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On Tuesday, September 21, the Karnataka legislative assembly passed the controversial Karnataka Police (Amendment) Bill, 2021, introduced by Home Minister Araga Jnanendra. This development comes after the Karnataka High Court urged the state government to develop a law on online gambling.
The Bill bans all formats of online gaming that involve an entry fee or registration fee. Since the Bill makes no distinction between games of chance and skill, it will impact all gaming formats, including casual games, strategy games, and even e-sports. It also deems online poker and rummy illegal in the state when played for stakes.
The Bill is an amendment to the Karnataka Police Act. Many offenses under the law already attract prison time, and the Bill proposes to increase these penalties. The Karnataka government has said the Bill is needed as the youth from rural areas, who have been idle in the city during the COVID-19 pandemic, “have shown a tendency of becoming habitual gamblers.”
Interestingly, this Bill also comes when fantasy game operators and professional fantasy players are looking to cash in on the upcoming ICC T20 World Cup and the ongoing Indian Premier League (IPL).
The proposed ban comes as online fantasy gaming platforms such as Tiger Global-backed Dream11 and Sequoia Capital-funded Mobile Premier League (MPL) that offer fantasy cricket and football games have become increasingly popular in India.
However, experts say the Karnataka Police (Amendment) Bill, 2021, may face legal hurdles, as it lacks clarity, particularly over how authorities identify an activity, website, or app as ‘problematic.’
Moreover, the Bill needs to be ratified by the Governor before it can be enacted as law, and given the recent Madras High Court judgment is likely to be challenged in the Karnataka High Court.
Karnataka Government Tables Bill Banning All Forms of Real-Money Online Gaming in Assembly
After Tamil Nadu, Karnataka has joined the list of southern states to introduce a Bill that outright bans real money online gaming. On September 17, the state government tabled the Karnataka Police (Amendment) Bill, 2021, in the State Legislative Assembly. The Bill was passed on September 21.
Karnataka Police (Amendment) Act 2021: Salient Features
The Bill is an amendment to the Karnataka Police Act, 1963, which banned online gaming and betting and provided maximum imprisonment of three years and a penalty up to ₹1 Lakh for violation of the provisions. The amended Bill bans all forms of wagering or betting, both in games of chance and skill, including in the form of tokens valued in terms of money paid before or after the issue of it.
The Bill introduced by Karnataka Home Minister Araga Jnanendra also seeks to ban electronic means and virtual currency, electronic transfer of funds in connection with any game of ‘chance.’
However, there is no ban on lottery or betting on horse races on any racecourse within or outside Karnataka.
The Bill seems to be very similar to the ones passed by the state governments of Telangana, Andhra Pradesh, and Tamil Nadu, wherein all forms of online gaming have been banned and criminalized, without making a distinction between games of skill and chance.
Taking note of the fallacies of the Bill passed by the Tamil Nadu government, Jnanendra told reporters that the Karnataka government had taken the Madras High Court’s judgment into consideration while drafting the Karnataka Police (Amendment) Act 2021.
“Our intention is to ban all games that involve profiting, betting, and stakes. We have taken lessons from the Madras High Court’s decision to strike down similar legislation in Tamil Nadu and have changed our Bill accordingly. The state has data on how many people have been affected by online betting and gambling during the pandemic, and this Bill hopes to put an end to it.”
The Bill’s main objective is to make effective enforcement of provisions of the Police Act by making provisions cognizable offenses and non-bailable. The only exception is Section 87 (gaming in public streets), which is made cognizable and bailable.
It will include the use of cyberspace, including computer resources or any communication device as defined in the Information Technology Act, 2000 in the process of gaming, to curb the menace of gaming through the internet and mobile apps.
The Bill will be debated upon in the Legislative Assemble sometime next week.
This is not to say that the Bill is not open to legal challenges. Given how the Tamil Nadu Gaming and Police Laws (Amendment) Act 2021 was struck down by the Madras High Court on August 3 for being ‘excessive and disproportionate,’ experts believe the Karnataka Bill will likely be challenged in the Karnataka High Court.
AIGF & Jay Sayta Weigh In
While the Madras High Court judgment was a landmark one in the history of the Indian gaming sector, the Tamil Nadu government is adamant in banning all forms of real-money online gaming without considering the skill aspect of some of the games in question. Being one of the larger states in the country, a financial and tech hub as well, Karnataka’s decision to tread down a similar path of banning real-money games instead of regulation is a serious blow to the industry.
Commenting on the same, Roland Landers, CEO, All India Gaming Federation (AIGF), states, “India is the fifth largest online gaming market globally and skill-based gaming, a sunrise sector, is giving birth to an increasing number of unicorns within the country, especially Karnataka. The sector has been a strong financial contributor to the Indian economy even during an unprecedented period of slowdown and is further expected to generate revenues in excess of $3 billion by 2025. The move by the Karnataka government in tabling the Karnataka Police (Amendment) Compliance Act, 2021 act can be seen as a setback to the state’s reputation of being a tech-hub and start-up capital.”
