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India’s Legal Framework over Online Gaming is a Mess, But Can It Be Fixed?

An attempt was made in 2018 for a contemporary regulatory mechanism over the online gaming sector to be implemented in India when senior Congress leader and MP Shashi Tharoor tabled the draft Sports (Online Gaming And Prevention Of Fraud) Bill in the Lok Sabha.

By Agency Desk
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Self-Regulation Charters are in Place, but are They Consistent and Thorough?

Working under the conditions of a lack of proper and comprehensive regulation over online gaming in India, the country’s major gaming industry bodies have endeavored to develop their own self regulation charters for organization members to abide by, seeking to achieve sustainable progress through integrity. Despite the good intentions, the gaming industry compliance charters suffer from a number of deficiencies in consistency and thoroughness.

Both the All India Gaming Federation (AIGF), the apex gaming industry body over esports, online fantasy sports, poker, rummy and casual games genres, and the Federation of Indian Fantasy Sports (FIFS), comprising of fantasy sports operators, have issued books of self-regulation rules for gaming platforms called compliance charters aimed to build a viable and safe gaming environment in India.

The two charters are not universally abiding as they apply only to the members of AIGF or FIFS respectively and a quick consistency check shows a number of discrepancies that can cause ambiguities. While both organizations require their members to provide games only to locals, AIGF restricts gaming platform services to ‘Indian residents’ following the definitions provided by the Foreign Exchange Management Act (FEMA), and FIFS restricts offers to ‘Indian users’ which is a vague term.

At the same time, FIFS adheres to FEMA rules for prohibition of payments in foreign currencies and using international credit cards, while AIGF vaguely restricts cross border liquidity. Inconsistencies and deficiencies of the two compliance charters can be found in a number of other key areas, including rules for handling personal data and confidential information, geo-blocking mechanisms and user localization, member personnel participation restrictions, grievance redressal mechanisms, as well as in envisaged audit tools and consequences for compliance breaches.

India’s Statutory Framework over Gaming Remains Largely Archaic and Complex

An attempt was made in 2018 for a contemporary regulatory mechanism over the online gaming sector to be implemented in India when senior Congress leader and MP Shashi Tharoor tabled the draft Sports (Online Gaming And Prevention Of Fraud) Bill in the Lok Sabha. The bill did not reach adoption and this left desi sport bettors, online fantasy sports enthusiasts, and people who play online casino games in a maze of often archaic and contradictory national and state-level statutory rules and restrictions.

The major law that deals with gaming in India is the Victorian-era Public Gambling Act of 1867 which aims “to provide for the punishment of public gambling and the keeping of common gaming houses”. The act focuses on physical gaming houses and exchange of money while wagering and does not include anything about online gaming and electronic transfers of funds.

In its Section 12, the Public Gaming Act expressly excludes any “game of mere skill” from the definition of gambling and the related prohibitions. Over the years, the meaning of the phrase has proven to be vague and difficult to be defined precisely, even though numerous rulings of India’s Supreme Court and various High Courts have sought to find a solution. For example, one and the same popular game, Poker, has been categorized as a game of skill by the High Courts of Karnataka and Kolkata, while the Gujarat HC has placed it under the ‘game of chance’ heading.

The Constitution provides powers to states to implement their own legislation concerning games of chance and a number of states have exercised this option. While Goa and Sikkim have allowed licensed operators to run casinos within their territories, a number of other states have chosen to impose bans on gaming.

The most recent case is Karnataka, where an October 2021 amendment to the state’s Police Act included a prohibition on all games, including games of skill when a risk of losing money is present, but allowed betting on horse races and online lottery purchase

The High Court of Karnataka struck down the blanket ban on gaming on February 14 as contradictory to the Constitution for disregarding the distinction between games of skill and games of chance. The decision followed similar verdicts of the High Courts of Madras and Kerala striking down gaming bans in their respective states.

India Does Not Need to Invent Hot Water

The current legal situation surrounding gaming in India seems complicated beyond repair, but the country doesn’t really need to elaborate some highly sophisticated solutions to fix it. It would be enough to review and consider what other countries have already done in the field of regulation and licensing over gaming and implement a selection of measures that are most suitable to Indian society.

With the advance of the internet and the influx of offshore gaming platforms all over the world, a number of developed economies like Sweden, Denmark, France and the UK have opted to implement regulation over the sector instead of attempting futile battles to ban them.

Besides making gaming companies pay taxes in the corresponding country and conform to anti-money laundering rules, the common feature shared by contemporary regulation approaches is the focus on gambler protection. Various responsible gaming mechanisms have been put in place to lower the societal cost of gambling and betting by shielding users from associated risks like addictions, excessive financial losses, privacy breaches, fraud and odds-tampering.

The implementation of a progresive regulatory framework by India inspired by leading global practice and combined with the establishment of a National Gaming Authority to oversee the sector and categorize games into skill- and chance-based brackets can do a lot to support the homegrown industry and ensure a safe gaming environment for Indians.

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