10 Reasons Why to Regulate Gambling Industry | UPSC

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IASbhai Daily Editorial Hunt | 3rd Oct 2020

I am not a product of my circumstances. I am a product of my decisions.– Stephen Covey

Dear Aspirants
IASbhai Editorial Hunt is an initiative to dilute major Editorials of leading Newspapers in India which are most relevant to UPSC preparation –‘THE HINDU, LIVEMINT , INDIAN EXPRESS’ and help millions of readers who find difficulty in answer writing and making notes everyday. Here we choose two editorials on daily basis and analyse them with respect to UPSC MAINS 2020.

EDITORIAL HUNT #169 :“10 Reasons Why to Regulate Gambling Industry | UPSC

10 Reasons Why to Regulate Gambling Industry | UPSC 10 Reasons Why to Regulate Gambling Industry | UPSC

JAY | VIDUSHPAT
10 Reasons Why to Regulate Gambling Industry | UPSC

      HEADLINES:

Should online gambling in India be regulated?

      CENTRAL THEME:

Regulation, rather than a ban, could bring with it several benefits as seen in other countries

SYLLABUS COVERED: GS 2 : DPSP : Governance : State List

      MAINS QUESTION:

Gaming industry is a multi crore business in India with less revenue potential for states. Should it be regulated for instance or banned in near future. Comment -(GS 2)

      LEARNING: 

  • What is game of skill ?
  • Courts verdict
  • How other countries handle Gambling Industries.

      INTRODUCTION: 

A few weeks ago, Google pulled Paytm from the Play Store for violating its gambling policies.

  • The growing popularity of gaming platforms like Dream11 and Paytm First Games raise questions about whether they are proxies for online gambling.
  • As they can involve financial transactions but are currently classified as ‘games of skill’.

      BODY: 

GAMING INDUSTRY

  • SKILL BASED GAMING : These skill-based games themselves could cross a billion dollars in value, the KPMG report states, and are growing at around 30% annually.
  • GENERIC GAMING INDUSTRY : Now that’s the skill part, but if you’re looking generically at gaming, both skill or chance, it is a very high number.

Largely it is unregulated and in the grey space.

  • REVENUE : One is the revenue argument. Since it’s happening largely underground, it’s a huge source of black money.
  • SOURCE OF REVENUE : If it is legalised and taxed in a realistic and reasonable manner, it can be a huge source of revenue for the government.
  • NULLIFY MATCH FIXING : The second is with regard to sports betting where there are a lot of allegations of match-fixing.

GREY AREAS

  • LEGAL STATUS : The current legal position is that though they are transaction-based, various courts have held that they are games of skill rather than games of chance.
  • JURISDICTION : Gambling and betting are a State subject. Every State has its own legislation on gambling.

Most States have an exemption for games of skill.However, these statutes are pretty old.

  • CLARIFICATIONS : In the present scenario these laws they do not clearly define or enumerate which games fall within this skill category.

Nagaland, for instance, has a separate legislation which details what are games of skill. Most States do not have that kind of clarity.

  • JUDICATURE COMES IN : So, it falls within the judiciary’s ambit to interpret whether a particular game falls within the ambit of skill or not.
  • HIGH COURT VERDICT : In 2017, the Punjab and Haryana High Court ruled that the format of Dream11, which involves picking and allocating points based on their real-life performance, is a game of skill and does not fall within the definition of gambling.
  • OTHER COURTS : The Rajasthan High Court, Punjab and Haryana High Court, and then the Bombay High Court all held that in the format being offered currently, Dream11 is a game of skill.
  • SUPREME COURTS STAND : However the Supreme Court, while hearing the appeals on Dream11, issued notice to all parties which means that they will go into the merits of the matter in detail and adjudicate finally on whether it is a game of skill or not.

LEGISLATIONS AND GAMBLING

  • LEGISLATIONS : The State Acts largely don’t define what is a game of skill.
  • STATE OF ANDHRA PRADESH VS K. SATYANARAYANA : What you go by is the interpretation given by the Supreme Court in various judgments starting from Satyanarayana (pertaining to the card game Rummy), where it said skill predominates over chance.
  • IMPLICATIONS : It’s still open to interpretation for a range of other games.There have been several appeals filed and dismissed against these judgments.
  • SC ON ONLINE GAMING : What this means is, if the Supreme Court says that daily fantasy sports are games of chance, then the entire industry shuts down and the issue goes back to the States in a sense.
  • ISSUING LICENSES : State governments can issue licences for these games.
  • RECOGNITION AS A INDUSTRY : If the Supreme Court says it is a game of skill, then the industry is open all over India.

