Karnataka HC strikes down state law banning online gaming, terms it as unconstitutional

The state's new online gambling law came into effect on October 5

e4m by Shantanu David
Published: Feb 14, 2022 2:56 PM  | 5 min read
Online gaming

The Karnataka High Court today struck down The Karnataka Police (Amendment) Bill, 2021, which banned virtual gaming and online gambling within Karnataka. The amendment had drawn the ire of industry associations, gaming companies, and individuals alike.

The move came after the southern state’s High Court had reserved judgment on December 22 after it concluded several hearings from a number of individuals, gaming associations, and other industry stakeholders who had petitioned to the court, claiming that the state’s online gambling law that came into effect on October 5 was unconstitutional.

Following the October 5 amendments to the Karnataka Police Act, 1963, which had prohibited all forms of online gaming where transfer of money is involved, several gaming companies were forced to suspend operations in the state.

Celebrating the court’s decision, Roland Landers, CEO of All India Gaming Federation (AIGF), one of the key petitioners who had challenged the amendment, said, “India is the fifth largest online gaming market globally and skill-based gaming, a sunrise sector, is giving birth to an increasing number of unicorns within the country, especially Karnataka. The sector has been a strong financial contributor to the Indian economy even during an unprecedented period of slowdown and is further expected to generate revenues in excess of $3 billion by 2025. As the apex industry body for online skill gaming, AIGF welcomes the judgment passed by the court that strikes down the Law banning online games.”

According to a recent EY-AIGF report, the number of real-money gamers is expected to cross 150 million by 2023, up from 80 million in 2020. However, many states, including Kerala, Tamil Nadu, Telangana have tried to clamp down on real-money games in 2021 itself, citing potentials for negative behaviours, financial irregularities, and more.

For instance, the Karnataka amendment was proposed following a Public Interest Litigation that requested a complete ban on all forms of online gambling. Because it didn’t differentiate between games of skill and games of chance, all forms of real-money games were forced to cease operations in the state.

On the Hon'ble High Court of Karnataka judgement on online gaming, Bimal Julka, Chairman - FIFS, said, "While we wait for the detailed judgement copy to analyse it minutely, on behalf of India's Fantasy Sports ecosystem, I would like to thank the Hon'ble High Court of Karnataka for its positive judgement on India’s Fantasy Sports industry today. The verdict is a welcome news for all the sports fans in India, the biggest market for Fantasy Sports globally, with 13 Crore+ users playing across 200+ platforms. This judgement follows other positive judgements given by Hon’ble High Courts 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 view has been further upheld by the Hon'ble Supreme Court multiple times."

"In light of the above, we look forward to working with the government of Karnataka in line with the recent budget announcement and the Central Government's vision to set up an AVGC task force to encourage Indian entrepreneurs in the Fantasy Sports sector. As FIFS, we will continue to ensure a safe experience for sports fans in Karnataka and India, and enable responsible growth of the industry," he added.

Sagar Nair, Co-Founder & CEO, Qlan, The Gamer's Social Network, notes “Real money gaming in India is still somewhat of a grey area while also being one of the most popular forms of gaming. We’re witnessing Indian betting platforms enter global markets despite continued concerns back home.”

Dinker Vashisht, Vice President, Corporate Affairs, Games24x7, another petitioner, said, “The verdict by honourable High Court of Karnataka, is yet another validation of what the online skill gaming industry has always maintained that we are legitimate business activity protected under the Constitution of India. We hope that these judgments can nudge state governments to frame progressive policy and regulatory structure for this sunrise sector.”

This ruling is another positive development for the burgeoning online gaming industry in India, following the government’s push for the sector in the 2022 Union Budget. The budget called for the setting up of an Audio Visual Gaming Comic (AVGC) task force, as well as a slew of other incentives, to help the sunrise sector grow.

Ankur Singh, CEO & Founder of Witzeal Technologies Pvt. Ltd., said that his company is happy to be able to resume operation in Karnataka, noting, “This move is in line with the initiatives proposed by the FM in the Union budget to set up an AVGC task force and will further help in giving a much-needed push to gaming companies and developers. Moreover, the move will provide immense opportunity for the employment of youth by building internal capabilities to cater to domestic and international demands.”

"It’s a great day for the RMG industry. This segment is being recognised again and again specially from top judicial institutions of the country. Even the central government has been showing support to the gaming industry as seen in the recent budget presented by the Hon’ble FM. I am sure all state governments will also support the industry to realize its true potential, both for employment opportunities and revenue generation which can also be a big contributor to the GDP. This will also boost the investor sentiment towards the segment” said Puneet Singh, Co-founder and COO, Baazi Games

While this is a welcome move, industry insiders say that a lot more clarity is needed in the sector, especially when it comes to real money gaming. Nair suggests, “What could help is a central approach by the Indian Government, laying down an operational blueprint for RMG/betting platforms. While there are no issues surrounding esports, a formulation of a legal framework addressing any form of gaming is necessary for the sustainable growth of the sought after industry.”

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