ABSTRACT:
The acceleration of the online gaming sector in India has begun a vigorous debate on legal, regulatory, and ethical matters. With smartphones readily accessible, low-cost internet infrastructure, and digital forms of payment, many millions of Indians are playing online in its many forms from casual games to real money fantasy sports and poker sites. However, the rapid acceleration in gaming growth has highlighted considerable gaps in India’s current legal framework in the area of online gaming and gambling.
A legal critical point between a “game of skill” and a “game of chance” defines the prominence of a gamification approach that is at the centre of India.” Games of skill are considered a permissible form of leisure, while games of chance are often deemed illegal forms of gambling under the Public Gambling Act, of 1867, or specific state legislation. The inherent difficulty in accurately describing online games, especially around real money gaming has created vagueness and diverging judicial interpretations across provinces and territories. Some landmark rulings, such as K.R. Lakshmanan v. State of Tamil Nadu[1] and more recent High Court decisions, have tried to describe these distinctions, but a central law is still required if players are to receive unequivocal legal protection.[2] and more recent High Court decisions, have tried to describe these distinctions, but a central law is still required if players are to receive unequivocal legal protection.
Further, various issues relating to consumer protection, gaming by minors, gaming addiction, financial fraud, and money laundering have pushed the availability of online gaming to public discussion. On the one hand, the central government recently moved to present the draft rules on online gaming, under the Information Technology Act, of 2000, but the absence of harmonization with state laws is still a problem.
This article provides an outline of the current legal regime in India relating to online gaming and gambling, judicial trends around the offer of online gaming, new policy developments on this topic, as well as the ongoing regulatory challenges, that consumer protection issues can compound.
KEYWORDS: Online Gaming, Gambling, Game of Skill, Game of Chance, Judicial Precedent, Challenges
INTRODUCTION:
The online gaming industry in India has seen explosive growth over the last ten years, buoyed by the incredibly high penetration of smartphones, cheap internet (including the advent of 4G), and the availability of online payment methods. Whether it’s simple recreational games such as Ludo and Candy Crush, or real money games such as poker, rummy, and fantasy sports, India’s gaming ecosystem is now one of the largest in the world. Industry estimates indicate that India’s online gaming market is now on course to exceed several billion dollars in annual revenue, and is poised to become a fantastic market for local and international capital.
However, this rapid growth has raised many legal and regulatory issues. Most of India’s legal structure concerning gaming and gambling was enacted before the Internet revolution, and the Public Gambling Act, [3]1867, was the basis for most of India’s gambling framework. This outdated colonial legislation only targets physical gambling establishments and is at odds with some of the complications that can arise from an online gaming platform. Additionally, India’s federal structure gives states the right to regulate when it comes to gambling and betting, leading to many differing laws and policies across the country. when it comes to gambling and betting, leading to many differing laws and policies across the country.
Games of skill (for example, chess or rummy) are usually not covered by gambling prohibitions, and games of chance (for example, poker or fantasy sports) often are prohibited or illegal. Courts have repeatedly been asked to rule on whether games such as rummy, poker, or fantasy sports challenges are games of “skill” or “chance” and as a result, courts have established new legal precedents, sometimes resulting in more confusion than clarity.
The Indian gaming industry is developing on both a vertical and horizontal basis each year, stimulating the purpose and emergence of a market for substantial and codified gaming laws and regulations. As the pandemic-driven social distancing policy grew, the gap between users and the internet shrank, and awakenings took place with both developers and the government to evolve the technology and the laws governing technology. With the surfacing of the growing technology in the gaming industry, the government’s development of Animation, Gaming, and comic (AVGC) opportunities is just starting to be recognized.
A comparative upside of gamers from 2021 to 2022 is roughly 12%. The online gaming market in India was worth $2.6 billion in 2022 and projected to grow at a CAGR of 27 percent and reach $8.6 billion by 2027 will explode the online gaming market.[4]
CONCEPT OF ONLINE GAMING AND GAMBLING:
Online gaming could simply refer to gaming over the internet ranging from casual games to competitive e-sports, real money games, or social gaming. The Indian online gaming ecosystem/PMA consists of fantasy sports (e.g. Dream11, MPL), online rummy and poker, e-sports competitions, casual gaming applications, and broader social gaming aspects.
Gambling on the other hand can generally be considered as staking or risking money or something else of value on an outcome of an event or game. Outcomes are ultimately determined by chance, typically winning additional money or somewhere of value (as in the case of winnings). In an Indian law context, it depends on if it is a game of chance or a game of skill.
The difference between games of skill and games of chance is an important legal dividing line in India.
A game of skill is one in which the winner is based mainly on the player’s superior knowledge, training, attention, experience, or judgment. Games of skill include chess, rummy, and a limited number of fantasy sports.
A game of chance is one where the outcome is determined primarily by chance or by random events, which include lotteries, various dice games, and again most forms of betting.
In recent years, we have seen hybrid forms of games where there are skill-based performances and money as part of the monetary reward that can create grey areas of regulation. Online fantasy sports are one normative example where players construct a virtual sports team from real-life athletes, and the courts would consider those to be games of skill but still involve money.
LEGAL FRAMEWORK IN INDIA:
National Level:
At the national level, and under the broader context of Indian law, we have
- The Public Gambling Act, 1867:
It is the main statute governing gambling in India. The Public Gambling Act prohibits a person from operating or visiting a “common gaming house”, however, it does not mention online gambling or gaming outright.[5] One important point to note is that the Public Gambling Act specifically exempts games of skills from its coverage. Skill versus chance in gaming law is extremely relevant to Indian law, although it is not defined or well expressed in the Act.
