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Industry voices suggest, Karnataka gaming ban won't stand test of law

Bangalore, September 22, 2021:  Industry associations, legal experts and analysts have weighed in on  the Karnataka Police (Amendment) Bill, 2021, passed by voice vote in the state assembly two days ago, which proposes to amend the gaming and police laws seeking to prohibit online gambling, betting and wagering in all forms. (details of the bill  in our report here)
Federation of Indian Fantasy Sports
The said Bill, while being a well-intentioned legislation creates confusion and uncertainty for legitimate online fantasy sports businesses. While the government's concerns may be valid, however, the Bill appears to be misguided since it penalises legitimate businesses by treating them at par with illegal online gambling, betting and wagering platforms. 
FIFS's legal experts have given the opinion that the Bill runs contrary to a catena of judgments delivered by the Courts. In fact vide judgment dated July 30th 2021 the Hon’ble Supreme Court finally upheld the validity of Online Fantasy Sports by stating that the issue of whether fantasy sports format amounts to gambling or betting or wagering is no longer res integra. Further, the Hon’ble Supreme Court also reaffirmed the judgments of the Rajasthan, Punjab & Haryana & Bombay High Courts all of which upheld the validity of fantasy sports as being legitimate businesses entitled to protection under article 19(1)(g) and article 14 of the Constitution of India. Going one step further the Rajasthan High Court vide judgement dated  22nd July, 2021, opined as follows (extract below):
 We are, therefore, of the view that offering of online fantasy sports in accordance with the Charter of the FIFS has already been judicially recognized as a business and consequently, entitled to protection under Article 19(1)(g) of the Constitution of India and the prayer seeking directions to the State Government to prohibit the same would be opposed to Article 14 and 19(1)(g) of the Constitution of India
Online Fantasy Sports is sui generis i.e. a unique and independent legal class of digital sports engagement platforms based on officially sanctioned real-live sporting events. It appears that the Bill intends to treat unequals equally which would be in violation of Article 14 of the Constitution through an overbroad and ambiguous definition of ‘gaming’. Given the unique nature of fantasy sports, the FIFS members urge the government to respect and align with the judicial and constitutional protections provided to its business activities.  
FIFS has many of its member companies with operating offices in the IT & ITES hubs where they are creating and developing software and services products and technologies for the fantasy sports sector. According to a report by NITI Aayog on Online Fantasy Sports, the sector has the potential to create over 12,000 additional highly skilled engineering jobs in the next few years, attract an FDI of over INR 10,000 crore and contribute over INR 13,500 crores in taxes to the government. FIFS and its members strongly believe that certainty is integral to the rule of law and hence the Bill needs to provide certainty and clarity to businesses, the investor community as well as consumers for the orderly growth and development of the industry.
Today, India is the world’s largest market for Fantasy Sports by user base and the Indian entrepreneurs who have built these businesses epitomise the Hon’ble Prime Minister’s vision of AatmaNirbhar Bharat i.e. technology built in India, for India, by Indians. It is imperative that the State Govt. recognises that the unintended beneficiaries of this Bill would be the grey market platforms and offshore online gambling/betting companies which pose a serious risk to Indian users. 
Formed in 2017, the Federation of Indian Fantasy Sports (FIFS) is India’s first and only Fantasy Sports self-regulatory industry body established to protect consumer interest and create standardised best practices in the fantasy sports industry.
PK Misra, President Players Association – All India Gaming Federation
Considering the support the online skill-based gaming sector has received in past rulings by both the Supreme Court - under article 19(1)(g) of the Indian Constitution, and various Karnataka High Court judgements, the move by the Karnataka government in tabling the Karnataka Police (Amendment) Compliance Act, 2021 comes as a real setback to the large professional players community that resides in the state. These players, who represent India in domestic and international level tournaments such as the 2018 Asian Games and World Series of Poker look to this globally accepted sector as a means to their livelihood, which has already witnessed a severe impact due to the Covid-19 pandemic. I really hope the state is able to review this matter and to adhere to a clear distinction between gambling and skill-based gaming.”   
Roland Landers, CEO – All India Gaming Federation (AIGF)
India is the fifth-largest online gaming market globally and skill-based gaming, a sunrise sector, is giving birth to an increasing number of unicorns within the country, especially Karnataka. The sector has been a strong financial contributor to the Indian economy even during an unprecedented period of slowdown and is further expected to generate revenues in excess of $3 billion by 2025. The move by the Karnataka government in tabling the Karnataka Police (Amendment) Compliance Act, 2021 act is highly regressive in nature, and a huge setback to the state's reputation of being a tech-hub and start-up capital. Skill-based gaming cannot be compared with gambling, and banning is not a solution. The sector needs the support of state governments to promote initiatives towards responsible gaming and recognition of the AIGF ‘Self-regulation Framework’. AIGF and its advisory members look forward to an opportunity to engage stakeholders within the state government to make an industry representation on the matter.
