Editor's note: Deeksha Malik is a final-year student at National Law Institute University, India. Her main interest areas are corporate law, arbitration, and sports law. She can be reached at dkshmalik726@gmail.com.

In 2015, while interrogating cricketer Sreesanth and others accused in the IPL match-fixing case, Justice Neena Bansal, sitting as Additional Sessions Judge, made the following observations as regards betting on cricket matches.

“Cricket as a game of skill requires hand-eye-coordination for throwing, catching and hitting. It requires microscopic levels of precision and mental alertness for batsmen to find gaps or for bowlers to produce variety of styles of deliveries’ (medium pace, fast, inswing, outswing, offspin, legspin, googly). The sport requires strategic masterminds that can select the most efficient fielding positions for piling pressure on the batsmen. Based on above description, cricket cannot be described anything, but as a game of skill.”

The debate on the issue of betting in sports has since resurfaced and gained the attention of sportspersons, media, sports bodies, policymakers, and the general public. In April 2017, the Supreme Court bench comprising of Justices Dipak Misra and AM Khanwilkar agreed to hear a public interest litigation (PIL) seeking an order directing the government to come up with an appropriate framework for regulating betting in sports. The arguments put forth in the PIL present various dimensions. One of these pertains to economic considerations, a submission that regulated betting would be able to generate annual revenue of Rs. 12,000 crores by bringing the earnings therefrom within the tax net. As for policy considerations, it was submitted that a proper regulation in this area would enable the government to distinguish harmless betting from activities that impair the integrity of the game such as match-fixing. Further, betting on cricket matches largely depends on the skill of the concerned players, thereby distinguishing it from pure chance-based activities.

The issue of sports betting witnesses a divided opinion till this day. This is understandable, for both sides to the issue have equally pressing arguments. Aside from its regulation being a daunting task for authorities, sports betting is susceptible to corruption and other unscrupulous activities. At the same time, it is argued that it would be better for both the game and the economy if the same is legalised.

THE MAGNITUDE OF CONSIDERATIONS

It is feared by some that the consequences of recognition and legalisation of betting could be negative, considering what happened in Australia. Australia legalised online betting in 2001, and by 2009, it found itself in a situation where betting took over the sporting landscape in a big way. The impact was clearly visible; betting was marketed extensively in public places, attracting many young potential punters. Some found the trend disturbing, for sports fans were more concerned about their personal gains than about the sport itself. It is estimated that around 500,000 Australians are on the verge of becoming “problem gamblers.”

There has been an increasing support for the other side of the debate that argues for recognition of betting as a legal activity. It is argued that criminalising betting does not prevent its happening; it merely drives the activity underground where it continues to thrive. Add to it the substantial revenues that government would be able to obtain therefrom. In fact, the Report of the Supreme Court Committee on Reforms in Cricket, also called the Lodha Committee Report, submitted that given the worldwide legal sports betting market which is worth over $400 billion, it will be in the best interest of the economy if betting is given legal recognition.

POSITION IN THE USA AND THE UK: GROWING ACCEPTANCE OF THE UK-BASED MODEL

In the USA, federal law has taken a tough stand against betting and gambling. The 1992 Professional and Amateur Sports Protection Act (PASPA) makes it unlawful for a person to sponsor, operate, advertise, or promote betting, gambling, or wagering scheme based, directly or indirectly, on one or more competitive games in which amateur or professional athletes participate. The provision prima facie makes no distinction between betting and gambling, and it is, therefore, irrelevant for the purpose of establishing an offence under this provision whether the activity in question involves skill or not.

