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Delhi HC hears out petition demanding ban on online gambling websites; ‘What makes you special?’, Chief Justice asks AIGF

“What makes you special? There’s no prayer against you,” Delhi High Court Chief Justice D.N. Patel asked All India Gaming Federation (AIGF), questioning their request to become a party to the PIL which seeks direction to the Centre to ban online gambling and betting websites in India. The hearing was held on July 31 by a bench consisting of Chief Justice D.N. Patel and Justice C. Hari Shankar in Court No. 1 at 4:15 pm. MeitY, Finance Ministry, and the RBI (Governor, Department of Information Technology, and Department of Foreign Exchange) are the respondents to the petition.

In response to the judge, AIGF’s lawyer Tarun Mehta said that the federation was a directly affected party since 27 businesses offering online betting services were its members. According to AIGF’s website, their members include Adda52 and PokerStars, both of which have been named in the petition. AIGF had also appeared before the court at the previous hearing, and had said that Adda52 and PokerStars were wrongly included in the petition.

The PIL (WP[C] 5661/2019) was filed on May 20 by chartered accountant Avinash Mehrotra, via his advocates Siddhartha Iyer, Prashant Kumar, Awantika Manohar, and Saurabh Suman Sinha.

‘Our websites host games of skill’, says AIGF; petitioner disagrees

All the respondents argued that the gambling in question is a game of skill and not of chance, to which Justice Patel asked, “You [the respondents] say gambling increases skill. What skill does gambling increase?” For context, wagering or gambling is legal in most Indian states as long as the element of skill is greater than that of chance. Mehta said gambling involves skill, not increases it. Mehta added that AIGF only represents people who say that online gambling websites are games of skill, and not of chance. The petitioner’s lawyer, Siddhartha Iyer, contested and said that the online gambling websites are games of chance, and not of skill.

Chief Justice Patel opined that “everything [in life] is a chance”. Making a choice between getting a B.Sc degree or LLB degree, and between being a judge and a lawyer are also instances of taking chance, he said.

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The petitioner has argued in the PIL that though games of skill are legal under the Public Gambling Act, the games offered on such websites are those of chance and not of skill. Success in teen patti, poker, blackjack, depends on the turn of the card and cannot be predicted, and hence it involves no skill, argues the petition. “Similarly, in the context of betting on sports, and the performance of individual players, there is no skill involved on part of the person betting,” says the petition. Such games/websites do not satisfy the test laid down in Supreme Court case KR Lakshmanan in 1995, the petition argues. The case had held that for a gambling game to qualify as a game of “mere skill”, it would have to mean substantial degree or preponderance of skill.

Online gambling funnels funds abroad

Iyer explained that the RBI had been made party to the case since payments being made on gambling websites are “going abroad”, purportedly referring to online gambling websites operated by foreign entities, an argument also made in the petition. Tarun Mehta also stated that the petitioner should have approached the authorities, instead of filing a PIL, “What was the need [for a PIL]?” he asked. Iyer replied that the petitioner made representations to all the respondents ⁠— RBI, MeitY, and Finance Ministry ⁠— on April 30, 2019, but did not receive any response from them, nor was any action taken in this regard.

Delhi wants to be party to the petition

Additional Solicitor General of India Maninder Acharya represented both MeitY and Finance Ministry, and filed a joint counter-affidavit to the petition. The lawyer for NCT Delhi argued that Delhi government should have been made party to the petition. In a conversation with MediaNama, Iyer said that the Delhi government is right in wanting to be party to the PIL, given its jurisdictional remit. However, Delhi already has a state law for gambling, he said. “The point is that online gambling can only be regulated by the Central government,” he clarified.

The lawyer for RBI, Nisha Sharma, said that the central bank would file its reply to the petition after the hearing. The case has been listed for November 28, 2019. It’s worth noting that Iyer asked for an earlier hearing date, but Justice Patel declined to do so.

Case so far: Interim ban declined earlier

At the last hearing for the case on May 29, the division bench constituting Chief Justice D.N. Patel and Justice Brijesh Sethi had declined to place an interim ban on online gambling websites, but had issued notice to MeitY, Finance Ministry, and the RBI. Advocates Gaurang Kanth and H.S. Parihar were directed to appear and accept the notice for MeitY and Finance Ministry, and RBI respectively.

Explaining that several websites offering poker, teen patti, and sports betting are operational, the petition said these sites are run by both Indian and foreign companies. Such websites include Adda52, Khelo365, PokerStars, 1xbet, Royal Panda, among others. Some sports betting websites even allow fantasy sports, where “unsuspecting players” bet money on individual performance of players.

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Here’s a list of all the websites named in the petition (NB: This isn’t an exhaustive list):

Clipping from the PIL

The petition prays for direction to MeitY to ban online gambling websites; to the Ministry of Finance to recover taxes from both individual players and websites; and to the RBI to check outflow of forex, to ensure FEMA 1999 compliance, and to issue guidelines preventing payment service to such websites.

