Upping the Game: Online Gaming

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Credit: Glenn Carstens Peters

Disclaimer: This research note is an analysis of information available in the public domain and is purely informative in nature. No part of this document is to be construed as legal advice or legal opinion.

As a flourishing market, the domestic outlook of online gaming shows potential to establish a lasting impact as an industry. Online gaming, both as a sector and as an industry, appears to promise great opportunities not just to users/players but to entrepreneurs and content creators alike. Currently, statistics demonstrate a database of over 360 million users participating in online gaming which is estimated to rise to approximately 500 million by 2022.

This burgeoning industry now necessitates a robust regulatory framework in order to achieve a larger economic impact.

General law on gambling in India

“…gambling includes any activity or undertaking whose determination is controlled or influenced by chance or accident or any activity or undertaking which is entered into or undertaken with consciousness of the risk of winning or losing (e.g. prize competitions, a wagering contract)…”

Thus, anything that involves risking money to win money may be considered gambling. This would, therefore, include sports betting, poker, and casino games. However, there are other legislations in India which contradict this to some extent.

Horse Race Betting
Contrary to most betting activities, horse race betting and venues for horse races are deemed legal. However, it can be assumed that despite its legality at state level, horse racing remains unique as a betting sport, perhaps because the sport would not seem as appealing were gambling removed.

Lotteries
The Lotteries (Regulation) Act 1998 gives state governments the authority to organize at most one lottery draw per week.

Casino Gambling
Goa and Sikkim are two state governments in India which have passed state level legislation to allow legalized casino gambling.

Goa initially permitted slot machines within hotels, following it up with complete casino operations. The state now hosts several land-based casinos, while several cruise ships with in-house casinos operate under Goa’s jurisdiction, which has boosted the state’s tourism appeal.

Sikkim has also legalized casino gambling and is currently home to two land-based casinos. It is also a prime campaigner for legalizing online gambling.

Online Gambling
For obvious reasons, the Public Gambling Act of 1867 makes no reference to online gambling. The Information Technology Act of 2000 is another act which can be interpreted to comprise online betting and gaming: This makes provisions for various offences relating to online activity, although again, there’s no specific mention of online gambling being illegal. However, it does give the Indian Government the power to block foreign websites.

At state level, there are two states which have introduced legislation relating specifically to online gambling:

  • Maharashtra: It has completely prohibited online gambling.
  • Sikkim: The government now has the authority to issue licenses to operators wishing to provide online gambling services within the state. This is a notable step forward for regulated gambling in India.

Current Legal Overview

Whether a game is a game of skill or a game of chance depends on each individual case as decided upon by judicial pronouncements. For instance, horse betting and fantasy sports have all been deemed as games of skill. Rummy and poker are deemed games of skill in some states, while others categorically prohibit them. However, whether sports betting is a game of skill is still under review pending before the Supreme Court in the case of Geeta Rani v Union of India.

Casino games such as roulette, blackjack and slots are usually considered as games of chance. Therefore, they are treated as betting and gambling activities. Hence, these are prohibited under most Gaming Enactments (except for Sikkim, which permits certain casino games).

Game of Skill v. Game of Chance
This distinction as to whether a game is a game of skill or a game of chance is predominantly based on case precedents.

Online Gaming
In most states and union territories, using money or money’s worth in games of skill is legal in accordance with respective state laws based on the Public Gambling Act, 1867. It is worth noting that the usage of real money in online games is legal if it is used in a game of skill and not a game of chance. However, this provision is not all pervasive. Some states such as Assam, Odisha and Telangana have adopted a restrictive approach legislating against any use of money or money’s worth in any game as legal. Sikkim and Nagaland have established some relaxations where it is legal to organize betting on games of skill as long as the venue/club hosting is licensed.

Furthermore, using money in online games raises contractual risks, whereby a player enters into a contractual arrangement with the online gaming company under the Indian Contracts Act 1872. This mandates disclosure of personal details as any contractual arrangement with a minor is deemed void. These raise several legal complications on grounds of public policy.

As recently as July 2020, the Madras High Court in D Siluvai Venance v State (2020) observed and acknowledged the lack of regulatory framework and judicial precedents with regards to games, especially those which exist on the internet, except for Varun Gumber v Union Territory of Chandigarh (2017 Crl. LJ 3836), Gurdeep Singh Sachar v Union of India and Chandresh Sankhla v State of Rajasthan which deal with the legality of fantasy sports.

Poker and Rummy
The question surrounding poker as a game, whether it is legal or not, continues to be a contentious subject. There are several pending judgments and those adjudicated upon are, albeit, contradictory to each other. However, two judgements — from Karnataka HC and Calcutta HC — have pronounced in favour of poker. The considerations in these two judgments were not based on the debate of whether poker was a game of chance vs skill. The Karnataka High Court judgement focuses on: if poker is played as a game of skill, it does not require a license and therefore, the police cannot interfere with a game of poker being conducted. Similarly, the Calcutta High Court judgment merely states that since the game of poker ipso facto is not included within the purview of the West Bengal Gambling and Prize Competitions Act, 1957 on betting and gambling, without there being a specific complaint, police are advised not to crack down on places where such games are organized and initiate an investigation.

To bring some semblance of clarity to the subject, the Gujarat High Court detailed in its judgment in the Dominance Games Pvt Ltd v State of Gujarat that poker is a game of chance and therefore amounts to gambling under Gujarat Prevention of Gambling Act, 1887 and made the following observations:

  • Poker originated from ‘flush’ or ‘Indian teenpatti’ which has been observed by the SC as a game of chance in its 1968 judgment and consequently, as a corollary, the game of poker is also to be construed as a game of chance.
  • The game of poker involves a process in which the players have no control or say on the cards received by them and the final outcome is based on mere luck or chance, depending upon how the cards are received by the player.
  • Poker face to bet would be a part of bluffing or deception and the so-called strategy, cannot be considered as a skill.
  • The outcome also depends on the ability of a player to spend money and how deep his/her pockets are. It is a game of deceiving, bluffing and duping other players.
  • Rummy is different from poker. While poker involves betting or wagering, rummy has very little to do with stakes and betting or wagering is not essential to it.

Fantasy Sports
Along the same lines, the legality of fantasy sports in India is dependent on…

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Eximius Ventures is a pre-seed stage investment firm investing in young and dynamic Indian Entrepreneurs with a precedence for female founders. You can reach out to us at pitches@eximiusvc.com.

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  16. India Online Gaming: Seeing paradigm shift — Offers massive playing arena by Bank of America

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