The time is ripe for gambling law reforms

Over the past few years, there has been an exponential increase in wagering activities in India. Gambling activities have morphed into various forms including betting on cricket and other sports, politics and any kind of uncertain activity, increasing popularity of card games like poker through various international websites, SMS competitions etc.

A KPMG report estimates the online gaming industry produces more than US $ 20 billion in revenue, while India’s gambling industry is estimated to be worth more than US $ 60 billion. Experts have suggested that the gambling industry is worth more than 2% of India’s GDP.

Yet the Indian legal system has not kept pace with these changes. Gambling is illegal in India, but many of the newer forms of gambling are not even caught under India’s archaic gambling laws that do not even contemplate many of the new forms of wagering activities. Is poker illegal? What about SMS competitions? How to tackle trans-national gambling done through the internet or controlled by crime syndicates from overseas? These questions need to be addressed by the law makers.

The existing laws regulating gambling remain archaic. Public gambling has been criminalised by the various state gambling legislations. Since the Seventh Schedule of the Indian Constitution has given the State governments the power to enact laws regulating gambling, there is hardly any inter-state co-ordination or a cohesive policy on gambling laws. While states like Maharashtra have banned gambling, Goa and Sikkim follow a licensing policy in allowing certain forms of public gambling and casinos. Neither the Information Technology Act 2000 nor its subsequent amendments provide any answer
as to the legality of online gambling.

Since gambling is criminalised in most states, most gambling and betting activities are controlled by organised crime syndicates. This leads to not only a loss of revenue for the government, but also leads to other effects like match-fixing, black money and funding of other criminal activities. By driving the market for gambling underground, it is transformed into a cash cow for the mafia.

The time is ripe for the government to consider a fresh strategy towards gambling laws. There is a strong argument against a complete ban on gambling: should the state really be banning something which is nothing but a private contract between two mature, consenting adults? Is that not too heavy a restriction on individual liberty and freedom of choice? Most western democracies have legalized gambling precisely because of these reasons. It is in this context that Radley Balko’s arguments in The Economist debate on gambling are worth quoting. According to Balko, “A free society where government bans activities it finds immoral or unseemly is not really a free society…The government has no business policing its’ citizens personal life for bad habits.”

Besides, the massive amounts of government revenue and the possibility of weakening the grip of criminal elements should surely convince the government to take a fresh approach. The government may consider taking a three-pronged strategy through which it can usher in much-needed reforms in India’s gambling laws.

Firstly, the central government should table a constitutional amendment to bring regulation of gambling under the Union list. This can be done by altering List II of the Seventh Schedule of the Constitution, which empowers state governments to make laws concerning gambling. This will allow a unified, pan-Indian strategy towards dealing with the problem.

Secondly, legislations that have outlived their utility should be repealed. Most gambling provisions date back to the later part of the 18th century and may no longer be acceptable in the current day and age. Punishments and provisions of the Public Gambling Act, 1867 and other similar state legislations may seem frivolous today. For example, a fine of Rs.1,000 may not deter a bookmaker dealing in crores. Moreover, the police have neither the resources nor the will to tackle the problem of gambling. Thus, in most cases, those indulging in wagering activities are let off with a fine or worse bribe the police officials to be let off. This, plus the numerous procedural requirements makes the prosecution of any major illegal gambling operator almost impossible.

Thirdly, the government should introduce a new comprehensive Central legislation in lieu of the repealed legislations and constitutional amendments. The new legislation should encompass all forms of gambling and gambling through various modes of communication.

The lawmakers can take inspiration from UK’s Gambling Act of 2005, which lays down a framework for regulating all forms of gambling activities. The Act has envisaged gambling through various modern means of communication like mobile, television and internet. The Act also lays down strict guidelines allowing gambling operators to accept wagers from adults over 18 years of age, provides guidelines for preventing gambling addiction and establishes a regulatory body overseeing all gambling operations. The abovementioned provisions will solve most social and economic problems associated with the gambling industry. By allowing only qualified adults to participate in wagering activities, setting up a regulatory mechanism to prevent addiction and warning people as to the harmful effects of gambling; most of the concerns as to the ill-effects of gambling will be suitably addressed.

By following a licensing policy in allowing the setting up of casinos and gambling ventures, black money transaction and funding of criminal activities will be curbed. The government will be able to keep a check on the financial activities of the gambling companies. A strict vigil on the finances of these companies will also stop funding of match-fixing and other cheating in sports.

These provisions will also profit the government exchequer by way of huge taxes. These taxes can be used by the government for funding its various welfare schemes. Moreover, by changing its Foreign Direct investment (FDI) policy, it would be possible to allow gambling companies of international repute to operate from India, thus offering quality gaming services to the Indian consumers.

One can only hope that the government does not turn a blind eye to these much needed and overdue reforms in gambling laws.

My thanks to Parag Sayta, Associate, Linklaters LLP and Ramanuj Mukherjee, student of NUJS.