Rolling the dice in India: Navigating the legal landscape of gambling

In India, most gambling operations are very heavily regulated. This regulation has a few exceptions, such as lotteries and horse racing. Gambling is a state issue in India, hence only the state governments have the power to define and control such activities for their individual states.

Everything you need to know is provided below:

What is Gambling?

Gambling is the risking or staking of money or any other prized possession that can be referred to as “stakes” on an event that does not have a predictable outcome with the primary purpose of increasing one’s financial gain or obtaining something of material value. Therefore, gambling must meet three criteria: consideration, which is the amount of money put at risk; risk; and price, which is the outcome of putting the money at risk. The outcomes of gambling are frequently apparent right away, as is the case when rolling the dice, spinning the roulette wheel, or seeing a horse cross the finish line. Long-term gambling outcomes include things like winning a future athletic event.

In India, gambling is accepted in both its traditional and contemporary forms. While modern gambling uses computers, mobile devices, the internet, and other technological advancements, traditional gambling has a brick and mortar model that is physically present.

What is Betting?

Gambling includes betting. Betting is included in the broad definition of gambling. The word “betting” lends legitimacy to the conduct of gambling. The most popular applications for this structured agreement are in the world of sports betting. In the current era, betting has evolved into a contract between two parties, wherein one makes a prediction and puts a bet, and the other either forfeits the bet or pays the other party the agreed-upon sum of money.

Gambling regulations in India

The primary law governing gaming in India is the Public gaming Act of 1867, usually referred to as the Gambling Act. However, since the State legislatures have been given the regulatory authority to create gaming laws specific to their own States under the Indian Constitution, it is the State that creates these laws in accordance with its own needs.Other governments have drafted or approved their own legislation to regulate and supervise gaming on their own territory in addition to the gaming Act, which is the primary statute that certain Indian states have embraced. 

Since the time of British rule, numerous Indian governments have enforced gaming laws, making all forms of gambling and betting prohibited in every state. Only Goa and Sikkim allowed gambling and betting, and only under the conditions outlined by each of these governments.

The Public Gambling Act 1867

As was previously said, the Public gaming Act is the fundamental Act that governs public gaming in India.

The Public Gambling Act, a Central statute, forbids operating or administering public gaming businesses. A 200-rupee fine or up to three months in jail could be imposed for any breach of the law under this legislation.

Principal violations of this Act include:

• Possessing, maintaining, residing in, or having care and administration of a gaming establishment.
• Playing in a public casino or watching someone else gamble in a public casino. 
• Giving or lending money to people who frequent one of these gaming establishments for gambling purposes. 

India has a strong gaming culture and has traditionally participated in many different types of gambling. Casino gambling, sports betting, horse racing, lotteries, online gambling, school games, and other types of gambling are some of the forms of gambling that are popular in the country. Gambling law in India is divided into two distinct categories: games that need skill and games that use chance. 

Games of Chance vs. Games of Skill: Legality and Regulation

Any gaming that involves the act of placing money, wagering for money, or any other act that is equal is prohibited by the Public gaming Act. However, the only exemptions to the above regulation that is permitted in India are games that require skill.

The Supreme Court has defined skill games as “the competitions where success depends on substantial degree of skill or not gambling and despite there being an element of chance of a game is preponderantly a game of skill it would nevertheless be a game of mere skill” 

As a result, except in specific circumstances/conditions, horse racing and dog racing are not considered to be forms of gambling because they involve a significant amount of ability. It’s interesting to note that the Supreme Court deemed rummy a game of skill. The Supreme Court’s justification was that “building up rummy takes considerable expertise in holding and discarding cards, and rummy requires a fair level of skill as the fall of cards has to be learned. It is mostly and largely a game of skill. However, a game of three cards known as “flash” or “flush,” sometimes known as a game of pure chance, was classified as gambling and thus falls under that category.

