Blog

On November 9, 2023, the Madras High Court upheld the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022, but removed 'rummy' and 'poker' from being classified as games of chance. This decision follows the court's earlier action in 2021, where it struck down the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, as unconstitutional in the Junglee Games India Private Limited v. State of Tamil Nadu case. You can read judgment from here All India Gaming Federation Vs. The State of Tamil Nadu

Telangana

Telangana has been stringent in its approach towards online gaming, with the Telangana Gaming (Amendment) Act, 2017, imposing a broad ban. While there hasn't been a landmark court order overturning the ban, the state's legislative approach has faced criticism for its broad sweep and potential infringement on rights. Legal challenges continue to be made, and the industry closely watches for any significant judicial review that might alter the state's legal landscape regarding online gaming.

Kerala

In a noteworthy judgment, the Kerala High Court in 2021 quashed a state government notification that banned online rummy played for stakes. The court highlighted that playing rummy for stakes does not amount to gambling per se and emphasized that a game of skill, even when played for money, does not become gambling. This decision was pivotal for online gaming platforms offering rummy and similar games, reinforcing the legal protection for games of skill.

Laws & Legsilations affecting/Governing online gambling in India

• Bombay Prevention of Gambling Act, 1887

• Punjab Public Gambling Act, 1867

• Madhya Pradesh Public Gambling Act,1867

• Tamil Nadu Gaming Act, 1930

• The West Bengal Gambling and Prize Competitions Act, 1957

• Uttar Pradesh Public Gambling Act, 1961

• The Meghalaya Prevention of Gambling Act, 1970

• The Kerala Gambling Act, 1960

• The J. & K. Public Gambling Act, 1977

• Goa, Daman and Diu Public Gambling Act, 1976

• The Pondicherry Gaming Act, 1965

• The Rajasthan Public Gambling Ordinance, 1949

• Assam Game and Betting Act 1970

• The Sikkim Online Gaming Act of 2008 

The Debate Over Games of Skill vs. Games of Chance

The distinction between games of skill and games of chance is a fundamental legal, social, and economic issue within the online gaming industry in India and worldwide. This debate is pivotal for regulatory purposes, determining which games are considered gambling (and thus subject to stricter regulation and often outright bans) and which are not. Below, we delve into the intricacies of this debate, its legal implications, and its impact on the online gaming landscape.

Defining Games of Skill and Games of Chance

Games of Skill: These are games where the outcome is predominantly influenced by the player's physical or mental skill rather than by chance. The player's expertise, knowledge, strategy, and decision-making ability significantly affect the game's result. Examples include chess, rummy, poker (to an extent, as argued in some jurisdictions), and fantasy sports.

Games of Chance: In these games, the outcomes are primarily determined by randomizing devices, such as dice, roulette wheels, or numbered balls drawn from a container. Players have little to no control over the outcome, and winning is largely based on luck. Examples include slot machines, lottery, and bingo.

Legal Implications and Regulatory Landscape

The legal status of a game being classified as one of skill or chance has profound implications. Games of skill often enjoy a more lenient regulatory environment, being exempt from many gambling laws, allowing for broader acceptance and operation within legal frameworks. On the other hand, games of chance are regulated under gambling laws, which can include prohibitions, age restrictions, and stringent licensing requirements. In India, the legal framework varies significantly across states, but a common theme is the reliance on the distinction between skill and chance. Several court rulings have reinforced this distinction, with the Supreme Court's judgment in the case of State of Andhra Pradesh v. K Satyanarayana (1968) being a seminal reference point, where rummy was declared a game of skill.

Challenges in Classification

One of the significant challenges in this debate is the evolving nature of games themselves, with many games blurring the lines between skill and chance. For instance, poker is widely regarded as a game of skill over the long term, but each hand's outcome has a significant element of chance. Similarly, fantasy sports require skill in terms of player selection and strategy, but the actual performance of chosen athletes (and thus the game's outcome) is uncertain and influenced by chance. Furthermore, technological advancements and the introduction of algorithms and artificial intelligence in online gaming have introduced new complexities. Some games may use algorithms to balance the skill levels of players, potentially introducing an element of chance in matchmaking.

Emerging Trends and Future Outlook

The Rise of Online Fantasy Sports

Online fantasy sports have seen a meteoric rise in India, with platforms like Dream11 being adjudged games of skill by various legal bodies. This has paved the way for a booming industry, albeit one that operates in a legal grey area, continuously challenged by regulatory uncertainties and legal battles.

Regulatory Proposals and Digital Innovation

In the 2021 amendments to the IT Rules, the guidelines are specifically designed for games involving real money and skill-based games that don't require payment, encompassing online fantasy sports, e-sports, and card games, among others. 

1. The first step involves the government creating a three-level system for resolving disputes, which includes establishing a grievance redressal mechanism for the oversight of gaming platforms. This will also involve the formation of a self-regulatory organization tasked with the registration and certification of online games, ensuring they adhere to the newly introduced rules. Initially, the government will recognize three such organizations, each including professionals from various sectors like education, health sciences, and social work, focusing especially on child protection.

2. the amendments classify legally permissible online real money games as those in which players invest cash or equivalent with the expectation of winning additional cash or prizes. These games must receive approval from self-regulatory bodies.

3. the changes bring in regulations for online gaming intermediaries, described as platforms that allow users to access one or more online games. This broad category includes internet service providers, web hosting services, cloud platforms, social media networks, and more.

4. online gaming platforms are required to perform KYC (Know Your Customer) verification for all users before accepting any initial deposits in cash or kind for allowed real money games. This KYC process is a customer identification, due diligence, and monitoring protocol typically followed by banks, NBFCs, and other financial institutions.

5.  there's a ban on online gambling games, including advertisements for such games and player regulations, to ensure adherence to guidelines aimed at preventing addiction and mental harm, emphasizing the importance of parental oversight.

6. the Group of Ministers (GoM) reviewing the goods and services tax (GST) rates for online gaming has suggested maintaining the current 18% tax for casinos and horse racing, while a 28% tax on the gross gaming revenue (GGR) is expected to continue.

Conclusion

The legal status of online gambling in India remains a dynamic and evolving issue, marked by a complex interplay between state-specific laws, judicial interpretations, and emerging digital trends. While states like Goa and Sikkim have embraced regulation, others have opted for prohibition, reflecting broader societal concerns. The distinction between games of skill and chance continues to be a pivotal legal question, shaping the industry's future.

As India moves towards potentially establishing a unified regulatory framework for online gambling, it will be crucial to address the challenges of consumer protection, ethical advertising, and responsible gaming. Balancing economic benefits with social responsibility will be key to the sustainable development of the online gambling industry in India.

This analysis underscores the need for a nuanced understanding of the legal, economic, and social dimensions of online gambling in India. As technology continues to advance and the market for online gambling grows, legal frameworks will need to adapt, ensuring a safe and equitable environment for all stakeholders involved.