The user base has grown phenomenally for online gaming, especially in this lockdown period.

  • NATURE OF TRANSACTIONS : It’s a very tricky question because the gaming industry has legal as well as illegal components.
  • BRANCHES OF GAMING INDUSTRY : And not everything is about paid gaming; there is also a lot of free gaming, casual gaming, gaming just for entertainment.
  • FEW REGULATIONSBetting on horse racing is regulated, casinos in Sikkim and Goa are regulated, certain games of skill are also regulated in States like Nagaland.
  • NET WORTH : According to companies like KPMG, the gaming industry in India would be worth about $150 billion.

GAMBLING IN ABROAD

  • OTHER COUNTRIES : Now, regulated and licensed betting regimes, as in the U.K. and many European countries, have a strong mechanism to monitor each of the betting websites.
  • EXPERT HANDLING : They track suspicious patterns if there is a sudden spike in betting for certain events, and investigate them.
  • SOURCE OF EMPLOYMENT : And there are, of course, other ancillary benefits like employment.

By way of a legal framework, we have regulations in Goa and Sikkim, where there is a licensing regime to allow certain types of casino games.

  • EXPANDING LEGISLATION : So, we could expand that kind of legislation itself. Or we could look at international examples like the U.K. which has the Gambling Act of 2005.

FEATURES OF GAMBLING ACT

  • The Act has four or five categories, and they regulate it based on those categories.

So, they have casual gaming, mid-level gaming, serious gaming, high-stake gaming.

  • They’ve divided the games into four or five categories, and then based on that, they have a licensing regime.
  • This applies across all games, whether skill or chance.
  • That is the closest we could also go, where we divide various games into various categories and have a different licensing fee for each.

SELF REGULATED GAMES

  • Games of skill seem to exist in a legal grey area.
  • Games of skill are largely self-regulated.

There are bodies such as the:

  • All India Gaming Federation,
  • FIFS [Federation of Indian Fantasy Sports]
  • The Rummy Federation

These have developed self-regulation codes for advertisements, the way of playing, taxation etc.

The only State where gaming or skill gaming has been regulated is Nagaland.

  • Otherwise, games of skill are generally self-regulated by these industry bodies, which is not bad.

BASIC REGULATIONS 

  • WHAT CAN WORK : A basic level of licensing regime can come in, but the operational regulation, should always be fine with the industry.
  • SANCTIONS AND MEASURES : There are no sanctions or penal measures that can be invoked against any erring operators.

A lot of people must have also seen advertisements about skill gaming companies. Some of them are misleading and give false assurances.
 

  • GUIDELINES : The Consumer Protection Ministry has issued certain guidelines on advertising.
  • SETTING UP BOUNDARIES : Perhaps these real money games can be included in that ambit and certain dos and don’ts [can be specified].
  • MYTHS AND PROPAGANDAS : Advertisements showing – You can play day and night on these platforms and use them as instruments to solve your social or financial problems.
  • CAPPING TRANSACTIONS : One issue that immediately stands out is whether there should be a cap on the amount of money people can play with.

REGULATING ASPECTS

  • MINOR BETTING : If somebody is putting up ₹100 or ₹200 a day, you can allow it as a kind of social gaming, because the prizes will also be limited in that sense and you don’t really need a licence.
  • SERIOUS BETTING : But where the monies are bigger, say you are allowed to put ₹5,000 and you can win up to a crore, that goes into the serious gaming or gambling aspect and that will definitely need complete regulation.
  • REVENUE POSSIBILITY : GST [Goods and Services Tax] and income tax are still applicable to these games.
  • LICENSING FEE : It’s only a licensing fee which may not be applicable at this point of time.

Dream11, for instance, is paying GST, and the winners will end up paying income tax as well.

      IASbhai Windup: 

  • NOT A SIN : Right now, the legal basis as a game of skill and so it does not fall within the sin category of, say, gambling and casinos.
  • NET TAX PAYMENTS : So these companies are paying a lower amount of tax.

It is another debate whether there needs to be a slightly higher rate of tax for these kinds of activities or not.

  • HUGE POTENTIALS : The revenue potential has also been weighed in.
  • TAXATION REGIME : If taxed in a rational and reasonable manner, games of skill or chance could lead to tens of thousands of crores in revenue.
  • OPPORTUNITIES AHEAD : For instance, the Maharashtra government is already looking at the aspect of regulating sports betting.
       SOURCES:   THE HINDU EDITORIAL HUNT | 10 Reasons Why to Regulate Gambling Industry | UPSC

 

TRENDING NOW : Important The Hindu Editorials 

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