How online gaming is caught between state legislations and public interest litigations

Updated: October 10, 2021 1:14 PM

The Centre and the State governments must work together to arrive at a common ground on the regulation of online gaming and clarify the distinction between a game of skill and a game of chance

Currently, at least four writ petitions have been filed by the All India Gaming Federation (AIGF) and three other gaming companies, challenging the constitutional validity of the Karnataka Police (Amendment) Act, 2021Currently, at least four writ petitions have been filed by the All India Gaming Federation (AIGF) and three other gaming companies, challenging the constitutional validity of the Karnataka Police (Amendment) Act, 2021

By Shivani Jha

The Karnataka government recently began enforcing the Karnataka Police (Amendment) Act, 2021, which criminalises all activities that fall under the umbrella of online gaming by bringing it under the scope of ‘wagering and betting’. The legislation subjects players participating in such activities to a punishment of up to three years of imprisonment and a fine of Rs 1 lakh. It is evident that, by including even online ‘games of skill’ under the scope of the enactment, the government has completely disregarded the distinction between ‘games of skill’ vs ‘games of chance’, which lies at the heart of distinguishing gambling from gaming. The term ‘game of skill’ threatens the burgeoning online gaming industry participants and jeopardises livelihoods.

Currently, at least four writ petitions have been filed by the All India Gaming Federation (AIGF) and three other gaming companies, challenging the constitutional validity of the Karnataka Police (Amendment) Act, 2021. The petitioners have argued that the ban is arbitrary, vague and unreasonable and does not meet the proportionality test and should thus, be struck down.

Kerala High Court Makes Way for Online Rummy

While one state has banned all games, skill or chance-based through legislation, the Kerala High Court struck down a notification by the government which banned online rummy. The Court found the notification to be unconstitutional for not qualifying as a reasonable restriction under Article 19(6) of the Constitution of India. The Judgement lifts the ban on Online Rummy while acknowledging it is predominantly a game of skill over chance. The Court highlighted the ‘substantial degree of skill test’ and ruled that games that involve preponderance of skill over chance are lawful and only games where the element of chance dominates over skill would be considered gambling and thus, be prohibited.

Legal Status of Online Gaming in the Different States in India

‘Sports’ and ‘betting and gambling’ fall under the ambit of the State List as provided under the List-II of Seventh Schedule in the Constitution of India. Accordingly, different states have taken different measures to deal with the regulation of gambling and sports.

In September 2021, the Madras High Court had struck down Part II of the Tamil Nadu Gaming and Police laws (Amendment) Act, 1930, which laid down prohibitions on money-based online games of skill. The Court deemed the amendment to be ‘unreasonable, excessive and manifestly arbitrary’ restrictions on fundamental rights under Article 19(1)(g) of the Constitution of India -which safeguards the right to practise any trade or profession in India. It further held that the State Legislatures’ powers to enact laws on ‘betting and gambling’ under the Constitution of India are limited to betting on games of chance. Further, even though the State Legislatures may enact laws to regulate skill games, an outright ban on a game of skill was viewed as arbitrary and unreasonable.

Similarly, the Telangana Gaming (Amendment) Act, 2017 and the Andhra Pradesh Gaming (Amendment) Act, 2020, prohibit all forms of gaming for money, be it games of skill or games of chance. Whereas, under the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016, “Gambling means and includes wagering or betting on games of chance but does not include betting or wagering on games of skill.” This Act provides the issuance of licenses necessary for participation in ‘games of skill’, and it also provides a schedule that enlists games that qualify as “‘games of’ skill’. So, there is no ambiguity about which games are permitted under the Nagaland law. Similarly, the Sikkim Online Gaming (Regulation) Act 2008 has embedded a similar approach of licensed online gaming as envisioned in Nagaland.

A few states, including Bihar, Madhya Pradesh, Uttar Pradesh, have adopted the Central Public Gambling Act, 1867. The position of law regarding online gaming under this Act remains unclear at present.

The varied stances taken by different states highlight the need for uniformity in the regulation of online gaming.

Public Interest Litigations (PIL(s)): A Source of Disarray for Gaming Laws and Policies in India

The Indian Courts have dealt with different online games to clarify their classification as a ‘game of skill’ or ‘game of chance’ to decide the applicability of different state gambling regulations on them. While there is no consensus among the State Governments on a uniform approach towards online gaming regulation, the judiciary has rendered many judgements in several Public Interest Litigations (“PIL”) that have further mystified the legal validity of online gaming in India.

In Gujarat, a PIL was filed to challenge the ban on PUBG imposed by its state government which was dismissed for not falling under the ambit of public interest litigation. The Bombay High Court, in Gurdeep Singh Sachar v Union of India, dealt with the game of skill vs game of chance debate while deciding the GST implications on the fees pooled by players of Dream11 Games.

This debate has been extensively discussed in numerous decisions of various high courts across the country. Most recently, in the case of Junglee Games India Private Limited. v. The State of Tamil Nadu, the Madras High Court lifted the absolute ban on online gaming imposed in Tamil Nadu. Similarly, the Rajasthan High Court had dismissed two PILs against Dream11 Fantasy Private Limited, which alleged that the game being played online is nothing but “betting’ on the official sports team. One of these PILs was upheld in the Supreme Court, which held that online fantasy sports involve skill and cannot be construed as gambling.

The Kerala notification and the Tamil Nadu Act resulted from PILs filed in the respective high courts. The irony in the situation is certainly not lost when both were eventually struck down due to PILs filed against the notification/act in either case.

The Allahabad High Court is currently dealing with a PIL, wherein the ban is being sought on online gambling sites that allegedly cheat the public by manipulating results. Presently, the Court has asked the Uttar Pradesh government to file a counter-affidavit reply to the PIL.

Recently, the Delhi High court also dismissed a PIL that raised the issue of the addiction to online games among children and directed the Centre to consider formulating a national policy protecting children from online games addiction and exploitation. The Centre replied to the Court emphasising that the issue of gambling and sports expressly falls under the domain of the states and must be dealt with accordingly.

The above mentioned PILs represent only a minor percentage of ongoing litigation that have already been or are currently being decided by the courts. This has created nothing but another channel for enhancing the ambiguity on the legal position of online gaming in India. The Supreme Court has repeatedly highlighted the misuse of PILs and how they squander the time and efforts of the courts.

In the case of online gaming, as can be interpreted from the abovementioned PILs, it is not just the courts’ resources that have been exploited. Even the state legislatures have time and again been directed to act on the result of a PIL, despite the matter being enlisted under their domain, i.e., the State List, in the first place.
It is only in the interest of the states to formulate policies on the regulation of online gaming through systematic consultation.

Way Forward

Online gaming has been booming rapidly, particularly; India’s esports market size has quickly scaled to Rs 3 billion in FY 2021. It is expected to reach Rs 11 billion by FY 2025. It is imperative that states recognise the lack of uniformity in the legal stance of online gaming in India. The confusion concerning the same has been amplified by the many PILs filed and entertained by the courts.

The Centre and the State governments must work together to arrive at a common ground on the regulation of online gaming and clarify the distinction between a game of skill and a game of chance to clear the smoke encircling the online gaming industry since the 1950s.

This has become even more crucial considering that eSports has been enlisted as a medalled event in Asian Games 2022. Therefore, a well-defined regulatory framework for eSports is urgently needed to ensure success for the country and its players in the Asian Games 2022.

(The author is a tech policy researcher and legal head at the Esports Players Welfare Association ( EPWA). Views expressed are personal and do not reflect the official position or policy of the Financial Express Online)

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