Karnataka High Court Voids Ban On Skill Gaming With Stakes

February 15, 2022
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The Karnataka High Court has struck down a state government ban on online skill gaming with stakes, in a judgment brimming with references to individual liberty, privacy and the freedom to do business.

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The Karnataka High Court has struck down a state government ban on online skill gaming with stakes, in a judgment brimming with references to individual liberty, privacy and the freedom to do business.

In another major victory for India’s online gaming industry, the high court voided hardline legislation from last year that criminalised online and offline skill gaming indistinguishably, in the face of backing for skill gaming with stakes from India’s highest court.

Chief justice Ritu Raj Awasthi and justice Krishna S. Dixit’s 123-page ruling also ordered the government to refrain from “interfering with the online gaming business and allied activities” of the case’s numerous petitioners, including lobby groups All India Gaming Federation (AIGF), the Federation of Indian Fantasy Sports and numerous gaming companies and individuals.

The ruling declared core sections of the Karnataka Police (Amendment) Act 2021 that criminalised betting and wagering except for horseracing to be unconstitutional and said it exhibited “manifest arbitrariness”.

“The Karnataka High Court judgement is yet another judicial affirmation of the legality of real-money skill games in India and is a welcome verdict for skill gaming operators throughout the country, and especially in Karnataka,” said Ranjana Adhikari, a Mumbai-based partner in the Media, Entertainment and Gaming Practice at IndusLaw.

Although the ruling does not bind other state governments, it is also the “third major judgement by an Indian High Court in the last six months where a state gaming law amendment has been categorically held to be unconstitutional and struck down”, Adhikari told VIXIO GamblingCompliance on Tuesday (February 15), referring to the high courts of Kerala and Tamil Nadu.

“It therefore cannot be denied that these judgments will have a persuasive value on other state High Courts if similar fact matrices were to come up before them.”

The Karnataka state government can appeal the decision to the Supreme Court and the decision allows Karnataka to pass new legislation on betting and gambling “in accordance with provisions of the Constitution”.

However, legal momentum appears to be with the online gaming industry, with delighted petitioners pointing to new central government support for developing the wider animation, visual effects, gaming and comics (AVGC) sector.

The Karnataka High Court ruling “is a definite step in the right direction to grow this vibrant industry”, AIGF chief executive officer Roland Landers told VIXIO.

“Furthermore, with the Honourable Finance Minister’s announcement at the National Budget 2022 of an AVGC task force, [this] will give a major boost to the game development sector.”

Finance minister Nirmala Sitharaman said in early February that an AVGC promotion task force, with all stakeholders taking part, will be established to “recommend ways to … build domestic capacity for serving our markets and the global demand”.

Dinker Vashisht, vice president for corporate and regulatory affairs for Games24x7, one of the litigants in the Karnataka case, said Monday’s ruling validated the legitimacy of the industry.

“We hope that these judgments can nudge state governments to frame progressive policy and regulatory structure for this sunrise sector,” he said.

But the Karnataka judgment, in addition to invoking repeated Supreme Court approval for skill gaming with stakes in general, is also notable for laying down a broad philosophical defence of online skill gaming with stakes.

The justices wrote that the state government’s invocation of public order and public health did not justify a broad ban, particularly in the absence of government-commissioned research into the health impacts of the industry.

“Regulation of online gaming based upon study and research will have to evolve to further the understanding of the impact of this [online] mode of access based on the experience and incidence of behavioural addictions and disorders,” it said. “This should be a data driven exercise to be undertaken on empirical evidence.”

Instead, and unusually, the ruling delves into wider issues of personal liberty, commercial freedom and even artistic licence.

“Political, social and economic changes have entailed the recognition of new rights such as right to privacy,” it says.

“Online games as contra-distinguished from [predominantly chance-based] gambling are also a form of expression and partake the character of business.

“It may be also a pursuit of happiness that falls within the contours of liberty and privacy of an individual.

“As already stated above, placing an absolute embargo on this may take away any positive development and benefit that the State may be able to achieve by otherwise balancing the competing interests of the society and the individual.”

The court ruling then extends the scope of citizen rights to recreation.

“It may be said that while the State has a vested and legitimate interest in the protection of its citizenry, the individual too has a vested right to partake in the recreation of gaming in exhibition of individual skills, albeit responsibly,” it says.

The ruling also describes games themselves as having inherent artistic and recreational value.

“These provisions of our Constitution having become expansive by the judicial process do not deny protection to 'abstract painting, avant-garde music and nonsensical poetry'.

“Therefore, the games of skill fall within the protective contours of [Constitutional articles], of course subject to reasonable restriction by law,” it says.

“A line has to be drawn to mark the boundary between the appropriate field of individual liberty and the State action for the larger good ensuring the least sacrifice from the competing claimants.

But the Karnataka government’s amendment, the court said, “suffers from the vice of paternalism since there is excessive restriction on the citizens freedom of contract”.

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