Online gaming addiction leads to impoverishment: Karnataka in SC, justifying curbs

Karnataka’s case is being heard in the Supreme Court along with another bunch of petitions.

Defending its moves on online gaming, the Karnataka government on Thursday told the Supreme Court that the state has the legal right to restrict acts of risking money on the "unknown result" of an event, and has the constitutional duty to ensure public health and social order.

In a written submission to the apex court, seen by Moneycontrol, the state’s Additional Advocate General Prateek K Chadha said that the Karnataka government has the duty to arrest "vices of gaming addiction that may lead to economic impoverishment of the players, while affording miscreants an avenue to engage in fraudulent activities at the former’s expense".

The submission comes as the state appeals the 2022 ruling of the Karnataka High Court that struck down provisions of a 2021 state legislation, the  Karnataka Police (Amendment) Act, 2021, which had placed restrictions on online games of skills played for "betting and gambling".

Karnataka’s case is being heard in the Supreme Court along with another bunch of petitions that challenged the taxation aspect of the online gaming industry.

"It has been pointed out that online gaming is contributing to the phenomena of rising indebtedness, manifestation of addictive patterns among the youth, as well as spike in instances of loan-sharking, that cumulatively result in disturbance to the mental as well physical health of online gamers has resulted in a public health exigency," Chadha stated.

He also claimed that online gaming was aiding a rise in criminal activities, adding, "It is being widely reported that teenagers from lower-income groups are gambling loaned money on fantasy sports mobile applications, causing harsh financial distress to their families, and in turn, spiralling into helplessness and suicidal instincts."

Additionally, it is reported that online gaming platforms are requiring individuals to submit copious amounts of personal data and allowing several in-app permissions, such as 'track user', 'record video' or 'erase data'. "These websites threaten the financial security of the citizens. It is not surprising that gambling has been related to money laundering and related fraudulent activities," said Chadha, adding that in the light of the multi-pronged risks posed by the online gaming and betting industry, Karnataka was within its legislative competence to regulate online gaming.

According to the submission, the 2021 act only regulates organising and participating in online gaming which involves wagering or betting with stakes in games of chance, or risking money on the unknown result of games of skill. There is no legal embargo on organising or playing games of skill without risking money (such as rummy, carrom, chess, pool, bridge, crosswords, Scrabble or fantasy sports).

The state's avowed purpose behind the 2021 legislation was to address the ever-growing nature of the problem of its citizens suffering adverse economic and social effects arising out of their participation in online gaming. The state legislature was thus of the view that given the all-pervasive nature, and the increased penetration of the internet and, hence, accessibility to such games, there was a clear and categorical need to pass the impugned legislation, said Chadha.

The submissions further said that there is no "rational basis" for distinction between online gaming and betting, as all that is done in these fantasy leagues it to force gamers to make a minimum of 11 individual bets (on how 11 players of their choice are going to perform in the real-world match), rather than one solitary bet.

There is no material difference between placing (outlawed) sports bets on the performance of a real-world team (placed with bookmakers), as opposed to a virtual team comprising players drafted by a virtual player (placed on online fantasy sports platforms), the submission said.

"Given the state of affairs, the State is within its mandate to prohibit the risking of money on games wherein online gamers bet on the unknowable outcomes of events, regardless of whether they are commonly considered as games of skill or not," said Chadha.

The hearing for all petitions linked to online gaming is likely to continue next week as well, following which the court may deliver its verdict.