Not all online games are gambling: Karnataka government misses the point

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Since Karnataka is the IT hub of the country and attracts many investors in the field of entrepreneurship and technology, such legislation may not be beneficial for investment in the state.

By Sandeep Chilana

The Karnataka Police (Amendment) Bill 2021 (“Bill”) was tabled in the Karnataka Assembly during the current session targeting online gambling, specifically betting and gambling silver. The bill criminalizes all activities of this online industry as well as players participating in these online bets and games and provides for a penalty of up to 3 years and a fine of up to 1 lakh rupees.

Over the past few days, the bill has created a lot of buzz due to apprehensions that the bill appears to include online games that primarily involve skill as part of the definition of betting.

Examination of the copy of the Bill suggests that the Bill intends to amend Section 2(7) of the Karnataka Police Act 1963 (“Act”) which defines the term “game ” as following :

“gambling” means and includes online gaming, involving all forms of betting or betting, including the form of chips valued in terms of money paid before or after they are issued, or electronic means and virtual currency, the electronic transfer of funds in connection with any game of chance, but does not include a lottery or a bet or a bet or a horse race at a racetrack in or out of state, where such betting where this bet takes place »

In addition, the Bill proposes to amend the explanation of Section 2(7) of the Act which defines betting, as follows:

“”betting or betting”, includes collecting or soliciting bets, receiving or distributing winnings or prizes, whether in money or otherwise, in respect of any act intended to aid or facilitate betting or betting or such collection, solicitation, receipt or distribution. Any act or risk money or otherwise on the unknown outcome of an event
including on a game of skill and any action specified above performed directly or indirectly by players playing a game or by any third party; »

The bill further proposes to amend Section 78 of the Act which criminalizes the opening of gambling joints. The most relevant amendments are reproduced here:

“Opening, etc., of certain forms of games.

Anyone,-

(a) own or occupy or have use of any building, room, tent, enclosure, vehicle, vessel or place or an internet cafe or online game involving betting or betting, including any computer resource or mobile or internet application or any communications device as defined in the Information Technology Act 2000 ( central law 21 of 2000), opens, keeps or uses the same for gambling purposes:

(vi) on any betting or betting transaction or system in which the receipt or distribution of winnings or prizes in money or otherwise is made to depend on chance or the skill of others; Where

(vii) any act intended to risk money or otherwise on the unknown outcome of an event, including a game of skill;

shall, on conviction, be punished with imprisonment up to three years, or a fine up to one lakh, or both:

As is apparent from a simple reading of the bill, although it was introduced with the intention of dealing with online betting and gambling, it is worded in such an ambiguous and vague manner, which is probably intentionally, that all online games that have a preponderance of skill, including traditional games such as chess, billiards, etc. where sums are involved as subscription fees or entrance fees may be at risk of becoming a criminal activity under the amended Police Act, which forces various IT companies, developers and young people to use these platforms for recreational purposes. as well as for professional purposes, A CRIMINAL.

Not only are the amendments proposed by the state, which is the Silicon Valley of India, a most regressive step, but also the same goes beyond the constitutional jurisdiction of the state. There is no doubt that entry 34 of the list of states in the Constitution of India gives the states the constitutional power to legislate to regulate “betting and gambling”. However, in exercising its legislative powers, the state cannot artificially extend the definition of betting, gambling or betting to regulate, prohibit or criminalize an activity which, in the generally accepted sense, does not constitute a bet. The current bill attempts to achieve exactly the same legal definition, i.e. it has been modified to artificially include games of skill which, according to the established legal position, are not considered as ” Paris “. Therefore, in my humble opinion, the said amendments, insofar as they attempt to criminalize games of skill, are in themselves unconstitutional.

It also appears that India’s most progressive state has decided to unilaterally restrict the fundamental right of choice of its citizens to engage in recreational activities in their private lives without any discussion or deliberation with stakeholders, on the basis of government standards of morality. treat their citizens like children who must be controlled and saved from “vices”.

Previously, courts have in the past raised concerns about such wording. In the recent Junglee Games v. State of Tamil Nadu, where Part II of the Tamil Nadu Gambling and Police (Amendment) Act 2021 had broadly banned online gambling, Madras High Court had pointed out how it was not legislation intelligible and expert committees should be set up for the distinction of skill and chance, emphasizing the fact that when the outcome of an event is under control, such an event is not a bet.

In his decision in Shreya Singhal v. Union of India, the Supreme Court of India, while upholding the right to freedom of expression on the internet, struck down Section 66A of the Information Technology Act 2000 on the grounds that the section has a deterrent effect. on the right to freedom of speech and expression on the Internet.

This landmark judgment also highlighted an important aspect of the drafting of the law, the Supreme Court went on to state that Section 66A of the Computers Act, which was enacted, sets out certain exceptions to freedom of speech, in particular the expression under Article 19, paragraph 2, such as public order. , defamation, incitement to crime, morality and morality.

The Court refused to accept that Article 66 A was enacted in the interest of “public order” since it covers in its scope both messages to individuals and mass messages . The Court also pointed out that the terms used in Section 66A were vague, undefined and open-ended.

While the judiciary has repeatedly reiterated the importance of drafting a law consistent with the intent of the law and the powers given to an authority to legislate on given matters, it seems that time and time again , there have been legislations that go beyond the same that has led to judicial review.

Since Karnataka is the IT hub of the country and attracts many investors in the field of entrepreneurship and technology, such legislation may not be beneficial for investment in the state. Moreover, with gaming becoming a profession of choice, it also affects many industries such as developers, gamers, publishers, game hosting companies, etc. A progressive state like Karnataka which hosts many tech and sports companies would basically lead to losing this golden opportunity. .

The author is a tax and litigation expert practicing in Delhi HC and Supreme C and a former partner of Shardul Amalchand Mangaldas

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