Sports Gambling: A Case for Legalisation in India

Anand Swaroop Das & Poonam Motwani ((Students of B.A.LL.B (Hons.) 3rd year at National Law University Odisha)).

“There is a practice around today that causes a lot of problems, damages families, people lose their jobs, they get in debt. They do it in excess. It is called drinking. . . . Prohibition didn’t work for alcohol; it doesn’t work for gambling ((152 CONG. REC. H4978 (2006) (statement of Rep. Barney Frank).)).”

Gambling is an activity which traces back to the beginning of every human civilization, religion and culture. Sports, is also one such activity. However, the mixture of both in the recent times has not bided well for the integrity of sports. And it gets even dirtier when the players of the particular game are themselves involved in gambling. The ubiquitous industry of sports gambling in the contemporary era is forever expanding even during lean economic periods. Black’s Law Dictionary defines gambling as “the act of risking something of value for a chance to win a prize ((Bryan A. Garner, Black’s Law Dictionary, (8th ed. West Publishing Co.) 701, 2004)).” Sports’ gambling presents additional concerns which are beyond the normal gambling-related issues as they jeopardize the integrity of the sporting events and also promulgate addictive behaviours among young individuals. Gambling on sports outcomes, though has remained an age-old practice in many societies, its development has engulfed that of organized professional sports. The twentieth century witnessed the rapid growth of a plethora of professional and non-professional sporting events; coupled with that of wide coverage through newspapers and television. These conditions factored in enabling the people to place bets on many sporting outcomes all over the world. Some countries introducedlegislation aimed to regulate a growing industry, while some other countriescompletely outlawed sports gambling ((Fabián Enrique Moya, Statistical Methodology for Profitable Sports Gambling, (2012) 6)). This industry thrives because it does not depend on the market situation but on the government decisions taken by a particular country.

Lately, another aspect of sports gambling came to the forefront of the contemporary sports betting industry in the form of online gambling. The phenomenal increase in sports broadcasting has led to online sports gambling and wagering. Online gambling catered to a larger global audience and started offering bets on many events. The enhancement of flow of sports programming on a number of network cable channels, sports channels, TV sources etc have further escalated the practice of online gambling. A fierce competition between online betting sites is increasing and making sports more vulnerable to corruption. It has become increasingly easy to place bets any time of the day on any type of competition or discipline, from any part of the world. Online gambling has blossomed into a three billion dollar annual business. In fact some of the leading high technology companies – including Dell, Yahoo, Intel and Microsoft – show profits that have less to do with their businesses than with stock market speculation and interest from hefty bank accounts ((Nirod Kumar Palai, Sarojini Mishra, Kumar Das, Gambling v. State: A Study Of Problems And Prospects Of Gambling Industry In India Under Globalization Regime, XIV International Economic History Congress, Helsinki, Session 24 (2006).)). In the recent times, a contentious debate is raging on the whole gamut of sports gambling and its proposed legislation in India. However, the question remains as to whether sports gambling will be legalized, regulated or completely outlawed?

Sports Gambling and the Present Framework in India: An Overview

The various sports governing models in India are Ministry of Youth Affairs and Sports, National Sports Federation, Indian Olympic Association, State Olympic Association, Sports Authority of India, Board of Control for Cricket in India (regulates gambling in cricket) etc. Indian Olympic Association acts as an umbrella body under which the government bodies, sporting events etc take place. Sports bodies in India are by nature autonomous. The sport’s governing bodies of India are registered under the Societies Registration Act XXI of 1860. These bodies receive government aids in various forms like direct financial assistance (in case of NSFs) and indirect subsidies like tax benefits (in case of BCCI). In cricket, betting practices are included in the Anti-Corruption Code and banned bythe ICC rules for players and player support personnel ((ICC Anti-Corruption Code for Players and Player Support Personnel2.2, http://static.icccricket.yahoo.net/ugc/documents/DOC C26C9D9E63C44CBA392505B49890B5AF_1285831667097 391.pdf)). Betting practices like spot-fixing and match-fixing are included in the Anti-Corruption Code.

Indians love to gamble. Indian gambling market stands to gain a whopping $60 billion annually of which about 50% is illegally bet ((James Thompson, Betfair and William Hill target India, The Independent (27 October 2009).)). The worth of the industry is more than 2% of our current GDP. There is a good percent of people wagering on horse-racing and lottery but the primary revenue is generated by betting on the outcome of cricket matches, a sport which is considered a religion in India. The Federation of Indian Chambers of Commerce and Industry (FICCI) has been actively urging the Central government to legalise sports betting and estimates a mind boggling Rs. 12,000- 19,000 crores of revenue to the government through the Rs. 3,00,000 crores illegal sports betting market alone ((Jay Sayta, Time Ripe for Gambling Law reforms- is the Government Listening, (2013) available at http://glaws.in/2013/09/time-ripe-for-gambling-law-reforms-is-the-government-listening/ (last visited Jan 24, 2014).)). The economic crisis of the country can be effectively met with such a chunk of money. In one of its surveys, FICCI concluded that 74 per cent people believed that legalizing sports betting will help curb match fixing and 83 per cent of respondents said that regulating sports betting with proper laws is better than banning it ((Dwaipayan Ghosh, FICCI wants sports betting legalized in India, The Times of India (2013) available at http://articles.timesofindia.indiatimes.com/2013-06-26/news/40206377_1_ficci-survey-ficci-sports-committee-national-sports-development-bill (last visited Jan 24, 2014).)).Chris Fismer, a South African gaming industry analyst, wrote on the legalization of betting wherein he stated that criminalizing the behaviour does not keep people from gambling on sports ((TNN, India Should Legalize Gambling, TIIES India (Apr. 21, 2010), http://timesofindia.indiatimes.com/india/India-should-legalize-gambling/articleshow/5838036.cms. (last visited Jan 24, 2014).)). Gambling enjoys a legal position only in horse-racing, lottery and rummy.