Internet and Mobile Association of India (IAMAI):
The Karnataka Police Act (Amendment) Bill, tabled in the State Legislative Assembly, will provide a conducive environment for the online skill gaming industry. 
However, the bill introduced in the assembly appears to have been drafted without considering the various legal and constitutional positions by including a wide definition of 'gaming' in amendments against various Supreme Court and High Court judgments. 
The bill has been introduced in the backdrop of a PIL filed in Karnataka High Court to ban online gambling.  After the cabinet approval of the bill, the law minister, JC Madhuswamy, informed the media that the bill is to ban online gambling and games of chance in the state. IAMAI is of the view that the bill may hurt Karnataka’s position as the country's startup hub and lead to the loss of jobs and revenue for the state. There are 92 gaming companies registered in Bengaluru which employ over 4,000 people. In the past three years, international investors have invested around Rs 3,000 crores  (Rs 30 billion) in gaming and animation startups in the state.  
Karnataka is often recognised for its several exemplary initiatives in developing futuristic policies to support new and disruptive technologies and having a regulatory framework conducive to startups working in emerging technologies. Karnataka was one of the first states to come up with an AVGC (Animation, Visual Effects, Gaming and Comics) policy recognising the immense potential the sector holds for the digital economy. IAMAI is hopeful that the state government will continue to take a progressive stand and relook at the bill to bring it in line with the Supreme Court and various High Court's judgments and help create a vibrant, inclusive, globally competitive, and sustainable start-up ecosystem in Karnataka. 
Legislative actions such as this, may create a cloud of confusion and create regulatory uncertainty, which may unintentionally result in investors recalibrating their investments in the state and many existing companies may consider shifting base from the state. In view of the above, IAMAI requests the Government of Karnataka to take a progressive view and ensure that legitimate online gaming companies which are protected under Article 19(1)(g) and Article 14 of the Constitution of India continue to operate in the State. 
Legal experts
The comprehensive nature of ban on online games being proposed by the state of Karnataka through the amendment of the Karnataka Police Act of 1963 may fall short in a Court of Law opine experts. The proposed amendment states “games means and includes online 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, electronic transfer of funds in connection with any game of chance.” However, experts believe that such a blanket ban will not hold in a Court of Law. In the event that the bill is passed, impacted parties including Gaming companies, associations, investors, employees may move court seeking relief. Rahul Narayanan, a senior advocate practising at the  Supreme Court said, “An all pervasive ban usually does not stand the test of law. Further there are certain precedents and judicial orders in this particular instance where an appellate may have a compelling case.”
 Earlier this year, the Government of Tamil Nadu had passed the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, amending the Tamil Nadu Gaming Act, 1930, prohibiting all forms of online gaming (games of skill and games of chance) in the state. This law removed the exemption usually accorded to games of skill from being penalised when played for wager, bet, money or other stakes. It was challenged in the Madras High Court on the grounds of being unconstitutional. On August 3, 2021, the High Court struck down the amendment stating that by imposing a wide-ranging complete ban, the least intrusive test was violated, and the ban had thereby fallen foul of Article 19 (1) (g) of the Constitution. “The Bill tabled in the Karnataka Assembly seeks to equate all games including online chess, online farming with the same brush as online gambling. The bill has made some exemptions including online betting on horse racing. I am not sure that application of a judicial mind will see any compelling rationale to this move,” said a senior corporate lawyer employed with a gaming company.
The Government should consider regulation rather than legislation. The industry has submitted itself to the idea of regulation being brought in and already moved towards some steps of self-regulation. A comprehensive framework with active participation of the industry association is a prudent way forward,” added the lawyer.   
Jayesh Ranjan,  Principal Secretary Industries & Commerce (I&C) & Information Technology, Electronics and Communications, Government of Telangana: We are threading cautiously when it comes to gaming. Blanket banning is not a solution, one needs to have a distinction between games of skill and games of chance.
The pushbacks from law enforcement and other agencies are largely driven by games of chance. We cannot rule out that certain things can’t be manipulated, the need is to understand how we navigate the regulatory framework, we also need to dive deeper and find a middle path… We are taking certain steps in Telangana, but want to ensure that these are not challenged by courts or lead to public outcry,” he said while speaking at the inaugural address of India’s largest B2B gaming summit GATO’21, organised by Internet and Mobile Association of India (IAMAI), in association with Games24x7.
Gopal Jain, Senior Advocate, Supreme Court of India, today suggested that the gaming sector should not meet the fate of the telecom sector and so, gaming regulations should have sector-specific provisions, with complete clarity, giving stability to business and avoiding any course correction like the retrospective tax case.
Bhavin Pandya, Co-Founder and CEO, Games24x7.
Centrally, it would help if the Central Government recognises certain games of skill and legislates over them. We can replicate some global models too where one needs to obtain a license to operate the games under specific conditions.