On the other hand, one may refer to the position in the UK, where there has been a well-developed betting market with appropriate measures to ensure that the system is not abused. The governing organisation in this regard is the UK Gambling Commission, initially set up under the 1960 Betting and Gaming Act which works in partnership with all the sporting bodies which, in turn, frame their own bye-laws to regulate betting.[1] Apart from licensing requirements, the framework provides for an information-sharing system, whereby bookies are required to report any suspicious betting activity within their knowledge to the Gambling Commission.[2] The example of the UK shows how through appropriate safeguards and implementation policy that involves various stakeholders such as the sports bodies and the booking companies, sports betting could be effectively regulated, bringing, at the same time, significant economic advantage. It does not come as a surprise that a majority of Americans have advocated for a UK-based model.

Recently, the Supreme Court of the United States began dealing with the issue in the case of Christie v. National Collegiate Athletic Association. The State of New Jersey seeks to get the PASPA annulled, which, in turn, would facilitate state-sponsored sports betting. It is being submitted that the federal government through the aforesaid statute is violating the anti-commandeering principle of the Tenth Amendment, according to which states cannot be mandated to carry federal acts into effect. The outcome of the case would certainly have an impact on the debate, one way or the other.

POSITION IN INDIA: THE ‘GAME OF SKILL’ DEBATE

In India, the power to legislate on betting and gambling is conferred on states, since these subjects are enlisted in the State List. Nevertheless, the pre-independence legislation, namely the 1867 Public Gambling Act (Act), is still valid today, though some states have enacted their own laws pertaining to betting and gambling. Section 12 of this Act provides that it does not apply to a ‘game of skill.’ The legislation, therefore, makes a distinction between a ‘game of chance’ and a ‘game of skill.’ The term ‘game of chance’ has been explained in the case of Rex v. Fortier[3] as a game “determined entirely or in part by lot or mere luck, and in which judgment, practice, skill or adroitness has honestly no office at all or is thwarted by chance.” It has further been held in the case of State v. Gupton that any athletic game or sport is not a game of chance and instead depends on a number of factors such as skill, ability, form and practice of the participants.

At this juncture, reference must be made to the case of KR Lakshmanan v. State of Tamil Nadu, wherein it was held by the Supreme Court of India that horse racing, foot racing, boat racing, football and baseball are all games of skill. Betting on, say, a horse race entails use of evaluative skills in order to assess several factors such as speed and stamina of the horse, performance of the jockey, and the like. Similarly, the Supreme Court in State of Andhra Pradesh v. K Satyanarayana observed that rummy is not like a three-card game which is based substantially on chance. There is considerable amount of skill involved in memorising the cards, or in holding and discharging them, in a rummy game. The uncertainty involved in shuffling and distribution of the cards does not alter the character of the game to one based on chance.

Based on these judgments, it is reasonable to infer that betting in cricket, too, is an activity involving sufficient skill and is not based merely on chance. A person who studies the form and performance of a player, the conditions of play and the like could predict the outcome of a game with a reasonable accuracy. The mere uncertainty of the outcome should not come in the way of understanding sports betting as an activity based on skill. Considering this important factor, the government should proceed to develop an appropriate framework to regulate betting. 

A PRACTICAL POLICY FRAMEWORK

The International Cricket Council, too, has suggested that India should come up with a suitable policy framework to regulate betting.[4] Such a framework would keep a check on individuals and further help detect and prevent corrupt activities. The above-mentioned Lodha Committee Report has strongly recommended legalising cricket betting in India. The suggestion is based on the premise that while match-fixing interferes with the integrity of the game itself and is unacceptable, betting is a “general malaise” indulged by different sections of the society and is capable of being regulated. Therefore, betting should not be equated with unscrupulous activities such as match-fixing.