The Socio-Economic Repercussions of Gambling on Society: An Analysis of the Pros and Cons

One moral opposition to gambling is the question of legitimacy when it comes to the form of entertainment. Unregulated gambling also increases family distress and rate of crimes. The social repercussions include negative impact on the family of the gambler i.e. spending less time with children and family, no work, personal bankruptcy etc. The eventual results of such activities are domestic violence, substance abuse, divorce, morbidity, premature mortality, suicide etc. Usually premature mortality results from substance abuse which is a direct consequence of gambling.  Neglecting children also leads to behavioral problems with them and also problems at school. Studies have found that problem gamblers face higher incidences of job loss, and lost productivity through non-attendance and lateness. People indulging in gambling also face numerous financial difficulties. The National Opinion Research Centre at the University of Chicago had conducted a survey which found that 20% of the pathological gamblers had filed for bankruptcy, compared with rates of 5.5% for low risk gamblers and 4.2% for non-gamblers.

Drug addiction, smoking, heavy drinking etc are also induced by gambling. An article by David P. Phillips published in the journal Suicide and Life Threatening Behavior claimed that gambling may be accompanied by an increase in suicides. In general, attempted suicides range between 17% and 24% of pathological gamblers ((M. N. Potenza, D. A. Fiellin, G. R. Heninger, B. J. Rounsaville, C. M. Mazure, Gambling: An Addictive Behavior with Health and Primary Care Implications. 17(9), J. Gen. Intern. Med, 721-732 (2002).)). Pathological gamblers resort to thievery, embezzlement, misappropriation, bad behavior, corruption and crimes to finance their playing. Asaccess to funds becomes limited, many resort to illegal activities to pay debts,appease bookmakers, maintain appearances, and of course, provide more money to gamble with ((K. Leiseur Social Impacts of Gambling, 7-13 (1987).)). A study of offenders on probation found that 4.5% were classed as problem gamblers ((Ricketts, Macaskill, Gambling As Emotion Management, (2000) 45)). The impact of gambling can include depression, stress-related illness, chronic or severe headaches, anxiety, moodiness, irritability, intestinal disorders, asthma, cognitive distortion, and cardiovascular disorders ((Grinols, E., D.B. Mustard, Business Profitability versus Social Profitability: Evaluating Industries with Externalities, the Case of Casinos, 22 Managerial and Decision Economics, 143-162 (2002).)). Physical health conditions which are caused by gambling are high blood pressure, ulcers, migraine headaches, intestinal problems, serious heart problems resulting from chronic stress ((Wenger, McKechnie, Wiebe, Methodology to accept the Social and Economical Impacts of Gambling, (1997), 158)). Problem gamblers also experience higher risks of alcohol, drug and tobacco abuse ((Stewart, S. H., Kushner, M. G. (2003), Recent research on the comorbidity of alcoholism and pathological gambling. Alcoholism: Clinical and Experimental Research, 27, 285-291)), as well as increased risk of mental health problems such as dysthymia, major depression, anti-social personality disorder, phobias, or anxiety ((Potenza, M. N., Fiellin, D. A., Heninger, G. R., Rounsaville, B. J. and Mazure, C. M. (2002), Gambling, J.  GEN. INTERN. MED, 17: 721–732)). Adolescents, whose parents are gamblers, have a greater probability of being anxious, having mood swings, insecurity etc.

Despite the counter-productive effects of gambling on the society, there are certain benefits associated with the same. In terms of entertainment pleasure, gambling helps people enjoy the time they spend in gambling. The revenue of gaming industries like hotels, restaurants, betting-houses etc increases and so does their net growth. Values of private and commercial property increases as gambling venues develop with time. The gaming industry allows for direct as well as indirect employment. There is an influx of people into this industry as wages are paid on hourly and annual basis. Gambling serves as a major tourism industry in some regions, pumping quite a huge chunk of money into the economy of the particular country. There is also a marked decrease in crime, policing and judiciary cost. Studies have proven that gamblers feel an increased sense of personal safety as a result of gaming venues. Public sectors, non-profit sectors and other charitable institutions benefit from gambling activities.

Sports Gambling in India: The Legal Aspect

The aspect of law is consistently connected and ubiquitously affects the conduct of the society. However, it is also relevant in ignoring certain relevant social facts and human tendencies in the wake of achieving an idealistic order governed by pure morality and not rationality.  In this wake, it becomes an indispensible requisite to examine the law relating to gambling in India so that a comprehensive view of both what the reality is and what measures are to be taken to add the essence of practicality to the system of governance can be measured. To borrow from the wordings of the 2nd US President John Adams, “we live in a world governed by laws not men. Those laws shape our lives, guide our conduct and define our relationship with the state. In the common law world, the evolution of law through precedent can change lives in profound ways. On a more prosaic, but more immediate, private law level, case laws shape everyone’s day-to-day lives and give pertinent insights into the law.”

The Public Gambling Act of 1867 is the primary legislation of the country. Under this old law, operating, assisting in operation, visiting a gambling house and being in possession of gambling devices is a crime. Even though the punishment prescribed under this Act is meager but still no betting person in India has ever been charged under this Act. The Constitution of India in the Seventh Schedule under the State List has made it clear that states have the right to make policies and legislate on ‘gambling and betting ((Entry 34, List II, Seventh Schedule, the Constitution of India)).’ To date most states have only made laws against gambling, while 13 states have legalized lottery, and 2 states (Goa and Sikkim) have legalized many other forms of gambling ((India Gambling Laws, Sports Betting, available at http://sportsbetting.net.in/gambling-laws/ (last visited Jan 24, 2014).)). A very pertinent example of internet gambling in India is the heavy Indian customer base of the UK based gambling company www.bet365.com.