Online betting and gambling

The Public Gambling Act of 1867 is an out-of-date law because it does not apply to online gambling and betting. There are many online bookies that entice players to put bets online. The Reserve Bank of India was given the power to manage or set up a payment system for controlling all types of electronic payment methods in India by the Payment and Settlement Act of 2008. This allowed for the regulation and restriction of online gambling in India.Businesses have found it challenging to partake in gaming and lottery betting as a result of FDI policies. The use of some websites and content pertaining to gambling is also banned by IT intermediary regulations. Therefore, the IT act 2000 governs online gambling or cyber activities in India in a way that enables the Indian Government the authority to prohibit or order foreign gambling apps and websites. It may be said that there is no specific law in India that declares internet betting and gambling to be against the law. Theoretically, it is acceptable to place bets on these reputable casino websites without fear of facing penalties.

As the RBI has advised the banks and payment gateways not to conduct transactions that are related to online casino sites or gambling, the payment portals may be the biggest challenges that gamblers in India may encounter.

Gambling categories and their legal status

• Casino gambling

The Public Gambling Act regulates casino gambling because it is considered to be outside the legal definition of “gambling” and to be legal. However, only two states—Goa and Sikkim—have partially legalised casino gaming, and in those two, only five-star hotels are eligible to seek licences that have been approved by the state. Goa also allows casino gaming on board an offshore ship.

• Sports betting and horse racing

According to the Supreme Court, wagering on horse races is a game of skill. The majority of gaming laws have made an exception for betting money or placing wagers on horse races. Horse Racing is excluded from the Gaming Enactments, but only under particular circumstances. These requirements state that the wagering must occur on the precise day that the horse has raced and in an area that has been approved by the State Governments, among other things. 

Betting on actual horses is prohibited within turf clubs. In addition to the laws and regulations established by the governments, autonomous turf clubs also establish their own rules.

Online wagering on actual horses would also need to comply with the requirements outlined in the Horse Racing Exemption. Bangalore and Calcutta Turf Clubs recently gained approval from their respective State Governments to enable internet wagering on horse races held in Turf Clubs (during the COVID-19 outbreak). 

In terms of sports betting, only the State of Sikkim allows it. To provide these games in the State, an operator is required to acquire a licence under the Sikkim Act. The only place in the state of Sikkim where these games can be purchased online is Sikkim.

• Cricket Betting

The Central Government sees gambling as a game of chance rather than skill, despite the fact that there are no gambling laws that specifically prevent Indians from wagering on cricket (as in horse racing). Following the 2013 spot-fixing scandal, the Law Commission advised the Central Government to legalise betting in India, but with strict regulations. To stop money laundering was the key motivation for this. 

However, because online gambling is a worldwide industry and Indian laws do not apply to foreign websites, the government has put in place some measures to make using these websites challenging. 

• Poker

For the purposes of the Gaming Enactments, it is typically maintained that specific poker variants or styles qualify as games of skill rather than chance.Because of this, these games are and should be permitted in line with the Indian States (to the extent that they meet the definition of skill games).

According to the Nagaland Act, poker is formally categorised as a skill game. In a similar spirit, poker is expressly excluded from the definition of “gambling” in the State of West Bengal under the West Bengal Gambling and Prize Competitions Act 1957. According to the Karnataka High Court, a licence is not necessary while playing poker as a game of skill in accordance with the Karnataka Police Act, 1963. Poker is currently illegal in the state of Gujarat, according to the High Court of Gujarat, which determined that it is a game of chance. 

• Bingo

Since bingo is seen as a game of chance and is therefore prohibited in the majority of Indian States, it is possible that it does not fall under the definition of “lottery” or within the scope of betting or gambling under most Gaming Enactments. 

• Lotteries

Government lotteries are governed by the Central Lotteries (Regulation) Act of 1998. This statute gives state governments the right to hold lotteries and to create rules and regulations, as long as they don’t interfere with or go against the Central Lotteries statute. It is prohibited to draw more than one lottery every week. However, many Indian states have been given permission to open a large number of lottery terminals where draws occur even every 15 minutes. One such well-liked state is Sikkim, which is renowned for its gaming machines and regulatory structure. In accordance with the seventh schedule of the Constitution, Sikkim is free to enact its own gaming regulations and is thus exempt from the Central Lotteries Act.