Having been so distinguished, a regulation along the lines of the UK model could be put in place to establish regulatory watchdogs tasked with monitoring betting houses and persons entering into betting transactions. Those placing bets could be brought within a licensing system wherein their identification and other details are recorded. This could be supplemented by an information-sharing mechanism whereby a database of undesirable entities such as bookies and fixers would be shared with players so that they do not remain in the dark with respect to suspicious activities. Importantly, players, match officials and administrators should be kept out of such regulated betting, and they should continue to be bound by the Board of Control for Cricket in India (BCCI) and IPL rules. It is important to note here that the BCCI Anti-Corruption Code prohibits participants from soliciting, authorising, placing, accepting, laying, or otherwise entering into any bet with any person in relation to the result, progress, conduct or any other aspect of any match or event. The Code further makes it an offence to ensure “the occurrence of a particular incident in a match or event, which occurrence is to the participant’s knowledge the subject of a bet and for which he/she expects to receive or has received any reward.” As can be seen from the provisions, the liability is imposed specifically on the participant. This is in line with the opinion of the Lodha Committee, which has recommended that if betting were to be legalised, the players should nevertheless be barred from indulging in the activity so as to prevent any apprehension concerning their integrity. It is submitted that bringing these reforms in the current uncertain and highly ambiguous regime would address several surrounding issues, provided all the stakeholders work in tandem.

Lesson could be learnt from the state of Nagaland, which recently enacted a law, namely the 2016 Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act. The said legislation defines “games of skill” as including “all such games where there is a preponderance of skill over chance, including where the skill relates to strategising the manner of placing wagers or placing bets, or where the skill lies in team selection or selection of virtual stocks based on analyses, or where the skill relates to the manner in which the moves are made, whether through deployment of physical or mental skill and acumen.” Besides providing such an inclusive definition, the Act sets out a schedule enlisting certain activities that shall be regarded as games of skill, such as poker, rummy and virtual games of cricket and football. All such games shall be regulated by way of issuance of a license to persons or entities based in India. Upon receiving the license, such a person or entity is eligible to earn revenue from games of skill, whether by way of advertising, obtaining a share of winnings or charging a fee for membership.

Some stakeholders are advocating for a uniform legislation on betting that would ensure that the legal position on betting remains the same across all the states. In July 2017, the All India Gaming Federation along with an advisory panel presented a white paper to Law Commissioner BS Chauhan, recommending a central legislation regulating online skill gaming, and that sports betting in general and cricket betting in particular be recognised as a game of skill. Such a legislation could introduce a system of checks and balances along the lines of that existing in the UK, for instance. A proposal has also been moved from the Central Information Commission in the case of Subhash Chandra Agrawal v. PIO, recommending the Government of India to consider moving the subject of sports from the State List in the Constitution of India to the Concurrent List so as to ensure a uniform policy regulating sports bodies and national sports federations such as the BCCI.

CONCLUSION

The international discourse on the issue of sports betting shows just how inadequate the Indian legal regime is to cater to the same. Suggestions have been pouring in from all quarters as to how, upon being legalized, cricket betting could be regulated. These suggestions, along with international best practices concerning ethics and betting, should be taken into account by the legislature and the executive to bring in an appropriate framework to address cricket betting. This, of course, requires the active participation of all the stakeholders, with the BCCI leading the way. 

[1] Ali Qtaishat and Ashish Kumar, ‘Surveying the Legality Issues and Current Developments’ (2013) 20 JL Policy and & Globalization 40, 42.

[2] See Gambling Act 2005 s 88.

[3] Rex v. Fortier 13 Que. KB 308.

[4] Rohini Mahyera, ‘Saving Cricket: A Proposal for the Legalization of Gambling in India to Regulate Corrupt Betting Practices in Cricket’ (2012) 26 Emory Int'l L. Rev.

Editor's note: Branislav Hock (@bran_hock)  is PhD Researcher at the Tilburg Law and Economics Center at Tilburg University. His areas of interests are transnational regulation of corruption, public procurement, extraterritoriality, compliance, law and economics, and private ordering. Author can be contacted via email: b.hock@uvt.nl.

This blog post is based on a paper co-authored with Suren Gomtsian, Annemarie Balvert, and Oguz Kirman.