One of the legal facets that have to be looked into is the prohibition limiting itself only to games of chance, i.e, the test being the determination of whether the dominant element is chance or skill ((Salman Waris, Online Gambling and Betting on cricket matches continues unabated, India law journal, available at  http://www.indialawjournal.com/volume2/issue_3/article_by_salman.html (last visited Jan 24, 2014).)). Thus, in the wake of undefined terminology “skill” by Indian legislation, the hope of interpreting the aforementioned lies in decisions of courts. It has been held by the Supreme Court of sIndia; in Dr. KR Lakshmanan v. State of Tamil Nadu ((Dr. KR Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226))that gaming is an act or practice of gambling on a game of chance. It is staking on chance where chance is the controlling factor. Furthermore, in the case of M.J. Sivani and Others v. State of Karnataka and Others ((M.J. Sivani and Others v. State of Karnataka and Others, 1995 6 SCC 289)), the Supreme Court held that when in a game the element of chance strongly preponderate, it cannot be the game of mere skill. However, it has been emphatically opined by Justice Mudgal ((Mudgal Panel Report, Times of India, available at http://timesofindia.indiatimes.com/sports/cricket/fixing-hits-ipl/news/Mudgal-panel-report-by-February-10/articleshow/28918978.cms (last visited Jan 24, 2014).))that these regulations are indeed “paradoxical”, whereby it is legal to bet on the sill of horses and jockeys, but at the same time betting on the skill of seasoned sportsmen is proscribed ((Betting law is paradoxical in India feels justice Mudgal, Times of India, available at http://articles.timesofindia.indiatimes.com/2013-10-12/news/42968188_1_justice-mudgal-sports-law-mukul-mudgal (last visited Jan 24, 2014).)).

Moreover, the spheres of Information technology Act, 2000 and Information Technology Act, 2011, prohibiting online gambling are imposed by the Union, conferring duty on the service providers to block internet gambling sites ((Supra note 23))and also providing for a very high liability for violation ((The Information Technology Act, 2000)). The Act also has extra territorial jurisdiction with regard to computer related offence committed in India ((Id. § 1(2) read with § 75)). Thus, in the U.S. cases of Missouri ex rel. Nixon v Interactive Gaming  & Communications Corp and  Minnestona v Granite Gate Resorts Inc, the court asserted jurisdiction based on the nature the nature of the ‘gambling operations’ web sited coupled with the intent to solicit business with residents of the other states.

Arguments Favouring the Legalization of Gambling in Indian Context

With the wheel of time, we have seen the changes generated in the organic body of law, as it seeks to adapt itself to the norms of the ever-moving society in which it functions. This however, isn’t without taking into account the plausible explanations of such adaptations. Thus, some of the reasons favouring the legalisation of sports gambling In India are as elucidated below:

  • The changed social perception of gambling – The subcontinent of India had recognized the leisure-providing aspects of gambling in the era of Vedic-Ages classifying it as one of the “Vyasana” ((P. V. Kane, Institute The Two Epics, 47 No. 1/4 Annals of the Bhandarkar Oriental Research Institute,  11-58, 12 (1966).))and also saw the attestation of an immoral connotation to the same in the epic Mahabharata ((Nalini Pandit, Ambedkar and the Bhagwat Gita, EPW, Vol. 27, No. 20/21, 1063-1065, 1063 (1992).)), whereby the depiction of Dharamraj Yudhishthira betting all his possessions including his wife due to the high generated by this activity ((Supra note 11)). This common folklore serving a deterrent against excess leisure also cemented an emphatic fear and loathsomeness in the minds of people categorising it as a vice and the Styx ((In Greek mythology, the River Styx forms the boundary and the passageway to hell. See Encyclopedia Mythica available at http://www.pantheon.org/articles/s/styx_river.html (last visited on Jan 24, 2014).))boundering ruin ((Durga Bhagvat, University Folk: Tales of Central India, Vol. 31, No. 2, Asian Folklore Studies, 1-89, 35 (1972).)). However, the perception of depicting it as a vice has undergone transformation with its being accepted as a socially acceptable form of leisure activity. It is to be understood that most people do not see betting as quite distinguished from using it for other leisure activities that require the shedding of money such as playing console games or renting a movie ((D. McGraw, The National Betting U.S. News & World Report, 50 (1997).)). This trend has also crept into the psychological patterns of the masses with this idea being positively received by the citizens ((Saving Cricket: A Proposal For The Legalization Of Gambling In  India To Regulate Corrupt Betting Practices In Cricket, 26 Emory Int’l L. Rev. 365, 370 (2012).)), especially since the 2010 – match fixing scandal ((Gaurav Gupta, Six major match-fixing scandals, TNN, available at http://articles.timesofindia.indiatimes.com/2012-05-16/top-stories/31725742_1_life-ban-indian-bookie-hansie-cronje (last visited on Jan. 24, 2014).)). Among the prevalent instances of inferring a widespread support and acceptance for the same lie in the writing of articles encouraging legalising sports gambling ((India Should Legalize Gambling, TIIES INDIA (Apr. 21, 2010), available at http://timesofindia.indiatimes.com/india/India-should-legalize-gambling/articleshow/5838036.cms (last visited on Jan 24, 2014).)), interviews generating much desired support in the favour of transparency ((Illegal Cricket Betting Makes Millions for Indian Gangs, BBC NEWS (Sept. 6, 2010, 8:31 AM), available at http:/www.bbc.co.uk/news/world-south-asia-I 1200235 (last visited on Jan 24, 2014).))through the tool of regulation and favourable results to the tune of 73% in polls conducted ((Should Gambling in India Be Legalized?,TIMES INDIA (Apr. 21, 2010), available at http://timesofindia.indiatimes.com/debateshow/5839360.cms. (last visited on Jan 24, 2014).)). Also, , the endorsement from the Government of India through State run Lotteries ((State Lotteries Manual, Comptroller and Auditor General, http://saiindia.gov.in/english/home/Public_Folder/Professional_Practices_Group/State_Local_Manual/KERALA/THE%20PRINCIPAL%20ACCOUNTANT%20GENERAL%20(C&CA)%20KERALA/State%20Lotteries%20Manual/State%20Lotteries%20Manual.pdf  ))brings forth the Government’s acquiescence to the fact that regulated gambling is not wrong. Hence, what is required at this juncture is to look for ways to work around whatever remains of the stigmatisation of sports gambling ((Government Look Into Possibility Of Legalizing Sports Gambling , The Economic Times (2010), available at http://economictimes.indiatimes.com/news/news-by-industry/et-cetera/Govt-look-into-possibility-oflegalizing-sports-gambling/articleshow/6495975.cms. (last visited on Jan. 24, 2014).)).
  • Sports’ gambling is legally impractical to eliminate – Over the heralds of law being the ultimate coercive and regulatory instrument ((K Sarvaria, Ra Nelson, Indian Penal Code, 676 (2008).)), one often forgets the fact that law cannot seek to do the impossible. Thus, the equation to ensemble the best results are to work on given facts. Here, the prevalence of sports gambling being an established fact, it can be stated that the adopted tool of outright banning has only encouraged illegal and unscrupulous activities ((Lori K. Miller & Cathryn L. Claussen, Online Sports Gambling- Regulation or Prohibition?11 J. Leg. Aspects Sport 99, 113(2001).)).  This, coupled with the inadequacy of punishments to deter people from this illegality ((L.Dileep Premachandran & Owen Gibson, India Looks To Legalize Betting on Sport After Spot-Fixing Scandal (Sept. 5, 2010), available at http://www.guardian.co.uk/sport/2010/sep/05/pakistan-cricketbetting-scandal -cricket. (last visited on Jan. 24, 2014).)), manifests itself as a failed system to contain the emerging arena of betting on sports.
  • It is to be understood that the application of an enforced mechanism in an environment where prohibition will not work is a futile exercise. The tool of prohibition has just driven the activities underground and has displayed no efficiency in either combating them or reducing the instances significantly.  Thus, the answer to this situation can be located in the quote: “Prohibition promotes unlawful activity, regulation removes it ((Frank Miller, Kailus, Note: Do not bet on unilateral prohibition of Internet gambling to eliminate cyber-casinos, 3 Univ. of Illinois Law Review,  1045-1081(1999).)).”
  • Thus, regulation of sports gambling would not only bring this Rs, 300,000 crore industry under the wing of the government rather than that of the underworld lords ((Virgil W. Peterson, Gambling: Should it be Legalized, available at http://www.heinonline.org/HOL/Page?handle=hein.beal/zahy0001&div=4&collection=beal&set_as_cursor=0&men_tab=srchresults&terms=legalize|gambling&type=matchall#13 (last visited on Jan. 28 ,2014).)), but will also ensure the checking of laundering of money for other hazardous activities such as terrorism and drug marketing.  It is to be understood that prohibition couldn’t stop the masses from drinking, resultantly only making the alcohol unsafe due to lack of regulation. Thus, it makes sense to legalize gambling and regulate it.
  • Justification from a social perspective– Gambling can be considered a harmless form of entertainment which acts as a recreational outlet for people. Gambling can be socially engaging and exciting, suggests Australia’s Mental Health Foundation (1998). Within this charged environment, individuals become part of a world away from the burden and drudgery of their daily routine ((Patrick Basham & Karen White, Gambling with Our Future? The Costs and Benefits of Legalized Gambling, Fraser Institute Digital Publication 55(2002).)). For others, gambling is stimulating due to the challenge of estimating potential wins and losses, especially with sports betting and horse racing ((Id. 56.)), hence boosting self-esteem.
  • Potential taxable resource benefits– The revenues generated by the gambling sector have always been in massive magnitudes, with the revenues amounting to 1% of G.D.P in US, UK and European Commission. Assuming the application of a proportionate rate to India, the revenues generated would be to the tune of Rs. 62,000 crores and hence, generating a tax of Rs. 7,594 crore under the Amnesty Voluntary Disclosure of Income Scheme in 1997-98, even after discounting of Inflation. Thus, when the decade has seen the economy of India slipping away into demise with the debt trap mounting ((The Emerging Debt trap, available at http://www.thehindu.com/opinion/editorial/the-emerging-debt-trap/article4874168.ece (last visited on Jan. 26 , 2014).))and the Indian currency losing its hold ((Rupee Fall Causes Examined, available at http://www.thehindu.com/todays-paper/tp-miscellaneous/rupee-fall-causes-examined/article5118785.ece (last visited Jan. 28, 2014).)).  That along with the limited resources and escalating needs for spending demands the harbouring of an additional source of revenue. The inflated frenzy with regards to sports in India (especially Cricket) contributes to the prosperous industry of gambling in sports. This, if taxed, could bring about the much needed financial resources, and the needed multiplier benefits ((Supra note 10, at 118.)).
  • Curtailing relocation of gambling businesses to foreign countries– The modern method of online gambling provides a path for the citizens choosing to bet over the outcomes of sports events to gamble the money via countries that proved havens for gambling proprietors ((Supra note 11)). This leads to a drain of wealth and eliminated source of revenue that would otherwise tremendously benefit the Indian economy.
  • Employment Opportunities– The tremendous industry of sports gambling once legalized will put forth a multitude of job opportunities to the qualified unemployed youth of the country and will contribute positively to the demographic dividend.
  • Tourism and FDI – The frosting of popular sports in India (especially cricket) has the potential to attract both tourists and patrons from outside the country.  The injection of new wealth into the system will provide a net benefit to the economy ((Supra note 49, at 71)).
  • Integrity of Sports not harmed – One of the popular notions that are forwarded as arguments against the legalisation of betting is the possible damage that may be caused to the integrity and the popularity of sports. However, this remains unproved by the factual circumstances following the various scams seen in the sports ((Supra note 17, at 366)), which could not bring about demise in the popularity of the sport. These aberrations on the part of players have neither escalated the corruption of the sport nor destroyed its integrity ((Supra note 10 at 120.)).

