India - To Bet Or Not To Bet.
Legal News & Analysis - Asia Pacific - India - Regulatory & Compliance
15 August, 2019
“As the society changes, the law cannot remain immutable”
– Justice D P Madon
They say cricket is not a game, it is a religion. In 2019, the India – Pakistan ICC World Cup match saw a viewership of 229 million within India itself. The importance of cricket as a unifying force cannot be debated and needn’t be proved; what is rather interesting is the ancillary impact a simple match of cricket can have on an economy, such as India.
Economic exploitation of cricket is widespread globally: it includes broadcasting rights, sponsorship and merchandising, to name a few. However, another prevalent and illegal exploitation in the form of betting takes precedence over all of the above, for the simple reason that due to the nature of the transaction, the said consideration paid, is officially taken out of India’s financial system and put into a parallel industry, which remains untaxed and unregulated.
In essence, betting is the act of putting at stake a wagering amount (a valuable or liquid cash) on the prediction of occurrence or non-occurrence of an event. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), India’s estimated illegal betting market is worth over Rs. 3,00,000 crore, a number that is even more astounding given India’s defence budget for 2019-2020 is Rs. 4, 31,000 crore. In 2015 alone, the Indian cricket team played 21 One Day International matches that raked in a total betting figure of Rs. 27,300 crore.
There are two kinds of money trail involved in betting: (1) black money exchanging hands; and (2) white money being turned into black money, due to the illegality of betting. While it is not certain when the former was taken out of the system, and whether its impact is subsisting or dealt with, the latter raises concerns about the economic stability of present-day India.
One may think that the bets are placed simply on the outcome of a match. The truth is far more complex, however, with bets placed on runs scored in an over, number of wickets taken by a bowler, number of sixes or fours hit by a team or a player, number of dot balls in an over, run outs and, lastly, stumped wickets. This web of possible bets makes it an enticing activity for people to engage in and possibly win large sums from. Bets change in a matter of seconds, they depend on several variables such as weather, unforeseen play, or even the toss.
Indians are not permitted to engage in online betting, hence, hawala (alternative remittance) channels are used to obtain passwords and carry out transactions on betting websites abroad. Irrespective of betting being illegal, betting is very deep rooted in Indian society – it has invariably become one of those acts that almost everyone indulges in but no one speaks of.
In 2013, India saw the unravelling of this parallel universe of betting, when the case of spot-fixing was brought to the forefront during the Indian Premier League. Following the 2013 fiasco was the 2015 IPL Season, where a total of 13 arrests were made for those involved in betting. However, it must be kept in perspective: these arrests possibly don’t even amount to 0.01% of people who were betting in 2015.
In 2018, the Law Commission of India published its report on “Legal Framework: Gambling and Sports Betting Including Cricket in India” (Report) where it dealt with the history, purpose and present-day impact of betting. Tracking the habit of betting back to ancient Indian texts such as the Mahabharata, Ramayana, and Rig Vedas, the Law Commission recognised the possibility that had betting been regulated at the time of Mahabharata, Yudhishtir wouldn’t have been able to use his brothers and wife as stakes in a game of dice.
Preceding the Report, two committees were set up by the Supreme Court of India: the Mudgal Committee, stated that “legalising sports betting would reduce the element of black money and influence of the underworld besides helping them in detection and focusing their investigation”; while the Lodha Committee recommended the legalisation of betting albeit with strong safeguards.
The Question of Morality
Historically, India’s stand against the legalisation of betting finds its root in morality. It is understood that with gambling, other perils such as loss of wealth, toxic vices and trouble to family are inevitable. Hence, the government generally prohibits activities that it considers may cause societal harm. The result is the banning of betting.
However, public morality is not a static concept, it’s an ever-changing aspect of society. Therefore, a relook at what is understood to be moral is warranted given the pervasive nature of illegal betting. J.S. Mill discussed the extent to which State should be allowed to restrict liberty of individuals and highlighted the conflict between liberty of individuals to carry out a trade of their choosing and be involved in desired activities that may affect the society at large. He stated “A person should be free to do as he likes in his own concerns; but he ought not to be free to do as he likes in acting for another, under the pretext that the affairs of another are his own affairs. The State, while it respects the liberty of each in what specially regards himself, is bound to maintain a vigilant control over his exercise of any power which it allows him to possess over other”. This leads us to understand democracy and governmental rule to be for the welfare of its citizens and the country as whole, something which the current legislations are not able to cater to.
