#5 – Why the Delhi High Court was wrong in requiring the Central Government to decide on the ban of online and overseas betting websites

The Delhi High Court (“Court”) in an order dated November 27, 2019 directed the Central Government and the Delhi government to take action towards banning certain offshore betting websites and online poker, and card gaming websites after ascertaining whether they fall under the category of games of skills or chance.

Background

A social activist, Avinash Mehrotra and a lawyer Deepti Bhagat (“Petitioners”) separately filed Public Interest Litigations (“PIL”) in the Court against illicit online gaming and offshore betting/wagering websites. The Petitioners argued that the games available, on the websites such as Adda52, Khelo365, PokerStars, 1xbet, Royal Panda, are based on chance and not skill. The Petitioners further argued that offshore betting websites which allow betting on sports like cricket or football should be held illegal as the outcome of those sports solely depends on the skill of players playing that sport and not on the skill of the person betting.

The Court tagged both the petitions together in October and disposed them off through a common order dated 27th November, 2019.

Arguments

The Petitioners put forward following arguments in support of imposing ban on such websites:

·         The Delhi Public Gambling Act, 1955 (“Act”) expressly forbids gambling, or wagering on games of chance in the Delhi NCT region. Since most of the games offered by the abovementioned websites are games of chance, they would be illegal under the Act.

·         These online gambling websites, are required to deduct tax at source, i.e., prior to the payment of the winnings to the players. However, it is speculated that these websites deduct a portion of the winnings as their commission, and release the rest of the amount to the players, without making proper tax deductions or subsequent payments. The Petitioner argued that even though these websites should be held illegal, they are still taxable.

·         The Petitioners also blamed the Ministry of Electronics and Information Technology (“MEITY”) for not having banned these websites from operating, despite MEITY having the jurisdiction to prevent illegal gambling under Sections 67 and 69 of the Information Technology Act, 2000.

·         Online gambling, being more accessible than gambling in physical premises, has more potential to inculcate addiction among the members of the public, and can be immensely detrimental as it can cause the people to gamble away their life’s savings.

The petitioners also argued against the legality of certain provisions of the Prohibition of Gambling and Promotion and Regulation of Online Games of Skill, 2015 (“Nagaland Act”) which allows wagering of games of skill. This Act lists poker as games of skill, and provides licenses for running the same. The Petitioners claimed that even if the websites offering such games are licensed by the Nagaland government, they cannot have a pan India presence, and by allowing such licensed websites to offer such games in other states, Nagaland has usurped the legislative power of such states.

Order of the Court

The Court directed the Central Government and Delhi Government to treat the petitions as representations and take a call on banning the operation of websites referred to in the petitions, after ascertaining whether they hosted games of skills or games of chance. The Court stated that the Governments must also consider aspects of money laundering, FEMA violations and taxation of the proceeds from gaming.

Our Views

State gambling legislations in most of the states in India deal with gambling only in physical setting i.e., “gaming houses”. Online gaming/gambling has not found its way to state legislations except in Sikkim, Nagaland and Telangana, which are the only states to have specific legislations extending to online gaming and offshore betting websites. Several states including Maharashtra, Goa, Delhi, Karnataka have excluded “games of skill” from the purview of gambling, in the context of a physical setting. However, there is no explicit mention of extending the same to an online forum.

Since the courts in India have not specifically decided on the legality of poker in online setting, it was a great opportunity for the Court to give its view on the matter. The Court, however, missed this brilliant opportunity by simply directing the Central and Delhi Governments to take action against such websites after ascertaining whether the game hosted by online platforms was a game of chance or a game of skill.

It is pertinent to note here that MEITY, during the course of hearing, submitted an affidavit claiming that blocking such online gaming and offshore betting websites was technologically infeasible as several states have enacted such legislations which partially or fully allow these websites to operate. Further, the Delhi Government submitted that they could only take any action if any gambling website was being hosted in New Delhi or if there was any instance of offline gambling.

While the MEITY has made its restrictions known to the Court, the Court has ignored the stance taken by MEITY and erroneously asked it to take necessary actions to ban the online gaming and offshore betting websites. This has merely added another element of ambiguity, and will create a further regulatory logjam in terms of how and who has the right and the duty to regulate such online and overseas betting platforms.    

While it remains to be seen how the Central Government will respond to the Court’s directions, since betting is a state subject under the Constitution of India, it should ideally be incumbent only on the respective State Governments to address how online gaming and offshore betting websites need to be regulated at the earliest. Unless 2 or more State Governments pass the resolution to be regulated by the law legislated by the Parliament, the Central Government will have no say in the regulation of online betting and gambling in such states.

It will be interesting to see how the issue of regulation of online gaming and offshore betting plays out in the year 2020. Neither the Central Government nor the various State Governments can afford to sit back and do nothing because the interest in India’s online gaming and betting sectors is only growing, as is evident from the increased foreign investment activity witnessed in these sectors in 2019.

The need for a clear policy statement on specific games such as poker has only gotten more urgent.

Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.