Karnataka HC strikes down state's online gambling law; calls it 'unconstitutional'

Bengaluru: In a major win for sports fantasy games, the Karnataka High Court Monday struck down a state government law that banned online gaming.

Calling the amended provisions of the Karnataka Police (Amendment) Act, 2021, as unconstitutional, the court struck down the clauses which prohibit and criminalise betting on and playing games of skill, including the ones online.

“The writ petitions succeed. The provisions are ultra vires of the Constitution and struck down,” a Division Bench of Chief Justice Ritu Raj Awasthi and Justice Krishna S Dixit stated, according to Bar and Bench.

However, while clarifying that the court wasn’t striking down the entire Act, the Bench added that it will not interfere if the state brings in a new law that is in consonance with the Constitution.

This leaves room open for further regulatory intervention by the government and there appears to be long term regulatory uncertainty, there already a matter pending before the Supreme Court in relation to skill based online and fantasy gaming so till the SC gives the final decision there would continue to be some amount of regulatory uncertainty for the sector in the long term, sources said.

It was on September 21 last year that the Karnataka Assembly passed a legislation to amend the Karnataka Police Act, 1963, making all forms of gambling, including online, a cognisable and non-bailable offence. Since the new law came into effect, several online gaming firms shut down their apps and sites in Karnataka.

An FIR was also registered under the amended law against the creators of the online fantasy sports platform Dream 11 for running a gaming house as defined in the new law.

Reacting to the verdict, Bimal Julka, Chairman of Federation of Indian Fantasy Sports (FIFS), said: “The verdict is welcome news for all the sports fans in India, the biggest market for fantasy sports globally, with over 13 crore users playing across more than 200 platforms. This judgement follows other positive judgements given by Hon’ble High Court’s of states such as Punjab & Haryana, Rajasthan, Bombay that recognised Fantasy Sports as games of skill and a legitimate business activity protected under Article 19(1)(g) of the Constitution of India.”

“The overall impact of the judgment for the sector is positive in the short term, as this formally allows entities involved in the business to continue to offer their services in Karnataka, earlier due to the amendments in The Karnataka Police Act such service providers were facing business disruption issues and regulatory hassles more so as many of them are based in the state,” Salman Waris, Partner at Delhi-based law firm TechLegis, was quoted in the media.

“India is among the world’s fastest-growing gaming markets today. Skill-based online gaming has the potential to grow from around $1 bn in annual revenues presently to $8-10 billion annual revenue by 2030,” Barnik Chitran Maitra, Managing Partner and CEO of Arthur D. Little, India & South Asia, was quoted in the media.

The Tamil Nadu government had, earlier last year, passed a law to ban online games such as rummy, poker and other skill-based games that involve betting and money prizes, but it was revoked in August. Other states that have clamped down on the industry include Telangana, Andhra Pradesh, Kerala, Assam and Odisha.

Published on: Monday, February 14, 2022, 10:57 PM IST