Game-changers that lead to financial success, political revolutions, or innovation, do not come “out of the blue”; they come from a logical sequence of events supported by well-functioning institutions. Many of these game changers originate from transnational private actors—such as business and sport associations—that produce positive spillover effects on the economy. In a recent paper forthcoming in the Yale Journal of International Law, using the example of FIFA, football’s world-governing body, with co-authors Suren Gomtsian, Annemarie Balvert, and Oguz Kirman, we show that the success of private associations in creating and maintaining private legal order depends on the ability to offer better institutions than their public alternatives do. While financial scandals and other global problems that relate to the functioning of these private member associations may call for public interventions, such interventions, in most cases, should aim to improve private orders rather than replace them.

FIFA example – from gentlemen’s agreements to a rich global regulator

FIFA is the governing body for football (or soccer, as it is known in some countries). Founded in 1904 under Swiss law by seven football associations, just 40 years ago, FIFA was a small gentlemen's club with a staff of 11, far from politics, which produced little cash. Since then, it has evolved into a powerful organization generating billions of dollars in annual revenues through sales of media and marketing rights; now it employs hundreds. The rise of FIFA has been a continuous process that was made possible by the reluctance of states and supra-national organizations such as the European Union (EU) to intervene in the governance of sport, particularly football. Hence, supported by and benefitting from the special treatment of sports, FIFA filled the regulatory gap and strengthened its status as a private regulator.

Besides the rules of the game, FIFA’s legal order includes privately-designed rules of cooperation and a complex organizational structure that spans every involved party including players, clubs, coaches, managers, club investors, officials, sponsors, and spectators. The centerpiece of the relations regulated by the rules of FIFA are employment-related questions. Most importantly, FIFA’s Transfer Regulations create strong tensions between FIFA’s regulatory autonomy and public orders such as the sovereign jurisdictions of FIFA’s member associations and supra-national organizations. Tensions between different levels of employment rules are especially visible in matters related to equality and/or non-discrimination of workers, the treatment and qualification of minors, the freedom to choose employment, and the freedom of movement. For example, the inability of players to terminate their contracts without cause, before expiry and without paying compensation, is in stark contrast with traditional employment laws, according to which employees are free to end employment without cause by prior notice. Figure below illustrates the relationships between the different levels of “football ordering” and public ordering when it comes to labor rules.

The Relationship of Labor Rules in Football

Furthermore, FIFA has also private dispute resolution venues and sophisticated system of sanctions and incentives promoting compliance with the decisions of the private order’s dispute resolution bodies. Possible sanctions vary but they are leveraged by the monopoly power of FIFA. Consider the right of FIFA to suspend a member association for a specific period or expel it fully from FIFA for failure to comply with its obligations, including an obligation to comply with FIFA or CAS decisions. Given FIFA's monopoly, this, in fact, means that national teams and licensed clubs from the suspended or expelled country cannot participate in any organized game. As a consequence, FIFA has been able to maintain cooperation among all involved actors, yet, along with the increasing commercial dimension, the incentives of states and other public orders, particularly the EU, to intervene have grown.

Integrity vs. legal order

The fact that FIFA is undermined by corruption is nothing surprising. Prof. Alina Mungiu-Pippidi shows that the average public integrity in more than 200 countries whose soccer associations are the FIFA constituents “is just 5, on a scale where New Zealand has ten and Somalia 1” […] “Were FIFA a country, it would clearly not be in the upper half, but somewhere near Brazil, whose officials seem to have been waist deep in its corruption, and which ranks around 121, with a 4.2”. FIFA’s administrative structure, certainly, needs reforms that will improve its financial stability and decrease corruption risks within the organization. These reforms, indeed, may require “public nudge” by the enforcement of extraterritorial “anti-mafia” statutes such as the US Racketeer Influenced and Corrupt Organization Act (RICO) that played the central role in the so-called FIFAGate. Moreover, in the light of “the second FIFAGate”—six months after the original scandal, a number of FIFA officials that replaced the old leadership were charged with a 92-count indictment—and after the recent neutralization of its internal corruption investigations (see here), more radical “public nudge” may be desirable. Indeed, these developments, as was discussed in this blog some time ago, may call for a more powerful intervention by, for example, the EU, to impose ‘certain basic “constitutional” requirements’ to FIFA.

