A Big Relief From The Silicon Valley Of India For Fantasy League Players

Introduction:

On October, 2021, the Karnataka Government through an amendment in Karnataka Police Act, 1963 banned and prohibited the operations of online gaming with stake in the State, thus it leading to big blow to startups and other established players in fantasy players. Through the legislation, the State government following the lines of Assam, Orissa, Telangana, Andhra Pradesh, Tamil Nadu, and Kerala, who had passed similar legislation before, banned gaming, betting and gambling through cyberspace and also went ahead in imposing punishment for those violating the said provision.

Through the amendment, though the state government tried to differentiate the “game of chance” and “game of skill” but ended up completely prohibiting any game where there is element of risk of losing money; thus over reaching the various judgments of Hon’ble Supreme Court of India and High Courts across the country, which has allowed the game of skill and had held that any law prohibiting online gaming as “excessive and arbitrary”.

Summarising the judgment:

A series of writ petitions were filed by various association and entities namelu All-India Gaming Federation, Federation of Indian Fantasy Sports, Mobile Premier League, Games24x7, A23, Junglee Games, Gameskraft, and Pacific Games, challenging and questioning the legality of provisions of Karnataka Police (Amendment) Act, 2021.

The Hon’ble High Court of Karnataka after elaborately hearing all the petitioners in the writ petitions and the state government passed a detailed judgment allowing all the writ petition; thus leading to:

  1. Sections 2, 3, 6, 8, and 9 of the Karnataka Police (Amendment Act 2021) were ruled to be ultra vires of the Indian Constitution and were therefore struck down.
  2. The decision does not prevent any new legislation controlling internet gambling in India, especially “Betting and Gambling,” in compliance with the Constitution.
  3. A writ of mandamus was issued to prevent the respondents from interfering with the operations of online gambling companies.

This judgment followed recent favourable rulings by High Courts  of Madras, Kerala, Punjab, Haryana, Rajasthan, and Bombay, which recognised fantasy sports as skill-based activities and a legitimate economic activity protected under Article 19(1)(g) of the Indian Constitution.

The High Court of Karnataka overturned specific amendment clauses on three grounds:

  • Online games are not considered gambling just because they are played on the internet.
  • There is a distinction between game of skill and game of chance.
  • Before implementing the amendment, no study was conducted to understand the negative impacts of online gaming

The challenged legislative action, in the considered opinion of High Court of Karnataka, contradicts the norm of proportionality and is far excessive in character, and so violates Article 14 of the Constitution on the ground of evident arbitrariness.

The petitioners cited various cases substantiating the game of skill as Constitutional. The Supreme Court ruled in two key judgments, State of Bombay v RMD Chamarbaugwala[1] and RMD Chamarbaugwala v Union of India[2], that tournaments requiring significant skill were not gambling activities. Such competitions were considered economic activities, and their protection was guaranteed by article 19(1)(g) of the constitution.  In State of AP v K Satyanarayna[3], the Supreme Court declared rummy to be a skill game since it required great expertise in keeping and discarding cards. The Supreme Court developed the preponderance test in this judgement, stating that rummy was “primarily and essentially a game of skill.”

Keeping this in mind the Karnataka High Court opined that,

“The games of chance do not enjoy any constitutional protection since they constitute as criminal acts. However, games of skill by their very nature stand on a different footing.”

Concluding on this note the Hon’ble High Court of Karnataka ruled that online gaming activities, whether with or without stakes, do not constitute “betting and gambling” as long as they primarily require skill, judgement, or knowledge.

 

Author: Tanya Sinha – an intern at Khurana & Khurana, Advocates and IP Attorney,  in case of any queries please contact/write back to us via email vidushi@khuranaandkhurana.com.

References:

[1] AIR 1957 SC 699

[2] AIR 1957 SC 628

[3] AIR 1968 SC 825

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