Elaborating this further, Justice Vikramajit Sen, a former Judge of the Supreme Court & former Chief Justice of the Karnataka High Court, added, “The Indian regulatory framework has clearly differentiated between games of skill and games of chance in India. Just because games of skills may involve an entry fee, they cannot be considered gambling. Games of chance are considered gambling as it involves luck rather than skill. Thus it is expressly prohibited by the law, wherein games of skill are considered legal across most states, including digital & online. The sector needs the support of state governments to promote initiatives towards responsible gaming and recognition of the AIGF’ Self-regulation Framework’. AIGF and its advisory members look forward to an opportunity to engage stakeholders within the state government to make an industry representation on the matter.”
With serious concerns looming from the Karnataka Government’s move to ban online gaming, PK Misra, President Players’ Association – AIGF and former senior IAS, said, “The move will affect the online skill-based gaming sector, putting an end to player’s right to earn their livelihood. There is no clarity on the scope of this law, and we remain in constant fear of the players’ livelihood being banned at any time without prior information or dialogue.”
Misra further added, “Around 10-12% of India’s gaming community is based in Karnataka, and many of these players who compete at the international level are afraid for not only their livelihoods but also their ability to pursue their dreams of becoming professional players on international platforms. I certainly hope the state government draws a clear distinction between gambling and games of skill. Since 1957, the Supreme court has reiterated games of skill as a legitimate business protected under article 19(1)(g) of the Indian Constitution, also supported by the Karnataka High Court in multiple judgments.”
PokerGuru also reached out to Jay Sayta, an expert on gambling laws and a technology lawyer, to clarify what the Karnataka Police (Amendment) Bill, 2021 implies and the possibility of it getting ratified by the Legislative Assembly.
“I think the Bill in its present form is not drafted very well and removes the distinction between games of skill and chance, making it susceptible to challenge on the grounds of being ultra vires the constitution. Having said that, the Bill is yet to be passed by the legislative assembly. After debate and consideration by the legislative assembly, it will be sent to the legislative council, post which it will be sent to the Governor for his assent. It is possible that the Bill might not be passed in its present form or maybe passed with certain amendments or changes.”
Sayta was, in fact, one of the petitioners in the Madras High Court challenge and had a front-row seat to everything that unfolded in this historic case. Sharing his views on the possibility of the Karnataka state government’s online gaming ban getting challenged in the High Court, Sayta said, “I think the Bill if and when passed by both the houses of the legislature and assented by the Governor will most certainly be challenged before the Karnataka High Court. The Madras High Court’s recent judgment striking down a similar law passed by Tamil Nadu will definitely help in mounting a strong case in the Karnataka High Court as well.”
The Tamil Nadu government has recently stated that it is considering challenging the judgment passed by the Madras High Court in the Supreme Court. Elaborating on what would happen if the state government decides to go ahead and appeal against the judgment, Sayta said, “Till now, nothing has been officially filed by the Tamil Nadu government. What we have is a statement by the Law Minister of the State saying they would like to file an appeal. Ultimately, the legal principles decided by the Hon’ble Supreme Court will be final and binding across the country. The decision by the Supreme Court in the matter will give definitive clarity for the sector. I am hopeful of a positive outcome.”
“Ultimately, the matters will end up in the Supreme Court, and the apex court will have to decide whether such overarching paternalistic bans are constitutional or not. I believe the only way to bring clarity to this sector is if the Supreme Court gives a conclusive verdict and sets parameters on what sort of restrictions can be imposed on online real money games,” Sayta added.
Telangana Shows Interest in Regulating Real-Money Online Gaming
In some positive news for the real-money gaming industry, Telangana Principal Secretary for IT, electronics, and communications Jayesh Ranjan, while speaking at a gaming seminar organized by IAMAI, said a blanket ban on online games is not the solution.
“We always had that clarity that blanket banning is not the solution. One needs to make a distinction between a game of skill and a game of chance. Some of these reasons, particularly from law enforcement agencies, have been a push back about banning or stopping people from playing these games, largely driven by a game of chance,” Ranjan said.
He said that skill development had taken a back seat in the last 18 months as skills cannot be acquired just by listening to lectures, and hands-on training is required.
“I see a lot of virtue in utilizing games for that kind of purpose. There are many companies that are working on those things. How do you pick up skills by gamifying the entire context and helping candidates navigate through those sessions in a user-friendly way? This is one major advancement in the way skills training will be delivered in the future,” he further added.
Telangana was the first southern state to ban online gaming in 2017. It is heartening to see that the state may be working towards a policy to allow online gaming but with safeguards.
This report was updated at 5:30 PM on 25.09.2021