India's Karnataka To Ban Online Gaming, Including Skill Products

September 6, 2021
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The government of India's Karnataka state has announced it will ban all online “wagering or betting” following court demands for clarity, but it remains unclear if eventual legislation will target online skill gaming with stakes.

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The government of India's Karnataka state has announced it will ban all online “wagering or betting” following court demands for clarity, but it remains unclear if eventual legislation will target online skill gaming with stakes.

The Karnataka Cabinet on Saturday confirmed that an amendment bill to the Karnataka Police Act 1963 has been approved and will be sent to the state parliament for debate later this month.

“We are amending the Karnataka Police Act, with an intention to put an end to online gambling, on the basis of the High Court’s directions,” law and parliamentary affairs minister JC Madhuswamy told reporters after the Cabinet meeting.

“The Cabinet has approved the amendments; it will be placed before the assembly,” he said.

Madhuswamy said the bill defines “online games” as those “involving all forms of wagering or betting, including in the form of tokens valued in terms of the money paid before or after the issue of it, or electronic means and virtual currency”.

The bill also bans “electronic transfer of currency in connection with any game of chance”, but exempts lotteries and betting on horseracing from the ban, Madhuswamy said.

However, The New Indian Express on Sunday quoted the draft bill as additionally defining “gaming” as “any act of risking money on the unknown result of an event, including on a game of skill, playing any game or by any third parties”.

The bill will disappoint the online skill gaming industry, which has been encouraged by a number of ministerial statements since August 2020 that hinted at a regulatory outcome, rather than criminalisation of almost the entire sector.

However, one legal expert cautioned that spurning constitutional protections for skill gaming will likely trigger a High Court appeal.

“The law on online gambling was imminent and expected,” said Ranjana Adhikari, a Mumbai-based partner in the Media, Entertainment and Gaming Practice at IndusLaw. “The pressure from the High Court was certainly a key reason for this.”

However, “what one needs to wait and watch is whether the prohibition extends to skill games as well” after passage of the bill, she said.

Should that happen, an appeal might replicate the Madras High Court’s voiding of similar amendments backed by the Tamil Nadu state government, a piece of legislation that the court criticised as “arbitrary, excessive and beyond [state] powers”, she said.

Speaking to The New Indian Express at the weekend, Karnataka home minister Araga Jnanendra made clear that the government has firmed against online gaming activity.

"We have a panel of experts and we will take action against online gambling sites. There is a need to bring strict rules and penalty clauses,” he said.

Jnanendra acknowledged the Madras High Court’s repudiation of similar, tough anti-gaming legislation, calling it a “setback”, and adding that further adjustments to Karnataka’s amendment bill may follow.

“Tamil Nadu suffered a setback after banning online gambling. After the order, some websites went to court, which ruled against the government.

“We will study the bills passed by other states on online gambling and come up with a better set of rules," he said.

The Tamil Nadu government has indicated it will resubmit legislation to sidestep the High Court’s withering assessment of its first effort to ban online gaming, likely setting the scene for a new court showdown in that state.

The Karnataka ban follows months of High Court orders to the government to provide details of the legislation in response to an activist’s lawsuit.

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