- Prize Competitions Act of 1955
This Act governs competitions in which prizes are awarded based on skill (puzzles and crosswords) and establishes limits on the number of individual prizes to prevent large-scale gambling under the guise of competitions.[6]
State Level:
- Tamil Nadu:
Tamil Nadu Passed the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022[7], which bans online gambling but regulates online games.
- Kerala:
The Kerala High Court quashed a notification from the state government to ban online rummy, citing it was arbitrary and unconstitutional.[8]
Self-Regulatory Bodies:
To further the commitment to responsible gaming practices, self-regulatory bodies have been established.
- All India Gaming Federation (AIGF):
AIGF is a non-profit organization that was founded in 2016 and supports self-regulation and advocacy for online skill gaming operators in India.[9]
- Federation of Indian Fantasy Sports (FIFS):
FIFS was established in 2017 and aims to promote consumer interests and develop standardized best industry practices in the fantasy sports arena.[10]
JUDICIAL PRECEDENTS:
State of Andhra Pradesh v. K. Satyanarayana (1968):
The Court found rummy is a game of skill generally speaking, and that skill dominates over chance in considering outcome.[11]
Dream11 Case (2021):
The Court held that fantasy sport is a valid form of legal activity and held fantasy sports to be a game of skill. The Court specifically pointed out that fantasy sports involve a user knowing superior information, applying judgment, and maintaining attention would differentiate if the outcome was determined by skill as opposed to chance, which would not involve that application.[12]
Junglee Games India Pvt. Ltd. v. State of Tamil Nadu (2021):
The Madras High Court has repealed the blanket ban on electronic games, including rummy and poker, provided for under the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021. The Court held that games like rummy and poker are competitive forms of skill-based games and cannot be classified as gambling.[13]
CHALLENGES:
- Fragmental Legal Infrastructure
- There is currently no single national framework for the regulation of online gaming. This absence leads to a patchwork of regulations with some states allowing and regulating online gaming while other states condemn and prohibit it.
- Unclear Demarcation of Games of Skill and Games of Chance
- Differentiating between games of skill and games of chance are murky waters. As a result of this uncertainty, we have seen many decisions that contradict each other in their legality for the same sort of game across jurisdictions.
- Insufficient Consumer Protection measures
- While many gaming platforms may have some form of user protection, few have real or substantial mechanisms in place to protect users from developing gambling problems or issues like: underage gambling or fraud. The overall lack of unified protection creates vulnerable users.
- Tax and Financial Compliance Issues
- The requirement and mounting strain of high Goods and Services Tax (GST) rates for online gaming activities, has made compliance taxing for many operators. There are significant inconsistencies regarding taxation from state to state.
RECOMMENDATIONS :
To promote a safe, transparent, and financially beneficial online gaming system in India, several recommendations are suggested:
Creation of Central Regulatory Authority
Create a national regulatory authority to regulate online gaming, and to promote uniformity across states, since the laws governing online games are different in each state.
Create a Uniform Legal Environment
Develop a national legalized framework that outlines and distinguishes games of skill and games of chance in a comprehensive way, providing operators and users with a clear ecosystem in which to conduct their activity.
Responsible Gaming
Introduce legislation with features including self-exclusion, deposit limits, and time restrictions to protect vulnerable users and operations.
Consumer Protection
Develop, monitor, and enforce user data privacy, a secure payment method, and procedures for resolving disputes.
Promote Public Awareness
Promote public awareness of the legal aspects of online gaming, information on real and potential harms, and how to get help with problem gaming.
CONCLUSION;
India’s online gaming sector has proliferated rapidly due to the ubiquity of smartphones and the affordability of internet connectivity. However, it is unclear what is legal in the online gaming environment because of fragmented laws, and due to the Internet as a new distribution channel, India is facing challenges in regulating this new form of gaming and play. The Public Gambling Act of 1867 is the key act related to gambling; however, it does not reference online gambling platforms. Legislative ambiguity around the online gaming medium and the applicable laws exists.
There is limited case law concerning the legal statutes surrounding online gaming. The Supreme Court of India has established some important precedents where it has determined that certain games (for example, rummy and poker) are defined as games of skill rather than games of chance. As a result, games of skill are not known to be gambling.
To continue to grow the online gaming industry, at least two recommendations exist that will assist the sector. Government representatives are in favor of establishing a central regulator that will implement rules that will be formed across all state boundaries. There is a need to define both games of skill and games of chance to properly delineate between the two categories. Once such definitions are made, consumer protection measures should be established to offer reasonable protections to gaming users. Such actions will be essential in creating and building UK trust in the online gaming sector and continued growth in the industry.
[1]https://indiankanoon.org/doc/1248365/
[3]https://www.indiacode.nic.in/bitstream/123456789/2269/1/AAA1867____03.pdf
[4]https://www.ahlawatassociates.com/gaming-and-gambling-laws
[5]https://www.indiacode.nic.in/bitstream/123456789/2269/1/AAA1867____03.pdf
[6]https://www.indiacode.nic.in/bitstream/123456789/1515/1/AAA1955___42.pdf
[7]https://prsindia.org/files/bills_acts/acts_states/tamil-nadu/2023/Act9of2023TamilNadu.pdf
[8]https://www.livelaw.in/news-updates/kerala-high-court-lifts-ban-on-online-rummy-finds-it-unconstitutional-game-of-skill-182529
[11]https://www.casemine.com/commentary/in/rummy-defined-as-a-game-of-skill:-implications-from-state-of-andhra-pradesh-v.-k.-satyanarayana-and-others/view
[12]https://fifs.in/the-supreme-court-once-again-affirms-fantasy-sports-offered-by-dream11-as-a-game-of-skill/
[13]https://www.livelaw.in/pdf_upload/junglee-games-india-private-limited-v-state-of-tamil-nadu-397904.pdf
