Experts say Karnataka’s ban on 'games of chance' may face a legal test

• The Karnataka government bans online "games of chance".
• As the IPL season has kicked in, Dream11, My11Circle, MPL Pro, Bet365, Gamezy and many others gaming platforms can come under the radar of Karnataka’s ban on online ‘game of chance’.
• The offence under the law will lead to a prison term of up to three years and fine of up to ₹ 1 lakh.

The Karnataka government on Tuesday reportedly passed a bill that bans online "games of chance”.

Karnataka Chief Minister Basavaraj Bommai reportedly said that the government will deal with gaming operators who run “games of chance” camouflaged as “games of skill”. Even those skill games that involve the risk of the player losing money would invite action under the law, he said.

However, there is not enough clarity on which games are considered under “game of skill” and “game of chance”. As the Indian Premier League (IPL) season has kicked in, online gaming firms like Dream11, My11Circle, MPL Pro, Bet365, Gamezy and many others can come under the radar of Karnataka’s ban on online ‘game of chance’.

Operating such games, sheltering such operations, and abetting and participating in such online games both cognisable and non-bailable is an offence, according to the bill. The offence will lead to a prison term of up to three years and fine of up to ₹ 1 lakh.

So far, Punjab, Haryana, Bombay and Rajasthan High Courts have given verdict supporting online gaming platforms like Dream11 and considers it as a “game of skill”.

The Karnataka government has gone ahead with the ban despite the Supreme Court’s decision that favoured the fantasy gaming industry, calling them skill gaming instead of gambling.

Priyank Kharge, former information technology (IT), tourism and social welfare minister of Karnataka, batted against a blanket ban for all online games. “The government should form a committee with industry stakeholders and come out with a law that curbs online betting instead of a bill that won’t stand the test of law,” he said in a tweet.

Kharge mentioned Karnataka is the gaming hub with investments of ₹4,000 crore employing thousands of people. The former minister further added that more clarity is required on certain of these issues because these are buzzing businesses.

“They (online gaming platforms) are run by very young players (individuals) who have just graduated from colleges and it will kill them at this stage. Tax certainty is required as you cannot tax the entire thing, just because you feel that there is revenue which can be collected from these activities,” said Abhishek A Rastogi, partner at Khaitan & Co in a Twitter live session with Business Insider on Monday.


In the same conversation, another panelist, Sandeep Chilana, managing partner at Chilana & Chilana Associates, said that there will be legal challenges by these online gaming entities in the court after the ban.

“In the online gaming casino sectors, and the entertainment sector everything is charged under different categories of rates. So I'm saying, gambling betting is one thing, but if you see a serious casino business, you are charging me the royalty, the licence fee to operate the casino, you are charging GST [goods and services tax] on that also, then you are asking for the 20% tax only even if it's a slot machine,” said Rastogi.

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