India: Karnataka High Court strikes down iGaming ban law; operators expected to return

The High Court of the Indian state of Karnataka has struck down the state's online gambling law, labeling it as “unconstitutional.” The judicial authority deemed the amendments made to the Karnataka Police Act, which had led to all forms of online gaming where transfer of money is involved to be banned, as against the constitution, and thus has invalidated the gambling law.

The decision, taken on February 14, provides relief to gambling firms that had shut down operators in the state, following the recent passage of the online gaming law, in October last year. Fantasy sports and gaming companies including Dream11, Mobile Premier League, Games24x7 and Ace2Three are now expected to make a comeback to Karnataka.

"This is a step in the right direction to grow the burgeoning gaming industry in the state and will help unlock the immense economic potential this sector has,” said All India Gaming Federation (AIGF) CEO Roland Landers according to Money Control, welcoming the judgment.

The Karnataka High Court on Monday struck down the Karnataka Police (Amendment) Act 2021, by which the state government prohibits online games with stakes to be ultra vires to the Constitution. The violation was punishable for 3 years and up to Rs. 1 lakh.https://t.co/NuX8PMSC3Z pic.twitter.com/17wZd1ZaT1

— AIGF (@aigfmumbai) February 14, 2022

The boss of the skill gaming industry body further said the organization “looks forward” to working with the Government and relevant stakeholders “to develop a clear regulatory framework” that will enable legitimate gaming companies to operate in the state, with safeguards in place to eradicate illegal gambling apps.

The AIGF was part of a group of petitioners, including industry associations, gambling firms and individuals, who challenged the constitutional validity of the online gambling law. The Karnataka High Court, on December 22, decided to reserve its judgment after concluding hearings from these stakeholders.

The All India Gaming Federation was joined in its efforts by other parties including the industry body Federation of Indian Fantasy Sports (FIFS) and a long list of operators, including the aforementioned Mobile Premier League, Games24x7 and Ace2Three, among others.

Hon'ble #Karnataka High Court has struck down certain provisions of the Karnataka Police (Amendment) Act 2021,as being ultra vires to the Constitution. State government has been restrained from interfering with business of online #FantasySport operators. More updates to follow.⏳ https://t.co/xqW3GuqR2K

— Federation of Indian Fantasy Sports (FIFS) (@FIFS_Official) February 14, 2022

While the case was initially heard by a single-judge bench, it was later transferred to a division bench comprising Justice Krishna S Dixit and Chief Justice Ritu Raj Awasthy who, on December 22, told parties with an interest in the judicial process they were allowed to file written submissions with any further argument, adds the cited news source.

“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,” said Salman Waris, Partner at Delhi-based law firm TechLegis, according to Business-Standard.

However, Waris warns that the Bench made it clear that the entire Act has not been struck down. Moreover, the judgment will not stand in the way of the legislature bringing in new laws against gambling, leaving room open for further regulatory intervention by the government.

Fantasy sports giant Dream Sports (Dream11) was recently valued at $8 billion

“There appears to be long-term regulatory uncertainty,” added Waris. “There already is a matter pending before the Supreme Court in relation to skill-based online and fantasy gaming so until the SC gives the final decision there would continue to be some amount of regulatory uncertainty for the sector in the long term.”

India is among the world’s fastest-growing markets for iGaming, with over 130 million online fantasy sports players across more than 200 platforms. Skill-based online gaming has been described as having the potential to grow from around $1 billion in annual revenues at the present to about $8 to $10 billion by 2030.

However, Indian law mostly does not distinguish between skill-based gaming and chance-based gaming, leading to many states banning all forms of online gaming. According to Waris, this is “counterproductive to India’s ambition of a trillion-dollar digital economy,” further reports Business-Standard.