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Legalise Betting, Gambling in sports; link stakes to Aadhaar/PAN: Law Commission
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Legalise Betting, Gambling in sports; link stakes to Aadhaar/PAN: Law Commission

Meera Emmanuel

The 276th report of the Law Commission of India (LCI) has proposed that India move towards the legalisation and regulation of betting and gambling.

The report, titled Legal Framework: Gambling and Sports Betting including Cricket in India, was prepared pursuant to a reference made in 2017 by the Supreme Court, in the case of Board of Control for Cricket in India v Cricket Association of Bihar & Ors (BCCI case).

Genesis of the 276th Law Commission Report

The BCCI case came before the Supreme Court in the backdrop of allegations that the 2013 season of Indian Premier League (IPL) Cricket was marred by match-fixing.

The Justice RM Lodha Committee (the second committee after the Justice Mugdal Committee tasked to examine the issue) had previously recommended the legalisation of betting with strong safeguards. While advocating for the legalisation of betting, it had also recommended that match/spot fixing be made a criminal offence.

Subsequently, the Supreme Court called on the LCI to examine the viability of legalising betting as recommended by the Lodha Committee, observing,

“…the recommendation made by the [Lodha] Committee that betting should be legalized by law, involves the enactment of a Law which is a matter that may be examined by the Law Commission and the Government for such actions as it may consider necessary in the facts and circumstances of the case.”

Majority in favour of Legalising Sports Gambling and Betting

The majority opinion in the LCI report has endorsed the Lodha Committee recommendation that betting and gambling should be legalised in India. To this end, the report has also proposed ways in which the gambling industry can be regulated.

In line with the Lodha committee’s proposal, the LCI has also advocated for demarcating match-fixing as a criminal offence, outside the purview of legalised betting and gambling.

However, one member, S Sivakumar, has not concurred with these views, opining that the LCI has gone beyond its mandate when it delved into sports betting in general. Sivakumar points out that the LCI was expected to confine its deliberation to the viability of legalising betting in cricket, in accordance with the Supreme Court’s terms of reference.

This apart, Sivakumar has also opined that it is not pragmatic to introduce legalised gambling and betting in India, given its current socio-economic and cultural circumstances. He also argued that the introduction of legalised gambling would only serve to benefit a handful of game operators, thereby pushing innocent masses to hands of poverty and penury. Ultimately, he is of the view that no form of gambling should be permitted in India. On a concluding note, he has said,

“The policy of the Government, in general, is to disallow betting an gambling and I apprehend that the recommendation of the Commission may lead to an unhealthy and unwarranted discussion.”

The Case for Legalisation of Betting and Gambling

As per the majority view, the rationale behind legalising betting is rooted in the idea that a complete prohibition is impossible to implement in India. Therefore, it would be better if it were regulated, rather than leave its effects unmonitored.

The rise of online gaming and Virtual Currency (VC) has only added to the difficulties in monitoring betting and gambling activity in India. On the rise of online gaming, the report notes,

Such activities show no signs of being stopped or curbed; the least that could be done is to regulate them.

The issue of Online Gambling has further been worsened by the rise in popularity and ease of availability of VC, a form of electronic money. Having taken the form of a parallel economy, gambling with VC, pushes even the Online Gambling market underground, and very often, out of the reach of the law enforcement authorities.

As explained in the report, a blanket prohibition on betting has paved the way for black markets in the arena. Hence, the logical and viable step is to regulate the area, not insist on its complete prohibition.

A total ban on gambling and betting activities would not completely eradicate the problem. Rather, it would drive it straight to the black-market. This in turn would result in making it harder to monitor such illegal activities, it would also render the helpless out of the protection of the law and at the mercy of loan-sharks and crime-lords…

the existing black-market operations relating to these activities are a major source of influx of black money in the economy, making, regulation rather than complete prohibition the logical step to be taken.

Apart from such practical considerations, the report also makes reference to a number of case laws where games of skill have been viewed as exempt from the prohibition on gambling.

Among other case laws cited in the report is RMD Chamarbaugawala v. Union of India. In this case, the Apex Court held that competitions which substantially involve skills are not gambling activities but are commercial activities, protected under Article 19(1)(g) of the Constitution.

Incidentally, the report also notes that the legalisation of the betting industry could yield more revenue for the state and more jobs for the economy.

