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Report No. 276

Chapter IX

Conclusions and Recommendations

9.1 With the advent of online gambling and the anonymity that it ensures, the gambling and betting activities have acquired a global presence. It has, therefore, become more challenging for countries to monitor or curb these activities. Many countries that prohibit gambling have not been successful, particularly with regard to online gambling. The transnational character of online gambling platforms calls for a much needed change in approach. With the changing times, there could always be an option to have a relook at the earlier approach of a complete ban. The relook, if any, may take into account the possible loss of revenue and employment generation that a regulation could bring about.

9.2 The size of the global gambling market has grown manifold in the last decade. This increase in size is naturally accompanied with an increase in revenue generation, that continues to rise every year. For example, Europe has reported a yield of 41% GGY (Gross Gaming Yield) and Asia has approximately yielded 39%211. In fact, Japan has the largest national betting market which is the result of permitting betting on horse racing, cycling, motorbike racing and boat racing, constituting a market twice the size of the United Kingdom. The same is also evident from the rapid increase in sales of Mainland China's State lotteries, recording a $51.1 billion high in 2013.

9.3 According to experts, though land-based lottery and casinos still dominate the gambling market, online gambling and betting are showing rapid growth. Such activities, if properly regulated would ensure transparency in the market, as also strike at the underworld's control over the illegal and unregulated gambling industry. Additionally, the revenue so generated by regulating and taxing betting and gambling, may become a good source of revenue, which in turn, could be used for public welfare.

9.4 Regulation would therefore, empower the authorised agencies to identify and prevent instances of gambling by minors and 'problem-gamblers' as well as save the public from any kind of inconvenience at the hands of the law enforcement authorities. It would also enable the Government to effectively curb the menace of black-money generation through illegal gambling.

9.5 There is merit in the argument that, had gambling been regulated at the time of the Mahabharat, Yudhishtir could not have staked his wife and brothers in a gamble. On the other hand, the argument made for 'revenue over morality' lacks merit. States such as Gujarat, Bihar, Manipur, Nagaland and Lakshadweep, prioritising societal morality over revenue collection, have put legislative embargos on the sale, storing and consumption of liquor; taking into account its ill-effects on the society.

Therefore, keeping in mind that the Indian society has always frowned upon gambling, considering its self-destructing capabilities and pernicious nature, it is most likely for the Indian people to choose morality over revenue in matters of gambling too.

9.6 Gambling has been proven to result in financial losses, causing an adverse impact on one's economic state, personal life and social life. Such activities affect the vulnerable sections of the society in unimaginable and often, irreparable ways. Further, in an unregulated environment, inherent greed and corruption result in increased criminal activity.

One of the major drawbacks of illegal gambling and betting activities is loan-sharking, i.e. taking loans at exorbitant rates for gambling. Aberrational behaviour sprouting out of compromised individual and social ethics is also a common side-effect of unchecked and unregulated 'betting and gambling', ultimately weakening the moral fibre of the nation.

9.7 The existing policy of the Government (National Sports Development Code of India, 2011, etc.), the current socio-economic atmosphere in the country and the prevalent social and moral values do not encourage betting and gambling. Accordingly, the Commission reaches the inescapable conclusion that legalising betting and gambling is not desirable in India in the present scenario. Therefore, the State authorities must ensure enforcement of a complete ban on unlawful betting and gambling.

9.8 However, incapability to enforce a complete ban has resulted in rampant increase in illegal gambling, resulting in a boom in black-money generation and circulation. Since it is not possible to prevent these activities completely, effectively regulating them remains the only viable option. Thus, if Parliament or the State Legislatures wish to proceed in this direction, the Commission feels that regulated gambling would ensure detection of fraud and money laundering, etc.

Such regulation of gambling would require a three-pronged strategy, reforming the existing gambling (lottery, horse racing) market, regulating illegal gambling and introducing stringent and over-arching regulations. For such an eventuality, the Commission recommends:

1. Since online betting and gambling are offered and played over media (telephones, wireless, broadcasting and other like forms of communication) covered under Entry 31 of List I of the Seventh Schedule to the Constitution, the Parliament has the legislative competence to enact a law(s) dealing with the same.

2. The Parliament may also enact a model law for regulating gambling that may be adopted by the States or in the alternative, the Parliament may legislate in exercise of its powers under Articles 249 or 252 of the Constitution. In case legislation is made under Article 252, States other than the consenting States will be free to adopt the same. Being a State subject under List II of the Seventh Schedule to the Constitution, it is needless to say that State Legislature(s) is competent to enact the required Law for the State(s) concerned, while duly taking note of the National Policy on gambling etc., and other legal considerations.

3. Since horse-racing, being considered a game of skill, has been exempted from the ambit of blanket prohibition on "gambling", both by the legislatures and the judiciary, other skill-centric games may also be afforded this exemption.

4. Operators ought to focus on the safety and protection of players indulging in such skill-centric games.

5. Gambling and betting, if any, should be offered only by Indian licensed operators from India possessing valid licences granted by the game licensing authority. For participants, there must be a cap on the number of transactions an individual can indulge in these activities in a specific period, i.e., monthly, half-yearly or yearly. The nature of stakes should be restricted to money with a linkage to PAN card and Aadhaar card, and the betting amount should be prescribed by law, having an upper limit on the amount one can legally stake in a gamble, which may be on the basis of the deposit, winnings or losses.

