Why Karnataka High Court Struck Down Ban On Online Gaming

Karnataka High Court strikes down the provision which banned online gambling and betting.

A croupier arranges gaming chips on a card table at Aspers Casino at Westfield Stratford City Mall in London, U.K. (Photographer: Simon Dawson/Bloomberg)
A croupier arranges gaming chips on a card table at Aspers Casino at Westfield Stratford City Mall in London, U.K. (Photographer: Simon Dawson/Bloomberg)

The Karnataka High Court on Monday struck down provisions of the Karnataka Police (Amendment) Act, 2021 that prohibited and criminalised online gambling and betting.

The amendments were challenged by the All India Gaming Federation, Federation of Indian Fantasy Sports, Mobile Premier League, Games24x7, A23, Junglee Games, Gameskraft and Pacific Games, who questioned the validity of the provisions.

The court struck down certain provisions of the amendment on three grounds:

  • There is a difference between games of skill and chance.

  • No research was undertaken to understand the ill-effects of online gaming before enacting the amendment.

  • Online games don't fall under the ambit of gambling merely because they are played on the internet.

The two-judge bench of Chief Justice Ritu Awasthi and Justice Krishna Dixit also clarified that the judgment will not prevent the state legislature to bring in a new law against betting and gambling.

The Karnataka High Court has taken a different path as compared to the Madras High Court, Senior Advocate Sajan Poovayya, told BloombergQuint. The latter, while dealing with a challenge to online gaming, said that there is no legislative competence for the state to draft a law, he said. Poovayya argued on behalf of several petitioners.

"The Karnataka High Court has said — 'I am not saying that the state has no power to make a law, but this law (Karnataka Police Amendment Act) is unconstitutional'," Poovayya explained.

Games of Skill Have Constitutional Protection 

The amendment puts games of skill on a par with games of chance when they are poles apart, the court said.

In the eyes of the state government's legislation, persons who play games of chance and skill constitute one class. This is against the fundamental right to equality as it's impermissible to allow items — different in fact or opinion — to be treated as the same, the court said.

The difference is that only games of skill — which have business characteristics — are protected under the fundamental right to carry on trade and occupation, the court pointed out.

....the ‘games of chance’ do not enjoy any constitutional protection since they are mala in se [criminal acts]. It is open to the legislature to absolutely prohibit them as is done to the trades in noxious or dangerous goods or trafficking in women. However, games of skill by their very nature stand on a different footing.
Karnataka High Court

No Research Undertaken Before The Ban

The Karnataka government had argued that the amendment was effected to curb the menace of gambling in the state.

But before imposing such a ban, the court noted, the government didn't make any attempt to study the ill-effects of online games specific to Karnataka's socio-economic and cultural conditions.

Though it's not a constitutional prerequisite, the content of a legislation has to be defended basis its intrinsic merits and technological advancement. So, it's ideal for the state to place necessary material for substantiating its stand, the court viewed.

The government should've undertaken a research exercise to find out if regulating online games was possible, rather than having a complete embargo, the court stated.

There is no material placed on record to demonstrate that State while enacting such an extreme measure, has considered the feasibility of regulating wagering on games of skill.
Karnataka High Court judgement

Offline vs Online Games

During the hearing, the state government had apprised the bench that the amendment act would focus only on online and not offline games.

To strengthen the basis of this classification, it had relied on Supreme Court rulings which have upheld the distinction between online media and offline media as valid.

This comparison, however, didn't find favour with the high court.

The court pointed out the differential treatment was in the context of dissemination of information via traditional media and online media. So, that's not applicable here as the subject matter is different.

And so, if the objective is to deal with gambling, then the government should prohibit activities which amount to gambling irrespective of where they are carried out.

In conclusion, the court held that online gaming activities played with stakes or otherwise, do not fall under 'betting and gambling' as long as they mainly involve skill, judgment or knowledge.