Nevertheless, while FIFA may need “public help” to clean its house and improve some areas of its legal order, no public order is a better alternative. Common rules spanning across borders, predictable contractual relations, and incentives to invest in training young players are only some advantages made possible by FIFA’s tailored rules of behavior. These advantages would be lost if public interventions would crash the FIFA order and replace it by a patchwork of national laws, unstable contractual relations, more costly dispute resolution and enforcement mechanisms, and limited ability to encourage talent development. Therefore, while FIFA as an administrative organization may generally be considered as more corrupt than an average government, it has been able to offer harmonized institutions that in many cases are better accustomed to the needs of the involved parties than their state-made alternatives, which often are based on one-size-fits-all approach and lack certainty of application.

Public orders as the reversed civil society

It does not mean that public orders such as the EU and nation states should do nothing. Private entities often need a “public nudge” not only to prevent excesses, but also to maintain incentives to produce rules that reflect new economic and social developments. In numerous writings (for an overview see Katz), law-and economics scholars indicate that while in principle private orders should be best left alone, states should limit the potential of powerful interest groups to undermine the roots of private orders such as FIFA. Who, how, and when should determine the benchmark of what is excessive is difficult, and law-and economics has declined to offer a general theory of the role of public orders in nudging private orders to limit interest groups’ power. Nevertheless, determining the role of public orders is no more difficult than the question what civil society should do when it comes to the performance of nation states.

In the context of nation states, the key role in limiting the power of elites belongs to the civil society. In case of monopolistic orders such as FIFA’s, however, there is often no direct representation of various actors inside such orders. Shouldn’t, then, states and the EU assume the role of a reversed civil society when interacting with large and successful private orders? In practice, particularly the EU is more and more involved in an informal co-determination of football-related regulation (for similar argument see here). For example, the recent social dialogue in European football, brokered by the EU Commission, is an example how public orders can fulfill their role as reversed civil society. The EU Commission, instead of intervening directly and regulating sports, encouraged, and should do so much more, various stakeholder groups, such as the European Club Association and FIFPro, to engage in a dialogue with the purpose of improving the practices of player protection (however, it is true that the EU Commission had a way deeper impact through EU competition law, see Duval). For the private order itself participation in this dialogue and active encouragement of the enforcement of its results is the best way to guarantee its role as a supplier of rules (see generally Colucci & Geeraert). In contrary, refusal to accommodate certain mechanisms, and mainly these that effectively limit FIFA’s executives’ power (e.g. Ethics Committee), may lead to a forceful, but legitimate, public intervention with possibly tragic consequences for the world of football.

Conclusion: Taking over fallen FIFA

What is so fascinating about FIFA is that it exemplifies how a very small number of enthusiastic people could set a mechanism that is ultimately able to create institutions that aim to regulate behavior of involved actors globally as well as to keep them away from regular courts. FIFA is an example of an order that has created huge economic and social value by being able to overcome many hurdles that prevented countless other member associations from creating their own orders (think of lawyers or investment bankers, for example). The fact that such order locks-in all involved football actors, despite some, such as small teams, benefiting significantly less by their participation than others, suggests that there is a value, despite FIFA’s monopoly power, that alternatives cannot offer. Some of them, such as increased certainty, are in the interests of all involved actors, whereas others, such as commitment to enforce contractual practices or training compensation awards, are more preferred by sophisticated actors (i.e. clubs and prominent footballers) and small clubs, respectively. This, though not allowing to state plainly that the private order is maximizing the welfare of all involved actors, also does not justify arguments for abandoning the current system in favor of state laws. In contrary, failure to accommodate mechanisms that limit the power of inside interest groups might undermine the order by giving incentives to interest groups to advocate public orders’ involvement, thereby putting an end to the monopoly of FIFA’s order, and possibly its destruction.