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Karnataka’s Amendment to Its Gaming Laws: What Are the “Stakes” for Online Gaming Companies? – Media, Telecoms, IT, Entertainment


India: Karnataka’s Amendment to Its Gaming Laws: What Are the “Stakes” for Online Gaming Companies?

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The government of Karnataka was the recent southern state banning all forms of online gambling involving monetary issues.

Interestingly, this state law comes at a time when the Madras High Court has clarified that games of skill which can be played online for wagers, cannot be classified as betting or gambling. money. In addition, the Madras High Court overturned the general ban on skill games in accordance with recent amendments to Tamil Nadu’s gambling laws; and declared that such a ban was ultra vires the Constitution and constituted an “excessive and disproportionate” exercise of authority.

So why has the recently notified Karnataka Police (Amendment) Act 2021 (“Gaming Act”) created such a stir in the online gaming industry; and opposed by prominent industry bodies such as the All India Gaming Federation and the Indian Fantasy Sports Federation?

The concerns are twofold: first, the Gaming Act now prohibits all forms of gambling that include wagering or betting, including games of skill; and, secondly, the gaming law is also vague regarding the operation and hosting of these Karnataka online gaming platforms.

Until the recent amendment, the state of Karnataka allowed online skill games played for wagers; and in particular, only prohibits all forms of betting or betting in connection with games of chance. However, the Gaming Act has now amended the term “gambling” to include online games involving all forms of betting and betting. In addition, the terms “stake or bet” have also been amended to include “any act of risking money or otherwise on an unknown outcome, including on a game of skill‘. Essentially, this would mean any game (even skill-based) that involves a user paying money to participate in a game (even money paid as “entry fee” or “entry fee” to participate); and have a chance to make money.

Over the years, the courts have attempted to draw a clear distinction between games of skill and games of chance. Considering that the courts have carried out this exercise after having rationally interpreted the terms “games of chance” and “games of skill”, through the law on games, the government of Karnataka puts the economy of the state at its foot. from the wall, forbidding all gambling which involves the act of risking money and making the gambling law blatantly arbitrary.

Another amendment that has worried the gaming industry is the amendment to the definition of ‘gaming instruments’, which now also includes computers, computer systems, mobile applications, the Internet or cyberspace, virtual platforms, software, accessories, etc. .used as a subject or a game medium. Given the broad conception of the definition, it is not clear whether the computer resources used to host or operate online gaming platforms, i.e. used as a subject or a means of play, would be considered “playing instruments”, even if these platforms are not offered or available to users of Karnataka.

In addition, if the platform is considered a “gaming instrument”, the place where these computer resources are located or stored would constitute “common gaming houses”. This would have a direct impact on online gaming companies with offices and servers in Karnataka, as these places would be considered a “common gaming house”. In particular, the law on games makes the operation of a common gambling house a punishable offense; and such an offense being a knowable offense; gives the police the right to initiate an action without a warrant or prior sanction from a magistrate.

The government should clarify that gaming companies can continue to operate in Karnataka, as long as the gaming companies do not provide online games to users in Karnataka. If no clarification is provided, the gaming companies would seek to move their operations outside of Karnataka, which not only impacts the state’s economy; but can also be considered as a violation of their fundamental right to exercise any profession. The ambiguity in the definition of “gambling instruments” further increases the fear of gambling companies of operating in Karnataka, since the police are not trained in the statutory interpretation of the law; and there is a risk that the police may even consider that the operation of the gaming platform does not comply with the gaming law; and can use their powers to restrict the operations of gaming companies in Karnataka

In keeping with the strict prohibitions and ambiguous language of the gaming law, it can be interesting to see how gaming companies are restructuring their operations in Karnataka and reaching out to users in Karnataka. However, based on recent trends, where courts have insisted that games of skill, even if played for stakes, should not be viewed as a form of betting or wagering. ; it is likely that the gambling law could also be challenged in the Karnataka High Court. In fact, the All Indian Gaming Federation, Mobile Premier League; and three other petitioners from the gaming industry most recently filed a petition in the Karnataka High Court against the state gaming law. What will come out of this petition? It would be a situation of waiting and monitoring. However, it may be good for the state government to reconsider its position with respect to the gaming law, after having read the comments of players in the gaming industry, to ensure that the law on the games are balanced. This balance could be done by focusing on reducing gambling addiction; but at the same time, also keep in mind that the law must (i) not have any impact on the livelihoods of individuals, i.e. individuals who are ‘professional gamers’, who play games of skill for high stakes, under a well-established set of rules and regulations enacted by the gaming industry; or violate an individual’s fundamental right to trade.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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