[This is the first part of a two-part post authored by Mitali Kshatriya, a fourth-year law student at RMLNLU, Lucknow. Part II can be found here]
The Indian Gaming Industry is expected to swell to $2.8 Billion with an annual growth rate of 40%. Indian gamers have a 13% share of global game sessions and are expected to add 40 million online gamers during 2020−22. A significant part of India’s gaming industry consists of real money gaming. The increasing popularity of real money games has led to problems such as addiction, misleading advertisements, overspending by users etc. This has led states enacting knee-jerk legislations imposing blanket bans on real money games.
In India, regulating the online real-money gaming sector has majorly been a state turf. However, there have been few attempts to regulate this sector at the central level. In 2018, a private member bill was introduced that aimed to establish a central Online Sports Gaming Commission which would act as a regulator for online sports gaming websites. The NITI Aayog in a 2020 report proposed the formation of a self-regulatory board for fantasy sports. Unfortunately, the efforts to regulate real money gaming at central level has been limited to fantasy sports. Other real money games continue to be regulated by states.
The article in its first part sheds light on the existing legislative framework for governing real money gaming sector; the judiciary’s support for regulations instead of prohibition; and the scope for introducing central regulations. In the second part, it discusses suitable regulations that can tackle ill-effects of real money gaming without impeding the growth of the real money gaming sector.
Taking stock of State Laws
Regulating gambling and betting is a state subject under Entry 34 List II, which results in laws varying across state lines. Most state Gambling and Betting laws demarcate games of chance from games of skill, the former is usually banned while the latter is allowed. A game of skill is one where the success depends “principally upon the superior knowledge, training, attention, experience and adroitness of the player”, it may however involve an element of chance. The route taken by various state laws can be broadly divided into three categories:
1. The Complete Ban
These are the states which allow neither online games of skill nor games of chance to be played for real money. Some states in this category do not recognize the difference between games of skill and games of chance (e.g., Telangana and Andhra Pradesh). While other states allow games of skill only when they are not played for real money stakes (e.g., Arunachal Pradesh and Odisha).
2. The Partial Ban
These states allow real gaming money for games of skill. In these states, the prescribed regulation for online gaming platforms can either be detailed and extensive (e.g., Meghalaya and Nagaland) or a specific set of regulations can be non-existent (e.g., West Bengal).
3. The No Ban:
These are states which allow both games of skill and chance. Only Sikkim, Goa and the Union Territory of Daman allow games of chance to be played for money.
Judicial Support for Regulation
Various High Court decisions have expressed concerns over the lack of regulations in the online gaming sector and have asked state governments to formulate suitable laws (see here, here and here). Notably, such judicial decisions have suggested regulation instead of an outright ban. In fact, the Kerela High Court and Madras High Court have struck down attempts to ban rummy and online games of skill respectively. In Junglee Games v. State of Tamil Nadu the Madras High Court held that online games involving skill cannot be considered as res extra commercium and cannot be put on the same pedestal as gambling and alcohol to warrant a complete ban. Games of skill qualify as business activity and thus should be protected under Article 19(1)(g). Therefore, any restriction on games of skill should be able to pass the test or reasonableness and the modern test of proportionality.
Scope for Central Regulation
Real money games are mostly operating in legal vacuum that has led to a lot of issues such as players taking out loans to continue playing, misleading advertisements causing users to believe that playing such games can substitute occupational earnings, gaming platforms using rigged software etc. Such issues can be tackled by implementing well thought-out regulations at the central level.
India can look for establishing a central gaming authority on the lines of those present in United Kingdom, Denmark and Sweden. It might seem that the biggest roadblock to this proposal is that Entry 34 allows only states to enact laws for ‘betting and gambling’. The key to solving this problem lies in the judicial interpretation of the words ‘betting and gambling’. In Junglee Games (Page no. 88) the Madras HC held that the meaning of words ‘betting and gambling’ should be conjointly understood to mean purely chance-based games. Therefore, under Entry 34 states can only regulate games of chance and not games of skill. Further, center can regulate real money games predominantly based on skill under Entry 31 of List I of the Seventh Schedule since they are “offered and played over media” (Page no. 116). Apart from relying on Entry 31, the center can also use its powers under Article 249 (Page no. 58) legislate over a matter in the State List in the national interest. However, a detailed review of that route would be beyond the scope of the present discussion.