Karnataka Court Strikes Down Amended Police Act Allowing Return of iGaming Operators
The Karnataka High Court’s decision to strike down the recent amendments made to the Karnataka Police Act, 1963 as unconstitutional proved to be a great relief to the online gaming industry in the state. The act, introduced to prevent the growth of the iGaming market, was declared ultra vires under the Indian Constitution by Justice Krishna S. Dixit of the division bench.
Judgement to Not Stop Further Interventions by State Government
Despite the judgement, Justice Dixit said that it could not be considered an ultimate decision. The judgement will not be regarded as foolproof insulation against subsequent attempts to bring about appropriate legislation on conducting betting and gambling operations according to Constitutional provisions.
The ruling dated February 14, 2022, came after the division bench had reserved their judgement on the multiple petitions by industry associations and operators against the amended act in December 2021. The new Karnataka Police Act was ushered in October 2021 and had mandated a crackdown on all online gambling operations in the state. The legislation had bracketed online skill-based games like fantasy sports and rummy with gambling.
The bench comprising Justice Dixit and Chief Justice Ritu Raj Awasthi said on February 14 that they had examined several arguments, principles, doctrines, and other details to come up with the judgement. The two judges acknowledged that the writ petitions have succeeded against the state’s move to curb iGaming operations.
The High Court issued a writ of mandamus to the Karnataka Police to prevent them from interfering in the petitioner companies’ activities and online gaming businesses. The full details of the order are not disclosed yet.
Karnataka Act Implemented Despite Earlier Judgements in Kerala, TN
Karnataka’s legislative assembly passed the act on September 21, 2021, which had come into effect on October 5. The development was followed by a shutdown of iGaming and fantasy sports services in the states by operators to avoid punitive action by the police. On October 8, 2021, the state police filed an FIR against the founders of Dream 11, terming their operations as gambling. Later, the High Court instructed the police not to take any coercive action against the founders Bhavit Sheth and Harsh Jain.
The amendment was met with backlash from associations such as the Federation of Indian Fantasy Sports (FIFS), All India Gaming Federation (AIGF), and providers like Mobile Premier League, Dream11, and Ace2Three. The petitioners expected the court to issue a stay on the new act as it did not distinguish between games of skill and games of chance.
The recent judgement is consonant with how courts in Tamil Nadu and Kerala had declared the respective state legislation to ban gambling as ultra-vires. The Madras High Court had struck down the amended Tamil Nadu Gambling and Police Laws (Amendment) Act, 2021, which banned rummy, poker, and other competitive skill-based games involving monetary rewards. Kerala followed suit and declared an amendment to the Kerala Gaming Act, 1960, as unconstitutional.
The Karnataka legislation, enacted after these judgements, went against the grain in bracketing skill-based and chance-based sports together. The challenge to the act was based on the premise that as per the Supreme Court law of 1957, competitive skill games are protected under Article 19 (1) (g) of the Constitution as they are business activities. Another argument against the directive was that states do not possess the competence to ban skill games, but games of chance such as betting and gambling.
Indian Industry Analysts Welcome Judgement
Industry analysts welcomed the court’s ‘forward-looking’ judgement. They opined that the blanket ban on gambling in Karnataka was antithetical to India’s goal of becoming a trillion-dollar economy. The judgement might help draft a comprehensive regulatory framework for the iGaming industry in Karnataka. The AIGF, in its petition, cited that Karnataka start-ups had contributed over Rs. 3,000 crore to the iGaming industry in India.
A new plan to prohibit online gambling is currently in progress, as per the state’s home minister Araga Jnanendra. Jnanendra said that the government was studying the court’s judgement to rectify their shortcomings and present new legislation that would stand the test of constitutionality. He emphasised that the legislation would protect the victims of gambling-related financial ruin.
As the iGaming industry continues to grow in India, it is going to be inevitable for state governments to embrace iGaming and sports betting, put in place proper legislation, a gaming regulator, and benefit from what the industry has to offer instead of continuing to fight against the industry.
