Online gaming

Everything you need to know about Karnataka’s online gambling ban

The online gaming industry has the potential to generate $ 2 billion in revenue by 2023 and is currently valued at $ 1 billion +

Despite the boom, Indian states are undecided on legalizing online gambling due to the indecision of what constitutes a game of skill or a game of chance

While the governments of Karnataka, Kerala, Tamil Nadu, Odisha and Assam regard fantasy gambling as a game of chance (which is banned throughout India), the Supreme Court, the governments of Punjab, Haryana, Maharashtra, Sikkim, Nagaland, others called the fantasy game as a game of skill (which is acceptable)

Indian online fantasy sports platforms have seen an increase in user numbers over the past two years; mainly due to the start of the pandemic and the increased use of the internet and smartphones.

In addition, according to an EY report, the online gaming industry has the potential to generate $ 2 billion in revenue by 2023 and is currently valued at over $ 1 billion.

Meanwhile, the number of players betting for real money on fantastic gaming platforms such as Dream11, Mobile Premier League (MPL), MyTeam11, Halaplay, 11 Wickets and My11 Circle, among others, is expected to reach 150 million in India. .

Yet like some segments like cryptocurrency, online gambling is an “ambiguous” concept for regulators despite the boom. Due to flickering regulations, earlier this week fantasy gaming platform Dream11 suspended operations in Karnataka. A lawsuit has been filed against its founders, Bhavit Sheth and Harsh Jain, in the context of a recent state ban.

In another instance, MPL, Halaplay of Nazara Games, Paytm First Games and other online casino type games have stopped offering gambling to users in Karnataka.

Inside Karnataka’s online gambling ban: when, why and how

In September 2021, the government of Karnataka passed a bill banning online “gambling”. According to the bill, it is an offense to operate such games, host such operations, aiding and participating in such online games, which are both recognizable and not subject to a bond.

The offense will carry a prison sentence of up to three years and a fine of up to INR 1 lakh under the Karnataka Police Act 2021 (Amendment).

The whole argument of Karnataka and other states banning fantasy gaming platforms is based on the fact that Dream11 and others are “games of chance” and not “games of skill”.

Games of chance include those which are based entirely on random factors of any type. For example, rolling dice, playing cards and the like where a player does not have control over the outcome of the outcome.

Skill games are primarily based on a player’s level of mental and / or physical expertise, such as horse racing, carrom, chess, rummy, Teen Patti and others.

The central conflict here is whether games like rummy and poker are “games of luck / luck” or “games of skill.” While the former is frowned upon, the latter is considered acceptable.

With the bill, Karnataka aims to ban online gambling, “involving all forms of betting or betting, including in the form of tokens valued in terms of money paid before or after it is issued. “. It also banned electronic means and virtual currency, the electronic transfer of funds in connection with any game of chance.

Some for, some against – a game of chance or skill?

In the ensuing debate, Tamil Nadu enacted an ordinance banning even simple skill games (if played for stakes) as wagering or wagering in cyberspace. This led to online gaming companies scrambling to get a stay of the order – which the Madras High Court granted.

In a move similar to that of Karnataka and Tamil Nadu, other Indian states such as Telangana, Kerala, Odisha and Assam had also banned real money gambling online due to a thin distinction between gambling. skill and gambling.

Not just businesses, last year a Chennai-based lawyer filed a petition calling for a ban on online gambling applications, where he also called for the arrest of Virat Kohli and Tamannaah Bhatia for being ambassadors for the MPL brand.

He alleged that they abuse their celebrity status and trick lower and middle class users into betting, into debt, into gambling, instead of working hard.

Former Indian men’s cricket team captain MS Dhoni and Saurav Ganguly have also been on the legal radar for their association with Dream11.

States such as Maharashtra and Punjab, on the other hand, have supported fantasy gambling as a “game of skill”. The Supreme Court has also dismissed a petition to ban fantasy games in the past, classifying rummy and other games as games of skill.

Sikkim and Nagaland require online gaming operators to obtain special licenses to conduct their real money games such as poker and rummy. But they are recognized as “games of skill” and therefore exempt from state gambling regulations.

Amid the gaming boom in the country, the Confederation of All Indian Traders (CAIT) also called for the exemption of Indian online gaming platforms from the proposed Karnataka law to ban online gambling and betting. The central theme is to ban gambling, not skill-based winnings when playing online games.

For example, the All India Gaming Federation (AIGF), an industry body for “skill-based online gaming”, and three online gaming companies, on October 5, filed petitions in the Karnataka High Court challenging the constitutional validity of the Karnataka bill. .

Need for a regulatory framework

Online gaming startups are currently caught in a maze of conformities, given that there is no centralized framework in this space. In the absence of a centralized framework at the union level, states have enacted their own laws and, therefore, lawyers are gambling testers for these companies.

Before release, each game must be reviewed by an army of lawyers who must check the flow and path of users to ensure that they are not violating any national or state laws. As the gaming industry pushes for self-regulation rather than legislation or bans, the only way forward is to have a centralized framework.

This is only possible if state-level cases are clubbed and brought to the Supreme Court.

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