In an elaborate report prepared with the help of legal experts, FICCI urges the government to legalise and regulate betting on sports, which it claims can generate substantial income for the state exchequer. By V. VENKATESAN

IN an important report and knowledge paper presented to the Union Ministry of Sports and Youth Affairs, the Federation of Indian Chambers of Commerce and Industry (FICCI) has made out a strong case for legalising betting in sports. The report and knowledge paper was prepared by Carl Rohsler, partner of the British law firm Squire Sanders, and Vidushpat Singhania, senior associate of the Indian law firm Lakshmi Kumaran & Sridharan. The knowledge paper gives elaborate details about the need to regulate sports betting, the amount of revenue that such a proposal would generate and technical details of going about the process, with examples from foreign jurisdictions.

In his preface to the report, former Chief Justice of the Punjab and Haryana High Court, Justice Mukul Mudgal, has pointed out that sport has been strongly linked with betting for decades. According to him, betting is a form of entertainment and may be allowed subject to regulations.

The betting market in India has an estimated turnover of Rs.3,00,000 crore. But most of the betting, says Justice Mudgal, happens in an unregulated manner with the involvement of the underworld, and the revenue from this is used to finance criminal activities. Persons placing bets are at the mercy of bookies as they have no legal right to have their bets realised; by not taxing income from betting, the government loses revenue between Rs.12,000 crore and Rs.20,000 crore. Justice Mudgal suggests that sports federations and the government, in the absence of legalised betting, also lose an effective tool to detect and curb match-fixing in sports.

The Information Technology (Intermediaries Guidelines) Rules, 2011, enjoin upon an intermediary to mention in their user agreement/terms and conditions that the user of the computer resource of the intermediary shall not host, display, upload, modify, publish, transmit, update or share any information that is related to or encourages gambling. These rules are based on the core value that gambling is illegal according to Central and State laws; therefore this legislation lays down provisions as to how commerce in gambling can be curbed on the Internet.

The FICCI report defines sports betting as a form of gambling involving the hazarding of money on the outcome of a sporting event. It is different from other common forms of gambling (playing games of chance and taking part in lotteries) because it involves the exercise of skill and judgment by the customer on an event which is outside the control of the operator.

The report argues that there are important advantages to accepting and regulating sports betting. Effective regulation, according to the report, means protection for the inexperienced and the vulnerable against the dangers of unwise betting behaviour; a fair and prosperous industry that provides consumers with entertainment in a controlled and responsible way that they can trust; protection for the integrity of sport; prevention of sport betting from being linked to criminality or being used to launder the proceeds of crime; protection for players, coaches and everyone involved with sport from unscrupulous approaches; and generation of substantial revenues for the state, which currently are being lost to overseas operators or remain uncontrolled in the black economy comprising satta operators.

The report suggests that there is little evidence for the current legal regime prohibiting sports betting being effective. Not only is there a substantial informal domestic betting industry, but many foreign websites currently offer Indian citizens a chance to gamble. The report argues that millions of Indians enjoy sports betting and will anyway indulge in it, whether the state prohibits it or not; that there are too many opportunities to bet; and that the current prohibitions are not, and cannot be, adequately policed. The result, according to the report, is that the betting experience of millions of Indian citizens is filled with a sense of illegality and risk.

The report reveals that some regulatory systems in the world restrict “live” or “in play” betting where bets are taken on whether (in cricket) the next ball will be a no-ball or, (in soccer), the timing of the next throw-in. These matters lie more in the hands of an individual player than with the whole team performance, and so are helpful to unscrupulous bookies/punters attempting to fix a particular result. The report recommends establishing a body or bodies to oversee the regulatory process. There are examples around the world where there are corporations created by statute and funded by licence fees charged to operators, and where expertise in relation to the regulation of betting can be concentrated.

Betting and gambling are listed as Entry 34 of the State List. The State legislature has the power to regulate sports betting and gambling within the territory of the State. Before Independence, betting and gambling were governed by Central legislation, namely, the Public Gambling Act, 1867, which governed aspects of gambling in certain territories of India. After Independence, some States adopted the Act to apply to their territory through Article 252 of the Constitution. This Article empowers Parliament to legislate for two or more States by consent and the adoption of such legislation by any other State. The jurisdiction of this Act is now limited to Uttar Pradesh, Punjab, Delhi, Himachal Pradesh and Madhya Pradesh.

The report suggests amendment of the Act and the drafting of regulations under it to regulate betting on sports. This, the report believes, will give States the discretion to adopt regulations formulated under the Act or consider similar legislation based on the model proposed at the Central level.

As an alternative, the report recommends that the Central government regulate sports betting through legislation under Entry 42 of the Union List, namely, “Inter-State trade and commerce”, as the nature of sports betting has changed with the advent of technology, thus limiting the capacity of a State to regulate the activity on its own.

Arguments against betting

Betting in sports, especially cricket, has not been tested legally for conformity with our constitutional provisions. However, gambling itself has come under legal scrutiny in a case before the Supreme Court. In State of Bombay vs R.M.D. Chamarbaugwala (AIR 1957 SC 699), the constitutionality of legislation levying a tax on the promoters of prize competitions was tested.

The court’s five-judge Constitution Bench held in this case that a prize competition that did not, to a substantial degree, depend upon the exercise of skill for its solution would be of a gambling nature and a scrutiny of prize competitions offered by the respondents clearly showed that there was an element of chance to start with, and, consequently, they must be of a gambling nature and fell within the mischief of the Act.

The Bench further held that gambling activities were, in their very nature and essence, extra-commercium, although they might appear with the trappings of trade. “They were considered to be a sinful and pernicious vice by the ancient seers and lawgivers of India and have been deprecated by the laws of England, Scotland, United States of America and Australia. The Constitution-makers of India, out to create a welfare state, could never have intended to raise betting and gambling to the status of trade, business, commerce or intercourse,” it observed. (Much of the regulation of gambling in other countries happened in recent years; the Gambling Commission in the United Kingdom, for example, to regulate gambling including betting in sports, was set up under the Act of 2005.) That the Supreme Court was clearly influenced by its own moralistic stand on gambling is clear from these observations:

“We find it difficult to accept the contention that those activities which encourage a spirit of reckless propensity for making easy gain by lot or chance, which lead to the loss of the hard-earned money of the undiscerning and improvident common man and thereby lower his standard of living and drive him into a chronic state of indebtedness and eventually disrupt the peace and happiness of his humble home, could possibly have been intended by our Constitution-makers to be raised to the status of trade, commerce or intercourse and to be made the subject matter of a fundamental right guaranteed by Article 19(1)(g). We find it difficult to persuade ourselves that gambling was ever intended to form any part of this ancient country’s trade, commerce or intercourse to be declared as free under Art. 301.”