Recommendations: The Way Ahead

Within the political boundaries of India, gambling can be construed as the “Payment of a price for a chance to win a prize ((Lakshmanan v. State of Tamil Nadu, 1 S.C.R. 395(1996).)).”  The same has been legally prohibited in India, socially stigmatised and blended with negative connotations. However, this concoction hasn’t helped to control this event ((Supra note 46.))and there have been generation of a counter-intuitive approach to bring it within the purview of law for better regulation ((Espn Cricinfo, Legalize Sports Betting in India, Says Delhi Court(Sept. 1, 2010),   available at http://www.espncricinfo.com/india/content/story/475479.html. (last visited Jan. 20, 2014).)). Thus the issue of creating a regulatory frame-work has to be approached with an open-mind and the subtext that it will effectively help to keep a better record and impose sanctions against people involved ((Supra note 37 at 398)). Thus, circumscribed within this chapter lies the model of regulation based on the legislations enacted by U.K. ((Gambling Act of 2005, §§19 (U.K.).))and South Africa ((South Africa’s National Gambling  Act of 2004 (South Africa).))as they have emerged in a better position ((Racing And Betting, Nat’l Gambling Board,  available at http://wivw.ngb.org.za/home.asp.pid=59 (lastvisited Feb. 21, 2012).))and have brought about more effective mechanisms post their legalising sports gambling ((Icc Anti-Corruption Code For Players And Player Support Personnel, available at http://static.icccricket. yahoo.net/ugc/documents/DOC 26C9D9E63C44CBA392505B49890B5AF_1285831667097 391.pdf)).

Thus, the requirement of the hour is to either amend and overhaul the Public Gambling Act or to enact a new legislation replacing it, in order to bring about modernisation in the current structure and to consolidate the law relating to sports betting into a more comprehensive, effective and flexible national scheme ((Supra note 37, at 391.)). This enactment can also mobilise the existing structures of national and international sports regulatory authorities for the effectuation its objectives, to prevent, deter and sanction corrupt betting practices ((Id.))and to ensure that gambling is conducted in a fair and open way ((Gambling Act of 2005, § 191(b) (U.K.).)). The first pertinent step of the same being the establishment of legal definitions of legal and illegal gambling ((Legal betting practices refer to betting and gambling on the likelihood of the occurrence of certain events in a game or sport or the placing of a wager. see Gambling Act of 2005, §§ 9(1)(b)-(c)(U.K.) ; National Gambling Act 7 of 2004 §§ 3 (South Africa).))to achieve the dual purpose of differentiation which will form the foundation and pulling out those arenas of betting that occur regardless of criminalisation from the slot ((Bbc News, Illegal Cricket Betting Makes Millions For Indian Gangs, (Sept. 6, 2010), available at http:/www.bbc.co.uk/news/world-south-asia-I 1200235; Tom Wright, India Profits from Pakistan Cricket Scam, (Aug. 30, 2010), available at  http://blogs.wsj.com/indiarealtime/2010/08/30/india-profits-from-pakistan-cricket-scam (last visited Jan. 29, 2014).)). Furthermore, the illegal practices should be classified under a separate head including but not limited to any attempt to interfere with the events to which the betting practices relate such as spot-fixing and match-fixing ((Gambling Act of 2005, c. 19, §42 (U.K.).)). The second step would be developing an executive structure to concretely manifest the act. The potential suggestions include the setting up of Gambling Commissions at both the centre and State levels, consisting of members of the relevant Ministry personnel and experts ((Dep’t Sports, About Department, available at http://yas.nic.in/indexI.asp’langid=1&linkid=10 (last visited Mar. 19, 2012).))for collecting information, monitoring and regulating betting. Furthermore, a Council should be established for assisting in policy formulation and a body for targeting and eliminating corruption.  Once these bodies are established, a system of licensing has to be brought in vogue ((National Gambling Act 7 of 2004 § 37 (South Africa) Gambling Act, of 2005, c. 19, § 65 (U.K.).)), allowing both individuals and syndicates ((Gambling Act of 2005, c. 19, § 127, § 65(2), § 93 (U.K.).))to present their information and legally venture the arena of sports betting. This will serve the dual purpose of pre-assessing risk ((Gambling Act of 2005, c. 19, § 69 (U.K.).))and also tracking them down in the possibility of commission of a crime. Additionally, in the spirit of Federalism and also in the apparent necessity of it, the power to issue and revoke licenses should be conferred on the respective States and Union Territories ((National Gambling Act 7 of 2004 § 30 (South Africa).)).

Cascading to the part about penalisation, it is imperative that the punishments be updated to manifest a deterrent effect as the punishments in the present governing act can be clearly connoted as inadequate. To incentivise legal operation in this field the fines can be up to the amount earned from illicit betting ((ICC ANTI-CORRUPTION CODE, supra note 39, § 6.2.))and may also include hefty fines and a term in prison ((National Gambling Act 7 of 2004 § 83 (South Africa).)). Moreover, an atmosphere promoting the employment of prudence and responsibility in gambling via awareness campaigns would be beneficial in bringing home the point that sports betting is a mere game.

