Monday, January 17, 2022

Karnataka Online Gambling Ban will be Rejected by Courts

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Industry does not expect the new blanket ban on online gaming in the state to live long, but fears its impact on local companies and jobs. The prohibition defines lotteries as an exception, even though Karnataka banned its government-run lottery 14 years ago.

The Bill Will Hurt Indian Business Before Being Struck Down, IAMAI Expects

The Internet and Mobile Association of India (IAMAI) issued a statement concerning the new amendments to the Karnataka Police Act of 1963 before the state’s legislative assembly adopted them.

According to IAMAI, the amendment bill and its wide definition of “gaming” directly contradict the consistent practice of several High Courts and India’s Supreme Court. Moreover, the act fails to distinguish between games of chance and games of skill which are protected by the Constitution of the Union.

“The Bill appears to have been drafted without considering the various legal and constitutional positions as it includes a wide definition of ‘gaming’ and is against various judgements by the Supreme Court and High Courts,” says the IAMAI statement.

The industry body further states that the online gambling ban introduced via the Karnataka Police Act will not affect games and betting apps that are based outside the country, but will hurt Indian skill gaming startups endangering numerous jobs and the substantial investments that have gone to these companies.

Karnataka currently houses more than 91 gaming companies and developers which provide jobs to approximately 4,000 employees. However, the new legislation threatens the state’s position as the leading hub for startups and innovation in India.

“The ban would impact Indian online gaming companies, while consumers would switch to games from other geographies. Further, this would impact the brands that have been built up with considerable investments over the last few years,” according to Biren Ghose, chairman of the Confederation of Indian Industry (CII) National Animation, Visual Effects, Gaming and Comics (AVGC) sub-committee.

Lottery and Betting on Horse Racing Left Outside the Scope of the Police Act

The adopted in September by the state’s Legislature Assembly Karnataka Police (Amendment) Bill (LA Bill No. 37 of 2021) makes use of the definitions of the Central Information Technology Act of 2000 for various computer and cyber-space terms and prohibits all forms of online gambling with such instruments involving the exchange of money via digital or other electronic methods.

The Karnataka Amendment Bill’s wide definition of gaming expressly names lottery and horse racing as exceptions. Nevertheless, state lottery in Karnataka has been banned since 2007 following a judgment of the Supreme Court.

In 1999, the Apex Court held that the right to sell lottery tickets was not a fundamental right as lottery was found to be outside the scope of “free trade”. In this way, India’s supreme judicial authority allowed states to ban lotteries.

Karnataka Scores High in Online Lottery Searches

Foreign-based online lotteries, including the world’s largest jackpot Powerball lottery, are still available for Karnataka residents. This concerns “true” online or digital lottery, and not central server-assisted distribution and sale of paperback tickets organized and run by other Indian states’ governments.

A recently published research paper by ENV Media’s analysts “Dissects the Indian Lottery Market” establishing that lottery is the most popular form of gambling in Bharat. The paper attributes the size of government lotteries to ₹ 50,000 crore per year before the introduction of GST of 28 per cent on top of the ticket values back in 2017. The levying of the indirect tax and the related increase in ticket price brought to a sharp shrinking of the market to ₹ 15,000 crore annually, with revenues reportedly shifting towards other lottery forms.

The paper also analyses proprietary geographical Google Analytics data and finds that states, which do not have their own government-run lottery, rank high in generated organic searches and traffic to online lottery pages. Karnataka is a good example, generating between 8.34 and 8.88 per cent of all users from the analysed data sets, ranking into fourth place after Maharashtra, Telangana and Tamil Nadu.

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