India must tackle illegal offshore gambling platforms

Constitutionally, the jurisdiction to regulate the subject of betting and gambling lies with the state governments.
Constitutionally, the jurisdiction to regulate the subject of betting and gambling lies with the state governments.

Summary

  • A mix of regulatory reforms, technological innovations and international collaboration can help tamp down on these platforms which prey on gullible users and pose national security threats. We must promote homegrown skill-based interactive entertainment startups to encourage responsible gaming.

Countries all over the world, including India, are grappling with the issue of offshore betting and gambling platforms as they pose multitudinal threats from individual customers to national security.

These platforms often employ sophisticated tactics to evade scrutiny, such as the use of mirror websites, white labels and surrogate advertising and are often served through anonymous links and channels that promise quick money to lure gullible users. The complexities involved and modus operandi adopted underline the urgent need for effective strategies to combat illegal gambling activities.

The recent goods and services tax (GST) amendments requiring all gaming platforms to pay 28% GST on deposits regardless of whether what they operate is a game of skill or chance has also led to the mushrooming of illegal offshore betting and gambling platforms, leaving the average Indian user vulnerable.

As per the amendment, the offshore betting and gambling platforms were required to register under the new GST regime, failing which they were to be blocked. However, none of these illegal platforms have registered under the GST regime and are still freely available to Indian users.

Also read: Govt eyes tax collection worth 14,000 crore from online gambling in FY25: Report

Constitutionally, the jurisdiction to regulate the subject of betting and gambling lies with the state governments. It may be noted that there was no internet at the time the Constitution was adopted. States having the jurisdiction to regulate poses two problems.

First, different states may treat betting and gambling platforms differently. So, a platform may be legal in one state but illegal in another. In addition, they have their own definitions of what constitutes betting and gambling, thereby creating a consistency problem across the states.

Second, blocking these illegal offshore platforms is complex. Enforcing a state-wise blockade is extremely difficult and poses technical limitations.

To avoid failure of implementation, without encroaching upon state jurisdiction, a constitutional amendment may be required wherein the power to regulate physical betting and gambling operators continues to be with states, but the power to regulate online betting and gambling platforms is handed to the central government for ease of enforcement.

To tackle offshore gambling and all such other offshore illegal websites and apps, it is necessary to establish central laws with uniform jurisdiction under a centrally designated authority. Such a Constitutional mechanism would enable the central government achieve this through the upcoming Digital India Act.

Also read: India plans crackdown on Illegal betting and gambling apps violating CCPA norms

Addressing the challenges posed by offshore gambling platforms requires a multi-faceted approach involving regulatory reforms, technological innovations and international collaboration. The Intermediary Rules 2021 published by the ministry of electronics and information technology (MeitY) prohibit intermediaries from hosting and publishing information that relates to money laundering or gambling through reasonable efforts.

The intermediary rules also introduced the concept of self-regulatory bodies (SRBs), which were required to certify permissible online pay-to-play skill-based games. One of the criteria to judge so was to determine whether the game involves wagering. However, this mechanism was not implemented owing to concerns regarding the independence of SRBs.

Advisories have also been issued by the ministry of information and broadcasting and the Central Consumer Protection Authority prohibiting direct and surrogate advertising of offshore betting and gambling platforms. These rules and advisories should be supplemented by authorities for proactive enforcement against illegal betting platforms.

At the same time, there is a need for stringent financial measures such as blocking transactions made with offshore operators, which is crucial for disrupting the financial flows to illegal gambling sites.

By implementing the best practices and leveraging emerging technologies, governments and regulatory bodies can effectively combat illegal gambling activities.

For now, the best way to block offshore betting and gambling platforms is through Section 14A of the Integrated GST Act, 2023 read with 69A of the Information Technology Act, 2000 requiring close coordination between the directorate general of GST Intelligence (DGGI) and the ministry of electronics and information technology.

Also read: March Madness: America’s sports gambling boom is a worry

It is equally important to support and create safe and legitimate avenues of alternative entertainment in India i.e. skill-based interactive entertainment. Promoting homegrown skill-based interactive entertainment start-ups through regulation and taxation would go a long way in enhancing the use of responsible gaming while also reducing the user base in India of illegal offshore platforms.

The author is a former senior director and group coordinator, Cyber Law and Data Governance, ministry of electronics and information technology. 

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