In the view of the successful regulatory models established by United Kingdom and South Africa that have triumphantly seen the decrease in cons of sports gambling and the responsible involvement of citizens in this activity ((Smith G.J., Pools, parlays, and point spreads: A sociological consideration of the legalization of sports gambling, 7(3) Socio. of Sport Journ., 271-286(1990).)), the following suggestive pointers are to be considered :-

1)    The setting up of a two-tier regulatory model with the Government Legislations and the National Sports Regulatory Bodies operating in tandem to regulate the sports gambling industry.

2)    The vetting of financial records and setting entry-check gates similar to the sports of derby allows combating the social evil of bankruptcy.  Additionally, the setting up of sophisticated economic barriers like the need of credit cards along with a particular bank balance will cater to checking youngsters from mindlessly jumping in this field ((National Opinion Research Centre (NORC), Gambling impact and behavior study: Report to the National Gambling Impact Study Commission. National Opinion Research Center at the University of Chicago(1999), available at http://www.norc.uchicago.edu/new/gamble.html (last visited Jan. 20, 2014))).

3)    The following standards set up by international bodies such as ICC ((Supra note 13, at 395)), along with stringent penalties for  individual sport related gambling offences ((National Gambling Impact Study Commission (NGISC) (1999). Final Report. Washington D.C.: NGISC., available at http://www.ngisc.gov/reports/finrpt.html (last visited July 16, 2001).)), are enough to effectively deter this industry from corrupting the integrity of sports.

4)    In accordance with the axioms of decentralisation, the states should be allowed to decide on the question of legalising sports gambling with regards to their specific demographic, financial and developmental situation. This right also has been specifically conferred to the states by the Constitution by providing Entry 34(Betting and Gambling) in the state List ((List II, Schedule XI, The Constitution of India.)).

Conclusion

The prospect of gambling in the modern parlance follows the growing trend of marketing consumer utilities delivering activates that combine the trinity of risk, excitement and chance.  In such a situation the hype from betting on the already popular sports events has emerged as a recreational outlet similar to leisure products and services, providing the adrenaline rush for escaping the mundane life ((Koerner, B.I, Extreeeme. U.S. News & World Report,122(25), 50-60)).  In the subcontinent of India, however, archaic notions about the immorality of such a sport still govern the legal setting of the land (even when the Mahabharata does not prohibit such and act). The connotation of this is similar to the prohibition on liquor in the state of Gujarat due to the preaching of Mahatma Gandhi. Thus, it can be said that the government instead of reaping revenue benefits from this activity is instead being fraught with the combating of this industry, the cons of which have over the years been easily nullified or can be nullified through regulation.

The aforementioned regulations should be implemented with immediate effect to protect not only the integrity of sports but also its spirit in general. The nature of gambling has been secretive and it has been observed that the business has flourished when it was completely banned. The legitimacy of sports will be upheld if such regulations are enforced. Hence, it is very apparent that though the country seems to cater to the needs of certain forms of gambling include the activities akin to gambling like share speculation and foreign currency speculation through the means of regulation,  it seems to adopt a double standard for sports gambling. However, it must be seen that the solution here demands that such betting be regulated for the betterment of the State and the Society, as we can never bet on the future of sports gambling in India, or can we?

International Trade in Gambling Services

Parth Chandra ((Hidayatullah National Law University, Raipur))and Sajid Sheikh ((National Law University, Jodhpur)).

In World Trade Organisation (WTO) jurisprudence, ‘gambling & betting services’ includes any activity involving the placing of bet or wager, that is, instances in which a person risks something of value (generally money) on the outcome of an uncertain event ((US Gambling, panel report, para. 445)). In this view, a bet or a wager can be made with respect to casino- type games, lotteries & sporting events, irrespective of how these services are supplied. Thus, gambling services should be considered to cover any service which involves wagering a stake with monetary value in uncertain events driven at least partially by chance, including lotteries, casino and betting transactions.  This definition thus covers, without limitation, online and offline market sectors, both charitable & commercial –run lotteries, betting services (including horse & dog racing, event betting & pool competitions); casino games, including table games, slot machines, bingo games, etc; services related to gambling machines that can be placed in locations other than licensed casinos and media gambling services. In this research paper the focus would be specific to online gaming industry in International Trade law. Gambling through Internet is the largest sector in games of chance. Some gambling internet sites require the downloading of a computer programme on the hard disk in order to play. Others use JAVA applets to run through the World Wide Browser, while others use all HTML and do not require any downloading.  It is estimated that in 2009 more than 33% of online gaming concerned Internet Casinos, while 25% concerned poker rooms and 14% gambling sites ((See a presentation by Williams Robert & Robert Wood, University of Lethbridge, Alberta, at the Alberta Gaming Research Institute Annual Conference held on 27th Mar. 2009, available at <http//.gaming.uleth.ca/agri_downloads/4455/Williams_AGRI_Conference_2009.ppt>)).  As to physical locations of servers used for online gambling, it seems that Gibraltar, the Kahnawake Mohawk Territory in Canada, Malta, the United Kingdom, and Alderney represent today top 5 jurisdictions for Internet gambling. With gambling services national regulation of cross-border gambling services has also to be analysed to check the legality of gambling services in different jurisdictions of the World. Although this research paper focuses primarily on the international perspective of gambling services, it is not without importance to assess the national legal framework attached in different jurisdictions to cross border gambling transactions which are now facilitated by technology GATS has been playing a major role in promoting trade in service industry. Even gambling services has been regulated by GATS in market access and schedule of specific commitments.

National Regulation of Cross-Border Gambling Services

In most jurisdictions, gambling is considered problematic activity, which bears special societal concerns. Thus many legislators have strived to control & limit the ‘traditional games of chance as much as possible and prevent them from going online. That is the case in Saudi Arabia, for instance, where the government has chosen to prohibit gambling internet services and users blocking programmes to enforce prohibition. In United States, too, gambling online is restrictive inter alia by a federal act of 2006. Such jurisdictions were called ‘totally prohibitive’ ((See Eva Schriever, ‘Conflict & Coordination between Diverse Regulatory Environments’ in Cross-Border Gambling on the Internet: Challenging National & International Law, research conducted by the Swiss Institute of Comparative Law , Schutless, 200)).