The Lotteries Regulation Act of 1998 grants state governments the power to approve lotteries inside their borders and to establish the corresponding tax laws. In India, for instance, taxes may be automatically subtracted from a player’s earnings when they play poker online.

Application for a Gambling License and Indian Gambling Licence Restrictions

Certain types of licences may be necessary, depending on the type of gambling activity and the platform via which the relevant activity is sought to be supplied. The following are these: 

1. Casino: Goa act and Sikkim casino law There are state laws in Goa, Daman, Diu, and Sikkim that regulate the sale of casino goods in five-star hotels. However, under the Goa statute, licences are allowed for providing casino items offshore in Goa.
2. Poker: The majority of Indian states permit businesses to provide expert poker games without a licence. Poker licences, however, may be needed in Sikkim, Nagaland, Telangana, Andhra Pradesh, and Gujarat.
3. Betting: If it’s a game of chance, most Indian states forbid it. However, if betting involves playing casino games, then casino licences will be required. Licences for Sir James will be necessary if betting is done on a horse race.
4. Sports and horse betting: If you’re maintaining horses for actual horse races, you’ll need a licence. However, this does not cover horse races in other countries. Online horse racing wagering is legal without a licence.
5. Fantasy Betting: If a fantasy sports game meets the criteria for a game of skill, no licence is necessary. However, in order to offer the aforementioned games in Nagaland, a licence is required by the Nagaland Act.
6. Lotteries: In accordance with the lottery regulations, state governments have the authority to designate a person or a business as a distributor or selling agent to promote and sell lotteries on behalf of the organising state. According to the Indian penal law, private lotteries are forbidden in the majority of Indian states.
7. Social Games: Social gaming is legal in the majority of Indian states without a licence.
8. Skill Games: According to the Nagaland statute, the only state with a functioning system for issuing licences for online skill games is Nagaland. The majority of skill-based games operate beyond the influence of such gambling games and the majority of gaming laws.

Taxes in India on Gambling and Betting

• Income Tax

According to Indian Income Tax rules, any winnings from a lottery, crossword puzzle, card game, or other game that exceed INR 10,000 must be withheld at a rate of 30% (excluding any relevant surcharge and cess). 

The payer must ensure that the tax at the rate of 30% is cleared or paid before releasing the entirety of the winnings to the winner/payee if the winnings are in cash plus kind or entirely in kind and the cash component is insufficient to honour the withholding/tax obligation in respect of the entire winnings. 

• Levy for Equalization

There is now a new tax that must be paid on any online services or items that are provided by foreign e-commerce companies to Indian residents. 2% of the turnover tax from sales of goods or services to Indian citizens is the rate of this tax. 

• GST

According to the relatively recent Goods & Services Tax (GST) laws, a 28% rate of tax is applicable to services like entry to casinos or entrance to entertainment events. 

Additionally, games that use direct betting models, in which players wager against the house, are actionable claims. When such actionable claims involve gambling, betting, or lotteries, they are considered to be supplies of commodities and are hence liable to GST at a rate of 28% (on the amount wagered). Skill-based game-related actionable claims are exempt from GST. 

Peer-to-peer models, in contrast, in which participants compete against one another and the gaming firm just offers a platform to facilitate such betting games, are considered “services” offered by the gaming company. Only if these “services” fall under the category of “ODAIR” (Online Information Database Access and Retrieval Services) will they be subject to GST. In essence, ODAIR services are those that require little to no human involvement. 

The following GST rates are now applied to winnings from online casinos and gaming:

• A 28% GST on the whole bet value is due under HSN 999692 for games of chance, including casino gaming.
• Under HSN 998439, an 18% GST is only applicable to the platform’s commission or service fee or to gross gaming revenue (total stake value minus dispersed winnings) for games of skill like esports, puzzles, and some card games.

The cost or amount of service that the gaming operators charge is subject to this tax. In contrast, if there is sufficient human involvement in the provision of services like live casinos, such services would not come under ODAIR and would instead not be subject to taxation.