ready for a legal battle. Fantasy sports games involve users drafting fantasy teams from a list of players who are playing live games on that day. The user collect points on the basis of the performance of their team. The legality of such games is also supported by the “Humphrey case” which held that such games are games of skill.
Why the law?
The law is introduced with an aim to curb menace of gaming through the Internet and mobile apps making online betting a cognizable offence. Since gambling was a non-cognizable offence in the state, the Dharwad High Court Bench through its order in 2019 ruled that police needs a prior written order from magistrate before raiding gambling dens. The SHO had no authority of law unless the magistrate permit the officer for investigation of non-cognizable offence. The statement of objects and reasons of the act states that the act has been introduced to enhance the punishment for gaming and ensuring orderly conduct by the citizens and to dissuade them from engaging in the vice of gambling.
The ban has given a serious blow to the nascent gaming sector in India which was one of the fastest growing sector in Indian Entertainment. The government believes this ban would help in controlling rowdyism and other illegal activities in the society. However, this is going to effect the youth who were financially dependent on it for their livelihood. This is also going to lead the foreign investors to disinvest their money from the industry thereby causing the gaming companies shifting out from the state. Undoubtedly, this move will affect the overall gaming ecosystem of India and will affect the investments, jobs , revenues and ultimately taxes to be paid by public.
Amisha Bhasin, Intern at S.S. Rana & Co. has assisted in the research of this article.