Indian Perspective: Legality in Gaming & Gambling Services

Till now India does not have its own dedicated online gaming and gambling laws. This has created an atmosphere of uncertainty and fear among the online gaming entrepreneurs in India. This is also of the reason why very few players have entered into online gaming area. For instance online forex trading sites like hotforex.com & iforex.com were neither banned nor allowed by Indian laws until a circular was issued by RBI on 17th September 2013 ((RBI/2013-14/265 A.P (DIR Series) Circular No. 46)). In India online poker gaming services is still a grey area and there are no specific laws to state whether they are legal or illegal. However the scenario is fast changing in a limited dimension after few judgements of High Courts of India protecting “Games of Skills” from criminal actions. Very recently on 7th January 2014 the Karnataka High Court in one of its rulings held that playing “Rummy” online is not a criminal offence as it involved “Application of Skills”. ((http://perry4law.org/onlinegamingandgambling/wp-content/uploads/2014/01/Kirana-S-v.-State-of-Karnataka-Criminal-Petition-No.-76482013.pdf))In fact another related matter is pending before Supreme Court and thus that ruling will decide the faith of online gaming industry in India. However one thing is quite certain and clear that unlike India’s counter parts India has not allowed cross border gaming or gambling services and accordingly it has placed its restrictions in its Schedule of Commitments under WTO.

Legality in Canada & USA: Gambling Services

Part VII of the Canadian Criminal Code makes all activities relating to operating or acting in support of a commercial betting enterprise is an offence, unless it is an enterprise licensed by a provincial government (Sec 207 (1) (a) of the code.) A criminal prosecution based on provisions of section 202 of the code was initiated in 2001 against an Antiguan based online operator that was offering bets to Canadian residents ((R vs. Starnet Communications International Inc., 17 Aug 2001, Vancouver 125795)).

In United States, gambling transactions are subject to highly restrictive regulations both at state and federal laws. The situation of online gambling was clarified in 2006 when the Unlawful Gambling Enforcement Act was adopted. While the Act does not expressly prohibit Internet Gambling it focuses on payment methods used to fund internet gambling to fulfil its goal since it prohibits the acceptance of any payment instrument for unlawful internet gambling.

In other jurisdictions gambling is allowed through licensing & other regulatory methods such as Australia, Switzerland & some European nations have adopted regulatory policy rather than keeping a blanket ban on online gambling.

GATS: Supply of Gambling Services  

Under GATS supply of services are pursuant to Article I: 2. they are as follows:

(A)       Cross Border Trade – MODE 1

(B)       Consumption Abroad – MODE 2

(C)       Commercial Presence – MODE 3

(D)       Presence of Natural Persons – MODE 4

In this paper the main stress is on Cross Border Supply as the research paper primarily focuses on online gambling industry.

In Cross Border Trade a user in member state receives services from another member state through its telecommunications or portal infrastructure.  Under cross border trade market access and national treatment which is covered in GATS is unconditional in nature. A member state under schedule of specific commitment has allowed another member state unrestricted entry in a particular sector. Then the member state is bound by the principles of national treatment and market access. The member states can only resort to inconsistent measures if there are no alternative measures available in exceptions under Article XIV under the head of public morality. The most famous case on Gambling services which cannot be ignored while talking about Gambling services is US-GAMBLING which will be dealt in this paper in detail and exceptions to it will also be dealt.

MARKET ACCESS

The market access provisions laid down in Article XVI, covers six types of restrictions that must be maintained in absence of limitations. The restrictions relate to:-

  • The number of service suppliers
  • The value of service transactions or assets
  • The number of operations or quantity of output
  • The number of natural persons supplying a service
  • The type of legal entity or joint venture
  • The participation of foreign capital

National Treatment (Article XVII)

It implies that the absence of all discriminatory measures that may modify the conditions of competition to the detriment of foreign services or service suppliers. The national treatment obligation applies regardless of whether or not foreign services & supplies are treated in a formally identical way to their national counterpart. This article is concerned that there are equal opportunities to compete.

US-GAMBLING CASE: A DETAILED ANALYSIS

The United States started  cracking  down  on foreign-based internet  betting parlours  in 1998, when  federal  prosecutors charged  21 U.S. citizens connected   to  offshore   internet   gambling   with  violations   of  the  Wire  Act (Hansen  2006). Among them was Jay Cohen, an American citizen and former stock trader who had been  operating  the Antigua-based  World Sports Exchange   (which   had   10,000  customers   that   year)   (Kanigher   2003). Twenty  of  the  indicted   persons   entered   guilty  pleas,   had   their  cases dropped, or remained  outside  the United States as fugitives, but Cohen re- turned  to the United States to contest  his case in court (Brunker  2001). He lost in 2000 and  was sentenced to 21 months  in prison  and  fined $5,000, becoming  the first person  convicted  in the  United  States for operating  an offshore internet gambling website (Hansen  2006). He outlined  his case  in a memo  sent  to the  government of Antigua, and  Antigua’s prime minister  hired  Mendel  to  file suit  against  the  United  States  at  the  WTO. In March 2003, Antigua initiated the dispute  resolution  process  of the WTO to challenge  the  United  States’ prohibition on  the  cross-border  supply  of online gambling services.   A Dispute  Panel (“Panel”), formed in June 2003, determined that the United States had made a commitment  to free trade in online  gambling  services  in GATS Section 10.D, “Other  Recreational  Services, Excluding Sporting.”    The Panel found  that three  U.S. federal  laws, including  the Wire Act, contravened this commitment  (the other  two were the  Travel Act, 18 U.S.C. §  1952, and  the  Illegal Gambling  Business  Act (IGBA), 18 U.S.C. §  1955).   State laws in Louisiana,  Massachusetts,  South Dakota, and Utah were also found to obstruct free trade in online gambling services.    The  Panel  determined that  the  cumulative  effect of these  laws was  inconsistent  with  the  United  States’ commitments  under  GATS, and made  a confidential  ruling in favour of Antigua in March 2004.  The Panel’s report was released publicly in November 2004 after unsuccessful negotiations between the parties.

