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Understanding And Addressing The Regulatory Void In Online Gaming Through Recent Judgments

Sunil Tyagi
8 Jan 2021 4:13 AM GMT
Understanding And Addressing The Regulatory Void In Online Gaming Through Recent Judgments
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The Indian tryst with online gaming, its legality and regulation has been a long one. As our society edges closer to being inundated with mobile phones and high-speed internet connectivity, we can see a corresponding rise in the menace of online gambling and the need for its management, so as to weed out illegitimate activities while protecting legitimate players. The Constitution...

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The Indian tryst with online gaming, its legality and regulation has been a long one. As our society edges closer to being inundated with mobile phones and high-speed internet connectivity, we can see a corresponding rise in the menace of online gambling and the need for its management, so as to weed out illegitimate activities while protecting legitimate players.

The Constitution of India under Article 246 refers to the division of legislative power between the center and the states. "Betting and Gambling" fall within the purview of the state list, empowering the respective state legislatures to enact laws in so far as betting and gambling is concerned. The Public Gambling Act 1867 is the central enactment to make provisions for the punishment of public gambling which has been adopted by certain states whereas the other states have enacted their own respective legislations. Most notable examples being Goa and Sikkim that have allowed gambling within their jurisdiction subject to the regulation of their respective governments.

When addressing concerns of online gambling, it is imperative to differentiate between a game that requires a degree of skill from those that are entirely luck based, this is because most state legislations provide exemptions to games of 'mere skill' ( for example in the Public Gambling Act 1867 an exemption has been carved out under section 12). It has been authoritatively held that competitions/games that involve substantial skill are not gambling activities. Furthermore, such activities are in fact business activities and are therefore protected under Article 19(1)(g) of the Constitution.

As early as 1933 in Saligram v. Emperor a learned judge of the Calcutta High Court laid down the defense that in order to escape conviction, it must be shown for all intents and purposes that the game being played was one of skill and nothing else, this helps us appreciate the evolution of jurisprudence surrounding games of skill and chance as discussed through the contemporary cases mentioned below.

The hon'ble Supreme Court in State of Andhra Pradesh vs. K. Satyanarayana & Ors (1967) distinguished rummy, a game not entirely based on chance, from 'flush', 'brag' etc. that were determined to be games of pure chance. It was opined that rummy requires considerable amount of skill in holding and discarding cards and therefore was mainly and preponderantly a game of skill. The court acknowledged that although there is an element of chance in the manner in which cards are shuffled and dealt out, it cannot be said that rummy is a game of pure chance and no skill is involved. Furthermore if there is evidence of gambling or that there is profit or gain being earned from the game of rummy or any other game played for stakes, this would count as an offence, however, if such elements are missing and persons are found playing rummy, the game does not fall under the definition of gambling as it is not a game of pure chance and for this reason such acts would not count as an offence.

In K.R. Lakshmanan vs. State of Tamil Nadu & Ors (1996) it was observed that games may be of chance, or of skill or of skill and chance combined. The throw of the dice, the turning of a wheel, the shuffling of cards all depict modes of chance as the result is wholly uncertain and doubtful. However, a game of skill is one in which success depends principally on superior knowledge, training and experience of the player. There are few games if any that are purely skill or luck based, therefore, what needs to be ascertained is whether the game is one in which the element of skill predominates over the element of chance or vice a versa.

At this juncture is must be noted that gaming is not an offence per se, it is punishable when carried out in a public place for a commercial purpose and in a common gaming house with a motive for profit as contemplated under the requisite legislation. Therefore as held in Kanwardeep Singh v. Union Territory of Chandigarh (2008), playing cards during the festive season, in a private property not for gain or profit would not constitute an offence.

Similar questions were raised with one of the most popular games recently in Varun Gumber v. Union Territory of Chandigarh and Ors. (18.04.2017) regarding fantasy gaming, specifically the operation of Dream 11 as a legitimate online gaming platform. The court was of the view that the playing of fantasy games by any participant involves the creation of a virtual team which certainly requires considerable skill, judgment and discretion. The participant has to assess the relative worth of each athlete/sportsperson as available for selection. He is required to study the rules and regulations and the strengths and weaknesses of each player based on an evaluation of past performances. He must further analyse factors such as age, injuries, the peculiarities of the stadium and other material factors that may have a bearing on the athletes performance. Success in Dream 11's fantasy sports arises out of a user's understanding of the rules, assessing the relative worth of the athlete and the anticipated statistics from real world events and devising overall strategies in selecting players and playing the game. Therefore it was determined that the element of skill has a much greater predominant influence on the outcome of the Dream-11 fantasy sports game than any incidental chance. For this reason it was held that Dream 11's fantasy sports are an exercise of superior knowledge, judgement and attention and therefore incorporated an element of skill and would not fall within the activity of gambling. It was further elucidated that the fantasy games would be considered a legitimate business activity and would be protected under Article 19(1)(g) of the Constitution of India. (This judgment had been subsequently challenged before the Hon'ble Supreme Court in a Special Leave Petition however it was dismissed vide order dated 15.09.2017).

