Recent Developments and Challenges in India’s Online Gaming and Betting Laws

Introduction
The practice of gambling has historical and mythological references across various cultures, including India. While ancient texts like the Rig Veda, Atharva Veda, Ramayana, and Mahabharata warn against its potential harms, texts such as the Katyayana Smriti, Manu Smriti, and Narad Smriti support its regulated existence, recognizing its value as a source of revenue for the kingdom.

Legislation
In modern India, gambling is primarily governed by the Public Gaming Act (PGA) of 1867, which prohibits betting and gambling in games largely based on chance. However, games that predominantly rely on skill are not prohibited. The distinction between skill and chance is often clarified in courts based on the predictability of a game’s outcome. The Supreme Court of India has ruled that betting on horse racing is a game of skill, exempting it from the PGA. It has also stated that games requiring substantial skill are considered businesses and fall under the protection of Article 19(1)(g) of the Constitution of India.

Despite the Supreme Court ruling, state legislatures have enacted their own laws to regulate gambling, with some states legalizing casinos and lotteries, while others, such as Andhra Pradesh and Telangana, have imposed strict bans. This division in state laws reflects India’s federal structure, with the Seventh Schedule of the Constitution assigning gambling to the states’ jurisdiction.

As online gaming has proliferated, courts have also started addressing its legality. The Gujarat High Court ruled that poker is a game of skill, and the Madras High Court has upheld the legality of real-money games like rummy and poker, which predominantly involve skill. In contrast, the Punjab and Haryana High Court recognized fantasy sports as a game of skill, requiring players to make strategic decisions.

Growth in the Gaming Industry
India’s online gaming industry has seen rapid growth over the past two decades. The market grew at a compounded annual growth rate (CAGR) of 28% from FY 2020 to FY 2023. By the end of FY 2023, real money games constituted 83% of the market, including games like fantasy sports, poker, and rummy. The growing popularity of online gaming has raised challenges for regulatory bodies, as existing laws like the PGA are not equipped to address digital platforms’ complexities.

Despite these challenges, the Information Technology Act of 2000 (IT Act) has become the primary regulatory framework for online gaming, addressing concerns related to data privacy, cybersecurity, and consumer protection. However, foreign-registered gaming platforms have raised concerns about tax evasion and money laundering.

Amendments to the IT Rules
On 6 April 2023, the Ministry of Electronics and Information Technology (MeitY) introduced key amendments to the IT Rules to regulate online gaming more effectively. These changes included the definition of ‘online gaming intermediaries’ and the verification of real-money games. Intermediaries are now required to establish user authentication, age verification, and grievance redressal mechanisms. They must also publish monthly compliance reports and ensure the use of self-regulatory bodies to verify games.

The amendments introduced provisions to designate self-regulatory bodies that can verify online real money games. These bodies must meet specific criteria and provide transparency, including the publication of verified games and the suspension of non-compliant platforms.

Goods and Services Tax Council
Following the 50th and 51st meetings of the Goods and Services Tax (GST) Council, the Central Goods and Services Tax (Amendment Act) 2023 was passed. It categorizes all real-money games under a single tax bracket, imposing a 28% GST on the full face value of deposits. This change aims to standardize taxation for online gaming but raises concerns about its impact on games of skill, which are constitutionally protected.

The GST Council’s stance on not differentiating between games of skill and chance reflects a view that gambling should not be encouraged, though this approach has sparked debates about its alignment with constitutional protections for games of skill.

Conclusion
India’s online gaming landscape is rapidly evolving, with both governmental and private entities working to regulate and promote the industry. The growing complexity of the sector calls for a balance between regulatory oversight and industry autonomy. As the government and self-regulatory bodies navigate these challenges, the ongoing evolution of laws will shape the future of online gaming in India. India’s experience highlights the importance of a nuanced approach to regulation, ensuring that innovation and user protection are both prioritized. As the industry continues to grow, the development of a clear and comprehensive legal framework will be essential for fostering a sustainable and responsible gaming environment.

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