(Pooja Tidke and Mallika Noorani)
The advent of technology and the constantly increasing number of internet users has led to a paradigm shift in how the gaming industry operates. Rummy, poker, fantasy sports, and other games have now found online players and audiences, but much of the regulatory realm on fantasy sports and online gaming in India remains ambiguous. Online gaming can be divided into three core categories, i.e., real money games (such as poker), mobile centric games (that set up pay walls to aid progression), and e-sports (such as FIFA). In recent years, fantasy sports has emerged as a unique format unlike any other online gaming format present in India and has shown great promise and popularity among young working professionals.
With Dream 11, the fantasy sport platform, sponsoring the Indian Premier League 2020, interest in fantasy sport has significantly grown in India. The Online Fantasy Sport Platform (OFSP) includes not just Dream 11, but many other players such as My 11 Circle, My Team 11, Howzat Fantasy, that have gained prominence in recent years. These platforms allow sports fans to build virtual teams containing counterparts of real players from upcoming matches and score points based on their on-field performance. The legality of fantasy sports has been discussed by courts in India, with most concluding that fantasy sport is a game of skill and not a game of chance. In August 2021, the Supreme Court upheld the Rajasthan High Court’s finding that Dream 11 is a platform that involves skill and does not amount to gambling.
Gambling, as a practice, is illegal in all states except Goa, Daman & Diu, Sikkim, and Nagaland. Games of chance are considered gambling in India, and banned in common houses under Entry 34 of List II of the Constitution of India, except in some states like Sikkim and Nagaland, that regulate it. This is since such games result in the exchange of money based on the outcome of an uncertain future event, and involve limited learned ability, strategy, physical coordination or strength, technical expertise, or specific knowledge. The Public Gambling Act, 1867, states that a game of mere skill does not fall within the scope of gambling.
Precedent on the Subject
In The State of Bombay v R.M.D. Chamarbaugwala, the Supreme Court interpreted the term ‘mere skill’ to mean games which predominantly rely on skill. In order to not be classified a game of chance, a game would have to involve a significant exercise of skill. The Court further clarified in K.R. Lakshmanan v State of Tamil Nadu, that even though the element of chance cannot be completely removed, success in a game of skill relies greatly on knowledge, training, attention, experience, etc., laying down the ‘preponderance of skill’ test.
In State of Andhra Pradesh v K. Satyanarayana & Ors, while determining whether Rummy was a game of skill or chance, the Supreme Court held that it required players to memorise cards and hold and discard them, indicating the need for considerable skill. The court observed that the game of Rummy is not a game of entire chance. It is mainly and preponderantly a game of skill. The chance in Rummy is of the same character as the chance in a deal at a game of bridge. In fact in all games in which cards are shuffled and dealt out, there is an element of chance, because the distribution of the cards is not according to any set pattern but is dependent upon how the cards find their place in the shuffled pack. From this alone it cannot be said that Rummy is a game of chance and there is no skill involved in it.
In Shri Varun Gumber v Union Territory of Chandigarh & Ors, the Punjab & Haryana High Court held that fantasy sports differ from online gaming and involve the application of skills in the drafting of teams by assessing the relative worth of the players, and take into consideration other crucial real-world factors such as the pitch, climate, health of the players, etc. The decision was appealed before the Supreme Court, but was summarily dismissed.
The Bombay High Court relied on this decision of the Supreme Court in Gurdeep Singh Sachar v Union of India, wherein it observed that unlike betting, winning or losing in fantasy sports was not dependent on any team winning or losing in the real world, and Dream 11 could therefore not be found guilty of carrying out gambling or betting in the guise of online fantasy sports gaming. The High Court of Rajasthan came to a similar conclusion in Ravindra Singh Chaudhary v Union of India & Ors.
State Laws Relating to Online Gaming
While recommending the exemption of skill-based games from the purview of gambling, no definition for the term game of skill was provided by the 276th Law Commission Report, resulting in varying interpretations of the concept. States such as Tamil Nadu, Telangana, and Karnataka have introduced laws or amended existing laws to ban online gaming that can take the form of gambling.
Telangana’s Gaming (Amendment) Act, 2017 has expanded the meaning of wagering and betting to include acts that risk money on uncertain events, even if such game is one of skill. This amendment has been challenged in the High Court of Telangana and the Court is yet to decide the matter. Tamil Nadu passed an ordinance that bans betting or wagering of any kind in cyberspace using any communication devices or computers, through common gaming houses, and electronic transfer of funds to deliver prize money. Punishment for violation of this law includes a two-year term of imprisonment and a fine of up to Rs. 10,000 or both. The Karnataka Police (Amendment) Act, 2021, too, bans online gaming and betting. It provides for imprisonment for a maximum of three years, a penalty of up to Rs. 1,00,000, or both for contraventions of its provisions. Lawyers for the petitioners have argued that the state does not possess the competence to legislate on games of skill. The Karnataka High Court has reserved its order on a batch of petitions challenging the constitutionality of the law in All India Gaming Federation v State of Karnataka. The Andhra Pradesh Gaming (Amendment) Act, 2020 also places restrictions on online games such as Rummy, that has been designated as a game of skill.
Need for Regulation
With the COVID-19 pandemic resulting in lockdowns and limited access to the outdoors, a large portion of the population has turned to the internet for entertainment. The accessibility and affordability of smartphones, tablets, and PCs has further played a role in growing participation in online gaming. Today, the online sports and games industry in India is valued at approximately USD 1.6 billion and is expected to reach USD 7 billion by 2025.
Much remains to be clarified regarding the distinction between skill and chance-based games and the manner in which each state government regulates it. If fantasy sports involve the evaluation of a number of factors, games like poker that involve math and memory skills, with many training and learning to be skilled at it in order to excel may also be categorized as skilled based at a later time. Any regulation regarding gambling must clearly lay down the contours that distinguish these games from each other, allowing one to be permissible, and the other banned. The absence of intelligible differentia has resulted in “gaming” and “gambling” being used interchangeably leading to the prohibition of legitimate businesses.
Having stated thus, a complete ban on gambling may not result in productive outcomes and will likely result in the emergence of new means of gambling. By regulating the sector instead, governments stand to gain significantly in the form of taxation considering the contribution to the exchequer from the fantasy sports segment alone which is estimated to cross INR 13,500 crore by FY24. It remains to be seen how fantasy sports and online gaming platforms will be regulated and how courts reconcile the distinctions in their categorization.