Recently the High Court of Rajasthan in Chandresh Sankhla v. The State of Rajathan and Ors. (14.02.2020) reiterated that the scope and ambit of the term 'game of mere skill' is twofold:

  • The competition where success depends upon the substantial degree of skill are not gambling;
  • Despite there being an element of chance, if a game is preponderately a game of skill it would nevertheless be a game of 'mere skill'.

Therefore card games where cards are shuffled and dealt out, there is an element of chance. However, this does not take away from the amount of judgment and discretion in holding and discarding cards. Likewise when it comes to fantasy sports the skill exercised in evaluating and drafting a virtual team and making substitutions in light of prevailing statistics has a much greater influence on the outcome as opposed to incidental chance.

The gaming industry in India is undergoing a dramatic transition as acknowledged by the Madras High Court in D. Siluvai Venance (24.07.2020). A significant challenge to effective and uniform regulation is the fact that gaming/gambling is a State subject and thus the legislation differs from State to State. What is permitted in one State may be an offence in another. It is also important to note at this juncture that such State legislations have been enacted prior to the advent of virtual/online gaming in India. The States of Sikkim, Nagaland and Telangana have introduced amendments so as to bring online gaming into their ambit. (The Sikkim Online Gaming (Regulation) Act, 2008, mandates that a licence has to be obtained for conducting online games whereas the Telangana Gaming Act, 1974, amended the definition of 'Common Gaming House' to include cyber space).

The Gujrat High Court via its decision in Amit M Nair v. State of Gujrat (29.09.2020) was faced with the concern that online gambling platforms are engaged in illegal activities and the same remains unchecked/ uncontrolled owning to deficiencies within the legal infrastructure (in this case the Gujrat Prevention of Gambling Act, 1887). It was opined that internet gambling presents many of the traditional concerns associated with gambling activities such as the likelihood of addiction and the high possibility of fraud, however this is coupled with pervasive accessibility of such websites which is putting children/ minors at risk.

As observed by the Gujrat High Court, the Hon'ble Supreme Court has on multiple occasions determined that 'Rummy' is a game of skill and not entirely of chance, unlike 'flush' or 'brag' (State of Andhra Pradesh vs. K. Satyanarayana & Ors and K.R. Lakshmanan vs. State of Tamil Nadu & Ors). However, it is important to investigate whether what is being played is Rummy in its true sense or just pure and simple gambling. This would need to be determined as per the facts and circumstances of each case.

The Gujrat High Court in Amit M. Nair concluded that while it is not permissible under the exercise of writ jurisdiction to direct the State Government to enact a particular type of legislation, it could always draw the attention of the State Government to the facts of the case so that they may treat the same as a representation and take appropriate steps at the earliest. The Government was also implored to examine whether such games result in money laundering or violation of laws related to foreign exchange as well and promptly take decisions in accordance with law in the larger public interest before it is too late.

Therefore a comprehensive legal framework is the need of the hour, keeping in mind the law of the land as well as the judicial precedents, to curb any illegal/ illegitimate gaming/ gambling activities. Such regulation would encourage investment in the sector, which could in turn lead to technological advancements as well as generation of revenue and employment.

Mr. Sunil Tyagi is an exemplary legal professional and has been a practicing lawyer for over 29 years. He is the Senior Partner and Co-founder of Zeus Law, heading the Real-Estate & Infrastructure, Corporate & Commercial Law and Compliance divisions. He is well versed with the intricacies of Indian Civil Law, Business and Commercial Law and regularly advises foreign investors as well as Indian entrepreneurs on their business and legal strategy with respect to investment in India. Nitika Bakshi is an associate (trainee) in the Corporate Team of Zeus Law Associates and has largely worked on research and corporate matters. 

Views are personal.

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