Internet Casinos Inc. was the world’s first internet casino. It began operations on August 18, 1995 and offers 18 different game options. The industry has grown to over 1,400 websites. Most of these sites are located on small Caribbean islands. Online gambling generates more income than any other online business. Nearly 30 per cent of the estimated 14.5million online gamblers come from Asia.
In minutes, a bet can be placed. Anyone with a valid credit card can create an offshore currency account with any gambling site. This will allow them to place bets for sporting events such as Wimbledon and Formula One. Betmart and Flutter allow you to place bets on any topic, including who will win the Nobel Prize or Madonna’s divorce. You can wager from a nickel to thousands and the amount will be adjusted to you account depending on your win or loss. The final balance can then be mailed or left for future betting.
The socio-cultural context in India is crucial to understanding the law that governs online gambling. The policy makers in India do not encourage gambling, even though it is not completely prohibited. Indian organized gambling industries are estimated to be worth approximately US$8.3 billion. Although stringent laws have stopped the growth of casinos, high-street gambling centres, and other forms of gambling in many countries, except the state Goa, the lottery is still the most popular form.
While gambling is not illegal in any way, it is tightly controlled and regulated. Modern India is a quasi federal Constitutional democracy. The power to legislate is distributed at both the state level and at the federal level. List II of India’s Constitution includes gambling. This means that each state has the authority to pass laws to regulate the gambling industry. Therefore, there is no national gambling law. Different laws govern gambling in different states. These laws are not only applicable across the nation, but also vary between each state. Some states have banned lotteries. Other states allow lottery marketing and distribution in other lottery playing states.
Gambling Regulation
Gambling can be defined as the payment of a fee for a chance at winning a prize. The nature of a game is determined by its dominant element, whether it be skill or chance. Gambling can be defined as a game where the element of chance, luck or skill is dominant in determining its outcome. Indian courts have declared that betting on horse racing, and a few other card games, is not gambling. Constitution of India does NOT protect the right of Indians to gamble or win lotteries. However, it should be noted that many lotteries operated by state governments make significant contributions to both the Union and state budgets. There is therefore resistance to total prohibition.
Gambling is covered by the following laws:
Public Gaming Act, 1867
This Act provides for punishments for public gambling and the prohibition of keeping a ‘common casino house’. The Act empowers state governments to make laws that regulate gambling in their respective areas. Each state has amended its penal legislation in line with their policy on gaming. However, online gambling is not affected by this legislation unless a broad interpretation of the definitions of common gaming house is made.
Indian Contract Act (1872)
The ICA is a codified umbrella of legislation that governs all commercial agreements in India. A wagering contract cannot be enforced according to the ICA. The Act provides that “any agreement by way of wager is null and void” and that no action shall be taken for any amount alleged to have been won or entrusted by any person to comply with the results of any game, other uncertain event or other wager. Invalid and unenforceable are gambling, lottery and prize game wagering agreements. A wagering contract does not constitute illegal gambling, but cannot be enforced by a court. Therefore, courts won’t entertain any cause-of-action arising out of a wagering contractual.
Lotteries (Regulation), Act, 1998
This Act sets the groundwork for organizing lotteries within the country. This Act grants the authority to state governments to regulate and promote lotteries within their territories. This Act also defines the conduct of lotteries and prescribes penalties in the event of a violation. Indian Penal Code punishes lotteries not authorized or approved by the state. This Act also prohibits sale of lotteries by other state-government entities in non-lottery states such as Gujarat or Uttar Pradesh.
Indian Penal Code, 1860
Section 294A deals about keeping a lottery bureau. It states that anyone who maintains any office or place for drawing any lottery other than a State lottery and a lottery authorized by the State government, is subject to imprisonment up to six months, fine, or both.
Publication of any proposal to pay or deliver any sum, or to do or refrain from doing anything, for the benefit any person, on any event related to or applicable the drawing of any ticket or lot, number, figure or figure in any of these lottery draws, will result in a maximum of one thousand rupees.
Internet gambling
Online gambling is subject to the same laws as gambling. All gambling agreements are considered wagering and cannot be enforced under the ICA.
As we mentioned before, India’s most popular internet gambling form is the online lottery. Online lotteries that are sponsored by the state governments cannot be sold in the states where they are banned. These marketers and distributors restrict their online services to people who live in the states where a lottery exists. Despite the fact that there has not been any reported breach by any company advertising online lotteries (or any other companies involved in such promotion), most of these companies require their consumers to give them an undertaking regarding their residency.
There have been cases where one state banned the lottery in another state, even online lotteries. In a recent case the Karnatka High Court confirmed the Karnataka government’s decision that it would be a ‘lottery-free’ zone. It imposed a ban on all lotteries, including those of other states, under the Lotteries Regulation Act 1998. In this instance, the state government directed that the kiosks and terminals selling the online lotteries be closed.
Enforcement over Foreign Jurisdictions
The Indian authorities might not be able, if the websites are being hosted or operated outside India, to issue any directive closing them down or prohibiting their access. Indian foreign currency laws forbid remittances of money outside India for gambling activity like the purchase lottery tickets, sweepstakes or pools. A gambling website located outside India that aims at receiving money from India cannot do this through legal channels.
Conclusion
Online gambling remains highly regulated and has very limited opportunities for growth. Although it is difficult for Indian gambling websites to target Indian customers, India-based companies can only distribute lottery products online within the allowed territories. The government’s strong authority to block gambling sites and the impossibility for enforcement of gambling-related contracts further deter the industry.