6. Similar restrictions should also be prescribed for the purpose of the amount one would be allowed to stake while using electronic money facilities of the likes of credit cards, debit cards, net-banking, VCs, etc..

7. Gambling must be classified into two categories, namely 'proper gambling' and 'small gambling'. 'Proper gambling' would be characterised by higher stakes. Accordingly, only individuals belonging to the higher income group shall be permitted to indulge in this form of gambling. On the other hand, individuals belonging to the lower income groups will have to confine themselves to 'small gambling', not being permitted to stake high amounts (falling within the bracket of 'proper gambling').

8. In order to protect the public from the ill-effects of these activities and with a view to have enhanced transparency and state supervision, all betting and gambling transactions should be linked to the operator's as well as the participant's/player's Aadhaar Card/PAN Card.

9. The enactment(s) so made to regulate gambling and betting activities must ensure that vulnerable sections of the society are protected from being exploited by the possible ill-effects of these activities. In particular, the youth and children below the age of 18 years (who may or may not be posing as adults), and those who are below poverty line and to whom as a social welfare measure, Central / State Governments provide subsidies to their Jan Dhan Account for sustenance. Putting such restriction is a must so that the money provided by the Government for their sustenance on different heads under the Direct Benefit Transfer Scheme is not misused in participating in gambling and betting and these vulnerable people are protected from the vice of gambling and betting. In other words, all those who get subsidies or do not fall within the purview of the Income Tax Act or the GST Act should be debarred from participating in online and / or offline gambling platforms.

10. The websites advertising gambling must compulsorily ensure that there is no objectionable or pornographic content on display on their portals/platforms.

11. Information regarding the risks involved in gambling/betting and how to play responsibly must be displayed prominently on all gambling and betting portals/platforms.

12. The transactions made between and among operators and players/participants indulging in these activities should mandatorily be made 'cashless'. This would go a long way in enabling appropriate authorities to keep a close eye on every single transaction so made. Necessary provisions should be made part of the relevant law(s), attracting penal consequences for cash transactions so made.

13. Any income derived from such activities should be made taxable under the Income Tax Act, 1961, the Goods and Services Tax Act, 2017 and all other relevant laws for the time being in force applicable to such activities in India.

14. The Foreign Exchange Management Act, 1999 and the Rules212 made thereunder as also the Foreign Direct Investment (FDI) Policy213, may suitably be amended to encourage Foreign Direct Investment in the casino/online gaming industry, lawfully permitting technological collaborations, licensing and brand sharing agreements, etc. Allowing FDI in this industry would bring substantial amounts of investment to those States that decide to permit casinos, propelling the growth of the tourism and hospitality industries, while also enabling such States to generate higher revenue and employment opportunities.

15. There must be a stringent law(s) in place to regulate Foreign Direct Investment on one hand and to prevent money laundering on the other.

16. Under the Information Technology (Intermediary Guidelines) Rules, 2011214, Intermediaries are barred from hosting or transmitting content relating to or encouraging gambling. However, this provision creates an anomaly when a State decides to regulate or allow gambling. For instance, even though the State of Sikkim has permitted online gambling and betting, it is unclear whether the Rules of 2011 would apply to licensed online gambling and betting enterprises. It is therefore suggested that the Intermediary Guidelines Rules be suitably amended to insert the word 'illegal' before the word 'gambling' so that those intermediaries that transmit or host content relating to illegal gambling, i.e., gambling activities not licensed by any State, may be held liable.

17. The "National Sports Development Code of India, 2011", which aims at preventing betting and gambling in sports or any other code applicable from time to time, will also require an amendment/modification, to create an exception for the same, if betting and gambling are to be regulated.

18. An agreement could be rendered unlawful by section 23 of the Indian Contract Act, 1872, if the consideration is not lawful or it affects the morality or is against public policy. Further, section 30 thereof makes wagering contracts void but not illegal215. These provisions stand detrimental to the interests of players/participants who indulge in gambling transactions and may not be provided winnings, as it makes it impossible for a party to assert such a right in a Court of Law. It is therefore suggested that section 30 be suitably amended to exempt transactions that legally take place with licensed gambling operators or casinos, from the ambit of 'wagering agreements'.

19. Detailed safeguards inter alia, for employees of casinos, minors, internal control requirements for casinos (like customer due diligence), maintenance of accounts, audits etc., and establishment of a council to look into and prevent 'problem gambling' and 'gambling by minors' must be put in place.

20. Match-fixing and sports fraud should be specifically made criminal offences with severe punishments.

21. Amend any other existing law(s) that puts an impediment to bring into effect the regulating mechanism to such effect. The Commission recommends accordingly.

9.9 The Commission would like to conclude the Report by quoting Justice D P Madon that "as the society changes, the law cannot remain immutable" and that "the law exists to serve the needs of the society which is governed by it." (Central Inland Water Transport Corporation Limited & Anr. v. Brojo Nath Ganguly & Anr., AIR 1986 SC 1571).

[Justice Dr. B.S. Chauhan]
Chairman

*

[Justice Ravi R. Tripathi]

[Prof. (Dr.) S. Sivakumar]

[Dr. Sanjay Singh]

Member

Member

Member-Secretary

**

[Suresh Chandra]

[Dr. G. Narayana Raju]

Ex-officio Member

Ex-officio Member


* Submitted a separate opinion

** Out of country on official visit



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