Why Avinash Mehrotra wants online gambling websites banned: Key arguments from the PIL

The petitioner said he had made his case from newspaper reports, the Law Commission’s 276th report on “Legal framework: Gambling and Sports Betting Including in Cricket in India”, and interactions with people who have lost large sums of money by gambling on these websites.

1. Gambling ruins lives, has historically been looked down upon: Online gambling has ruined lives and financial security of several people. It has historically been looked down upon. The petition cited Rigveda and Yudhisthira’s gambling problem in Mahabharata (“where he was willing to gamble away his own wife and brothers”) as cultural precedent. People who gamble have high levels of anger, do not communicate clearly, are less independent, don’t engage with people, among other things, argues the petitioner.

2. Gambling is already illegal: Gambling, or wagering on games of chance is “per se” illegal, and most state legislatures have “expressly forbidden” it, including the NCT Delhi under the Delhi Public Gambling Act, 1955.

3. Online gambling websites don’t pay taxes: Such websites keep a percentage of a player’s winnings as commission, and release the rest of the amount, without deducting any tax. This leads to loss of revenue and foreign exchange for the State. Even illegal activities are taxable, argues the petition.

4. Some websites offered betting on the Lok Sabha Elections 2019: Websites, including on IndiaBet.com and Diamondexch.in, allowed betting on the outcome of the Lok Sabha Elections 2019. Betting on elections and aiming to profit from them is “nothing but an insult to democracy, and also illegal”.

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5. Regulators have failed to enforce existing laws: The proliferation of these websites is enabled by lack of enforcement of existing laws by RBI and MeitY. It is within MeitY’s jurisdiction to act against illegal gambling under Section 67 and 69 of the IT Act. Payments made on these websites are done via organisations governed by the RBI and Ministry of Finance, who should take steps to prevent the operations of such websites.

6. Online gambling is worse than gambling: “Online gambling is a far worse evil than regular gambling,” because its easily accessible, and can be played on the go. With advances in technology and increased internet access, even young adults and minors are susceptible to addiction to online betting. People can gamble savings away “without even leaving the house”. Since gambling online involves no physical exchange, it can be harder for people to understand how much money they’ve lost. “The numbers on the screen, in essence, seem more like pretend money than the real thing.” “Online gambling is a far more dangerous activity, than regular face to face gambling, both of which are legally impermissible in our country.”

7. Minors can access online gambling websites: Online gambling has no age barrier, and websites are designed to attract young players through elements of video games.

8. Money laundering: Being unregulated, it’s “potentially a great place” for laundering money, and foreign exchange laws; income tax laws are likely being violated by such sites. Foreign websites, such as bet365.com, take payments in foreign currency, and could lead to forex reserves leaving the country in violation of FEMA 1999, without the RBI knowing.

9. Technology like cryptocurrencies has made it worse: Online gambling issues become worse with the rise of bitcoin and cryptocurrencies. It’s harder to track the amount of money being traded, “since they operate in a parallel economy”.

10. No legal provision to recover lost money: Even if gambling was not prohibited in the strictest sense, it’s not possible under Indian law (Indian Contract Act, 1872) to recover anything that has been wagered since gambling contracts are unenforceable.

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Existing legal framework for gambling

The petitioner explains that most states have legislations placing a total bar on gambling. States such as Haryana, Himachal Pradesh, Punjab, Madhya Pradesh, Chattisgarh, Uttarakhand, and north-eastern states of Tripura, Manipur, and Mizoram, and others have adopted a variation of the Public Gambling Act, 1867. Other states ⁠— Andhra Pradesh, Delhi, Gujarat, Maharashtra, Jammu & Kashmir, Meghalaya have enacted state laws to prohibit gambling. New Delhi, which falls under the Delhi HC’s jurisdiction, has also prohibited gambling under the Delhi Public Gambling Act, 1955.

Nagaland is an exception

The petitioner notes that the Nagaland government is an exception and allows games of skill under the “Prohibition of Gambling and Promotion and Regulation of Online Games of Skill, 2015 (Act. No. 3 of 2016)”. The Act lists poker and nap as games of skill. The petition notes that the state government has permitted people “to lay waste to their fortune, hard earned money, and possible inheritance, by permitting them to play games of pure chance, under the garb of calling them games of skill”. Moreover, there are no safeguards for this in the Act.

The Act provides licences for running games of skill, but since these games are available online, they have a pan-India presence, and people from other states can access and play these games. However, the Act cannot have a pan-India presence as it only permits operations of these websites in Nagaland. The state has “usurped” the legislative power of all other states by allowing such games, says the petition.

Additionally, the petition argues, Nagaland has not examined the issue of unenforceability of bets/wagers won by a person, and even in Nagaland, “a gambler would not be in a position to legally recover his winnings, in case he is successful in a game of chance.”

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