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Karnataka Issues Online Casino Ban, While Government Considers Legalization

India has long been considered a wild west when it comes to online gambling. The federal government has long since resisted addressing the issue, even though the country’s laws allow online casinos to operate because the laws do not mention technology. This is a sore spot for a government reeling from an economic turndown due to a global pandemic, and now the federal government has assigned a commission to look into the merits of legalizing and taxing online casinos. At the same time, certain states have already decided to ban these casinos. Most recently, Karnataka passed legislation banning all online gambling activities.

Law and Parliamentary Affairs Minister J C Madhuswamy of Karnataka said that “the draft bill defines online games as, games involving all forms of wagering or betting including in the form of tokens valued in terms of the money paid before or after the issue of it or electronic means and virtual currency, also electronic transfer of currency in connection with any game of chance.” Horse racing and lottery bets are still allowed within the state.

Madhuswamy added that the “instrument of gaming includes any article used or intended to be used, including computers, computer systems, mobile apps, internet or cyberspace, virtual platforms, software and accessories,” in a statement to reporters. The punishment for playing was also increased from one year to a three-year jail sentence and a fine of Rs one lakh.

Tamil Nadu, Andhra Pradesh and Kerala have already passed similar bans in previous years, outlawing casinos and a number of other gambling entities.

Although in August, Tamil Nadu suffered a defeat when it came to their ban against online rummy games, when the Madras High Court ruled that the ban violated national laws and was therefore struck down. The court stated that national laws classify rummy as a game of skill, not chance (an important distinction in legalities), and that Article 19(1)(g) of the Constitution allows people the right to practise any profession or to carry on any occupation, trade or business, meaning that new laws banning rummy could not be enacted.

Historically, bans have not done much in India. In states where online casino is supposed to be banned, lack of action of the respective government bodies makes it difficult to enforce these laws anyway, and players tend to log in and wager on online casinos despite bans. Meanwhile, individuals who play at Indian online casinos in states where it is not outright banned can continue to do so.

Casino apps, though banned from Google and Apple stores for a while, have also seen a resurgence, mostly because enthusiasts will insist on playing anyway, and those who are tech-savvy enough have always found a way around laws.

With the federal government ignoring this pressing issue for many years, other countries have been able to swoop in and do business in the country. Most of India’s online casinos are remotely licensed through Malta, Gibraltar, Curaçao, or other countries that do allow online casino and gambling. This means that India has missed out on many years of income from these casinos when it comes to taxes and licensing fees. Other countries have legalized gambling not just due to popularity, but because this booming industry is adding a million to their respective GDPs – and this industry is considered likely to continue to grow for years.

One group, the Confederation of All India Traders (CAIT) addressed a letter to Karnataka Chief Minister Basavaraj Bommai talking about the business repercussions of such a ban on casinos. CAIT Secretary General Praveen Khandelwal said to, “Unfortunately, the Karnataka Bill does not distinguish between a game of skill and a game of chance. Game of chance is pure gambling and should be rightfully banned. However, by including games of skill in the ambit of the Bill, the proposal has not only gone against established jurisprudence but threatens the thriving Indian gaming start-up sector.”

The letter goes on to detail that any bans will just encourage illegal activity and allow more foreign gaming companies to come into the market, rather than allowing Indian companies to flourish.

It will also confuse customers who may not know any better to fall for schemes from non-legitimate casino companies. Unlicensed online casinos are also a problem throughout India, with groups possessing enough digital skill to set up entire casino websites with fake licence numbers that either don’t pay out or steal a customer’s information. Countries where gambling online is legal have laws and restrictions on sites to prevent information from leaking and keeping casino companies fair and regulated.

Currently, all states are waiting on a Taxes and Goods Panel to make their report to the finance minister, which may lead to a change in laws that allows Indian casinos to actively engage with customers, without fear of legal repercussions.