Ultimately, the Commission concludes,

Having discussed the pros and cons of legalising regulated gambling and betting activities, it would be apt to say that the arguments in favour of the same far outweigh the arguments alluding to the immorality of these activities.”

However, it is also cautioned that the current legal, socio-economic and moral scenario in India is not conducive to the immediate legalisation of betting. Therefore, for the present, the State must work towards implementing the current prohibition on unlawful betting and gambling.

The existing policy of the Government…the current socioeconomic atmosphere in the country and the prevalent social and moral values do not encourage betting and gambling.

Accordingly, the Commission reaches the inescapable conclusion that legalising betting and gambling is not desirable in India in the present scenario. Therefore, the State authorities must ensure enforcement of a complete ban on unlawful betting and gambling.

Recommendations

The LCI concludes its report by making recommendations that could be adopted by the Government when it chooses to legalise and regulate betting and gambling in India. To this end, the LCI proposes a three-pronged strategy i.e.

  • Reforming the existing gambling (lottery, horse racing) market,
  • Regulating illegal gambling, and
  • Introducing stringent and overarching regulations.

Specific recommendations made to this effect include the following.

Laying down the Legal Framework

  • Betting and Gambling is a subject falling in the state list of the Seventh Schedule of the Constitution. However, since betting and gambling take place over media platforms such as telephones, wireless, broadcasting etc., it could come within the purview of Entry 31 of the Union Government List in the Constitution. Hence, Parliament has the legislative competence to enact laws concerning the same.
  • The Parliament can enact a model law. Alternatively, the Parliament may legislate under Articles 249 or 252 of the Constitution. Article 249 provides the procedure for the enactment of Central laws on subjects in the state list. Article 252 empowers Parliament to make laws for two or more states subject to their consent and adoption of the law.
  • States can adopt their own law after taking note of the National Policy on gambling and allied considerations.
  • Appropriate amendments have to be introduced in relevant laws such as the, Indian Contract Act (1872), National Sports Development Code of India (2011), the Information Technology Act (2000) etc. so that any impediment to implementing a mechanism for legal betting is removed.
  • The Foreign Exchange Management Act (1999) and the Foreign Direct Investment Policy may be suitably amended to encourage Foreign Direct Investment in the casino/online gaming industry, lawfully permitting technological collaborations, licensing and brand sharing agreements, etc.
  • There must be stringent laws in place to regulate Foreign Direct Investment on one hand and to prevent money laundering on the other.

Checks and Balances to be introduced

  • The enacted laws should also ensure that vulnerable sections of society are protected from the possible ill-effects of these activities. Such vulnerable persons include minors and those below the poverty line.
  • Skill-centric games may be exempted from the ambit of blanket prohibition on gambling, as is the case with horse racing.
  • Persons below the poverty line who get subsidies or those who do not have to pay taxes should be barred from participating in gambling platforms. This is intended to ensure that money spent by the government on the sustenance of such persons is not misused for the purpose of betting or gambling.
  • Only licenced operators can be allowed to conduct betting. The licences could be granted by the gaming licence authority.
  • Detailed safeguards for employees of casinos, minors, internal control requirements for casinos (like customer due diligence), maintenance of accounts, audits etc., and establishment of a council to look into and prevent ‘problem gambling’ and ‘gambling by minors’ must be put in place.
  • Information regarding the risks involved in gambling/betting and how to play responsibly must be displayed prominently on all gambling and betting portals/platforms.
  • There should be caps on the number of wagering transactions in a period of time for interested persons to take part in.
  • The betting amount should be prescribed by law.
  • Stakes should be restricted to money with a linkage to PAN card and Aadhaar card. In fact, the report recommends that all betting and gambling transactions should be linked to the operator’s as well as the participant’s/player’s Aadhaar Card/PAN Card.
  • Income-based restrictions should be introduced. A distinction must be made between high-stakes “proper gambling” and “small gambling”. Those having income on the higher side would be permitted to participate in proper gambling with higher stakes. Those falling under the lower-income categories can only be allowed to partake in small gambling.
  • Any income derived from such activities should be made taxable under the Income Tax Act, 1961, the Goods and Services Tax Act, 2017 and all other relevant laws.
  • In the interest of ensuring they are better monitored, transactions between operators indulging in these activities should mandatorily be made ‘cashless’.
  • Gambling websites should be barred from displaying pornography.
  • Match-fixing and sports fraud should be specifically made criminal offences with severe punishments.

Read the Report:

Report276.pdf
Preview