Those in favour of the legalisation of betting or gambling, for that matter, are of the opinion that primacy should be given to individual autonomy and state intervention should be at the minimum. Those against it believe that immorality is a justifiable ground for restricting individual liberty, in order to maintain societal decorum. However, there is a need to disassociate morality from the act of betting. In order to regulate certain practices, it is necessary to acknowledge them as a prevalent act, instead of a moral or immoral act.
Betting and gambling are enumerated in List II of the Seventh Schedule in the Constitution of India, which makes it a state subject to be legislated upon. While Goa, Daman & Diu, Sikkim, and Nagaland are the only states where gambling activity can be said to persist albeit in a very limited way, Maharashtra and Delhi have the most stringent provisions regulating the activity.
Legalising Betting: Mechanisms and Impact
It is pertinent for the state governments to take cognisance of the effect legalising betting may have on the economy, apart from increasing revenue. It will invariably increase employment, allow transparency in the market and strike at the pervasive control the underworld has on the unregulated betting industry. Furthermore, regulating the industry would allow authorised agencies to identify and prevent instances of gambling by minors and gamblers who are identified as “problem-gamblers”.
In the Report, the Law Commission suggests a three-pronged mechanism to regulate gambling, namely:
(1) reform the existing gambling (lottery, horse racing) market;
(2) regulate illegal gambling; and
(3) introduce stringent and over-arching regulations.
Since betting in India primarily is done over telephones, wireless, broadcasting and other similar forms of communication, the Indian Parliament may choose to legislate on the same under Entry 31 of List I of the Seventh Schedule. Further, Parliament may also choose to enact a model law, which can then be adopted by the respective State Legislature.
Regulating betting and gambling can be a long process and will require amendments to be made to a series of state and central legislations, such as an amendment to the Foreign Exchange Management Act, 1999 and the Rules, as well as to the Foreign Direct Investment (FDI) Policy, to allow FDI into the sector and to prevent money laundering. Similarly, the Indian Contract Act, 1872, which does not recognise any contract where the consideration is unlawful, affects morality or is against public policy, and is in the nature of a wagering contract, will have to be amended to bring it into line with the change in law, as they may be detrimental to the interests of players and participants of gambling. The Indian Penal Code, 1869, The Income Tax Act, 1961, the Information Technology Act, 2000 and Rules thereunder, The Central Goods and Services Tax Act, 2017 will also see amendments to bring forth the legalisation.
Some pivotal aspects with regard to the infrastructure will also need to be established – for instance, gambling and betting should only be offered by Indian licensed operators who have obtained valid licences from the game licensing authority, there should be a limitation on the number of transactions a person can engage in along with a time period stipulation. The nature of stakes should be restricted to liquid consideration, linked to a PAN or Aadhaar card, and the betting amount should also be prescribed by law. Additionally, the Report suggests that 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.
The Report also recommended detailed safeguards for the employees of casinos, minors, internal control requirements for casinos, maintenance of accounts, audits, and the establishment of a council to look into and prevent ‘problem gambling’ and ‘gambling by minors’.
The advantages of a regulated gambling and betting industry is multi-fold. It will generate considerable revenue, employment, tourism, protect vulnerable sections of society and prevent any inconvenience caused by law enforcement authorities. It is pivotal, if not absolutely necessary, for State Governments to reassess their stance on betting and analyse whether morality lies in banning the activity or regulating it.
For further information, please contact:
Bharat Vasani, Partner, Cyril Amarchand Mangaldas
 Maryam Farooqui, “ICC World Cup 2019: India-Pakistan match garners viewership of 229 million”, Money Control, June 28, 2019. Available on https://www.moneycontrol.com/news/trends/sports-trends/icc-world-cup-2019-india-pakistan-match-garners-viewership-of-229-million-4149861.html
 Law Commission of India, Report No. 276 – Legal Framework: Gambling and Sports Betting Including in Cricket in India, Government of India, July 2018.
 Harsh V Pant, “We need not whine about India’s small defence budget”, Live Mint, July 10, 2019. Available on https://www.livemint.com/opinion/columns/opinion-india-s-non-debate-on-defence-1562750138136.html
 Soumalya Santikari, “Betting In Cricket: Stakes Skyrocket In India’s Dark Playgrounds This World Cup – Part I”, MoneyControl. Available on: https://www.moneycontrol.com/news/cricket/betting-in-cricket-stakes-skyrocket-in-indias-dark-playgrounds-this-world-cup-part-i-4096011.html
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 Regulating Sports Betting in India: FICCI available at:http://blog.ficci.com/sports-betting-india-faq/3708/2/.
 J.S. Mill, On Liberty and Utilitarianism (Bantom Classic, New York, 2008).
 Constitution of India, List II, Seventh Schedule.
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