In January 2005, the United States appealed this ruling to the WTO’s Appellate Body   (“Body”). Antigua filed a cross-appeal shortly thereafter, and both countries made oral arguments  before  the  Body.   In April 2005, the Body issued a report that generally upheld the Panel’s findings.  It affirmed that the United States had committed  to free trade in online  gambling  services  and  ruled  that  the  three  federal  laws  violated  these  commitments (although  it did not refer to other  state and  federal  laws that Antigua had sought  to include).

In January 2005, the United States appealed this ruling to the WTO’s Appellate Body (“Body”). Antigua filed a cross-appeal shortly thereafter, and both countries made oral arguments before the Body.   In April 2005, the Body issued a report that generally upheld the Panel’s findings.  It affirmed that the United States had committed  to free trade in online  gambling  services  and  ruled  that  the  three  federal  laws  violated  these  commitments (although  it did not refer to other  state and  federal  laws that Antigua had sought  to include).  “chapeau”  condition  that  regulations  not  discriminate  between countries, noting  that  some  U.S. companies are  allowed  to offer internet  gambling services by accepting  online wagers on horseracing. In May 2007, the  United  States responded by invoking  procedures under GATS Article XXI to modify its schedule  of commitments,  specifically excluding  online  gambling  from its recreational  services commitments.

Consequences of Such Act: Retaliation

The WTO generally grants aggrieved countries  the right to suspend concessions and other obligations  when  partners  violate their trade commitments, but  these  remedies  are  usually  narrow,  specific  adjustments   to  bilateral trade,  aimed  at prohibiting  an amount  of offending-country exports  equal in value to the damage  caused  by the offense (often through  the imposition of ad valorem tariffs) (Chang 2004). In Article 22.3 of its Dispute Settlement Understanding, the WTO states that suspensions should be confined to the same sector where the violation occurred if possible (WTO n.d.). However, when  no same-sector  retaliation options  would  provide  adequate compensation,  the  WTO has  been  willing to authorize  cross-retaliation. Antigua successfully argued that raising duties on U.S. services imports would harm its economy without significantly affecting the United States.  About 49 per- cent  of Antigua’s total goods  and  services  imports  come  from the  United States,  but  this  amounts  to  less  than  0.02  percent   of  total  U.S. exports. No country has actually suspended IP rights in accordance with a WTO ruling, so the online gambling dispute is in uncharted territory.  Antigua could ignore U.S. copyrights on software, movies, and music owned by U.S. companies, and sell up to $21 million worth of these media annually in domes- tic markets. Antigua could also grant compulsory   licenses and produce U.S.-patented products such as pharmaceuticals.  However,  while it is inexpensive  to  reproduce most  copyrighted materials,  many  patented goods need  to be  manufactured, and  Antigua’s potential  gains  from patent  suspension  are limited by its lack of capacity  to produce goods  such as pharmaceuticals.   And getting rid of trademarks,  which identify the producer of a product  and  inform  consumers where  to  seek  recourse  if the  product fails, could  erode  the  quality  and  safety  of  consumer   goods.

Conclusion

The Antigua-United States online  gambling  dispute  resulted  from a combination  of U.S. legislative processes  that struggled  to balance  competing  interests  and  U.S. services  trade  commitments  made  in a sector  that  developed  unexpectedly.  As the online gambling industry grew, U.S. laws governing online gambling were stuck in a state of ambiguity, and in the eyes of the WTO the United States failed to resolve this ambiguity in a way that complied with its trade commitments. But suspending IP rights is a thorny means of retaliation.  Antigua set a precedent that provides  small countries  with useful leverage in trade disputes;  but the difficulties of implementation and  the  harm  done  to Antigua’s reputation might overwhelm  and outlast the economic  benefits. The spirit of the GATS would be defeated if the member nations refuse to act on its market commitments. Under WTO GATS a member nation in has to act in less inconsistent manner possible to trade when the other member nation refuses to act on its market access commitments. If there is no less inconsistent measure available then the member nation can resort to inconsistent measure or retaliatory measure. Similarly in US-Gambling after USA failed to comply even with the panel’s report Antigua was left was no choice other than to adopt retaliatory measures which it did by suspending the IP rights in relation to USA which could not be suspended due to TRIPS obligation. US-Gambling case is a landmark ruling by the panel as it has cleared the way for many such gambling trade services across the world.

References

  1. NEIL MUNIN, LEGAL GUIDE TO GATS, 140 (Kluwer Law International , 2010).
  2. Appellate body report, US-Gambling, United States – Measures Affecting The Cross-Border Supply Of Gambling And Betting Services, WT/DS285/AB/R, 10 November 2004
  3. KRAJEWSKI & ENGELKE, WTO-TRADE IN SERVICES, 412 (Martinus Nijhoff Publisher, Vol 6, 2008).
  4. Williams Robert & Robert Wood, University of Lethbridge, Alberta, at the Alberta Gaming Research Institute Annual Conference held on 27th Mar. 2009, available at <http//.gaming.uleth.ca/agri_downloads/4455/Williams_AGRI_Conference_2009.ppt
  5. Black’s Law Dictionary, (West Group Publishers 7th ed, 2002).
  6. Concise Oxford English Dictionary, (Oxford University Press, 10th ed, 1999).

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  1. www.westlawindia.com
  2. www.manupatra.com
  3. www.wto.org