Why in News

1. The Law Commission has recommended that gambling and betting on sports, including cricket, be allowed as regulated activities taxable under the direct and indirect tax regimes and used as a source for attracting foreign direct investment (FDI)
2. The commission’s report, “Legal Framework: Gambling and Sports Betting including Cricket in India”, recommends a number of changes in the law for regulating betting and generating tax revenues from it

Definition of Gambling & Betting

• Betting is considered to be a form of gambling. The main difference between the two activities is that in gambling ‘the stakes’ or ‘the wager’ is placed on an event without any basis of the outcomes, whereas in betting the stakes are placed, based on at least an idea or the performance about the said betting event.
• Kautilya’s Arthashastra defined gambling as wagering with inanimate objects such as dice; and betting as something that involved challenges and was concerned with cockfights, animal races and similar contests.

Law Commission Recommendations

1. Parliament may also enact a model law for regulating gambling that may be adopted by the States or in the alternative, the Parliament may legislate in the exercise of its powers under Articles 249 or 252 of the Constitution.
2. Gambling and betting, if any, should be offered only by Indian licensed operators from India possessing valid licenses granted by the game licensing authority.
3. Gambling must be classified into two categories, namely ‘proper gambling’ and ‘small gambling’. ‘Proper gambling’ would be characterized by higher stakes, whereas individuals belonging to the lower income groups will have to confine themselves to ‘small gambling’.
4. The transactions made between and among operators and players/participants indulging in these activities should mandatorily be made ‘cashless’.
5. Any income derived from such activities should be made taxable under the Income Tax Act, 1961, the Goods and Services Tax Act, 2017.

Consequences that ensue due to unregulated Gambling and Betting

• Some of the major problems related to illegal gambling and betting activities are the exponential growth of illegal trade and commerce, and corrupt practices such as spot-fixing and match-fixing being employed in sports.
• A total of 2916 cases have been registered under the gambling act in a period of 28 months, i.e., 104 cases per month, on an average.
• The Delhi Police terms gambling as “connecting crime” that connects the gambler with other criminal activities. In order to regain the lost money or in an attempt to ‘invest’ more money into gambling, expecting more return an illegal gambler is bound to end up in committing other crimes like chain snatching, looting, stealing, etc.
• A total ban on gambling and betting activities has not completely eradicated the problem but it has driven it straight to the black-market. This in turn has resulted in making it harder to monitor such illegal activities.
• Illegal betting causes substantial monetary loss to the economy, with profits escaping the purview of taxation, and also increases the circulation of black money in the market.

Advantages of a regulated Gambling and Betting industry

• Protection for the young and vulnerable against the dangers of unwise betting behaviour.
• Employment generation (more than 8000 people are employed in casinos in Goa).
• Fairer and more trusted betting experience for consumers, offering entertainment in a controlled and responsible manner.
• Blow against organized crime like match fixing which threaten to damage public trust both in sport and in the legitimate betting industry.
• Generation of revenues from taxation of sports development and preventing sport betting from being linked to criminality or used to launder proceeds of crime.
• Protection of players, coaches and all involved with sport from unprincipled approaches

Lessons from International Perspective on Gambling & Betting

• Countries across the globe have adopted three approaches in the matter of regulating gambling and betting activities.
• Some Countries, especially those which give primacy to religious morality, have taken the view that the role of government is to protect its citizens from the negative effects of such activities.
• The Countries that give primacy to religious morality often impose a complete ban on gambling, while others view gambling and betting as an industry to drive trade and revenue; and encourage tourism and employment.
• Some countries also operate between these two extremes, striking a balance and permit gambling in a controlled and regulated environment; as a result, they earn substantial revenue from the tax imposed on such activities. This revenue can be utilized for promoting sports, cultural, charitable activities or any other activity aimed at the economic growth or development

What needs to be done?

• Legalizing betting and gambling is not desirable in India in the present scenario. Therefore, the State authorities must ensure enforcement of a complete ban on unlawful betting and gambling.
• However, incapability to enforce a complete ban has resulted in a rampant increase in illegal gambling, resulting in a boom in black-money generation and circulation.
• Since it is not possible to prevent these activities completely, effectively regulating them remains the only viable option.
• But law commission recommends that regulated gambling would ensure detection of fraud and money laundering, etc.
• Such regulation of gambling would require a three-pronged strategy, reforming the existing gambling (lottery, horse racing) market, regulating illegal gambling and introducing stringent and overarching regulations

Practice Question

A complete restriction on betting has not eradicated it but has sent the activity ‘underground’ covered in the murky undertakings of the crime syndicates. In the light of the above statement critically analyse the recent proposal of Law commission to regulate gambling and betting on sports in India?