Introduction

The gaming sector has seen a bourgeoning growth during the
pandemic, and India does not have a comprehensive legal framework
in place to promote the industry. Technology has far outpaced
regulation. Gaming laws in India remain dated, and as a result,
their application to online structures remains complex. The
dichotomy between the centre and states coupled with divergent
views of various courts in India make it difficult for companies to
have clarity on permitted activities in the sector.

The market value of India’s gaming industry was around INR
90 billion in financial year 2020. This was estimated to go up to
over INR 143 billion by 2022. The industry has been evolving at a
rapid pace in the country, and analysts predict over 40,000
new job opportunities by 2022¹. Online gaming will touch
500 million users by 2025 in India²

The primary central legislations dealing with gaming laws in
India are the Public Gambling Act, 1867 (“Gambling
Act”) from as far back as the British rule in India
and the Prize Competitions Act, 1955 (“Prize
Act”). Current Indian jurisprudence builds on the
anti-gambling rhetoric prevalent at the time of enactment of the
Gambling Act. The Gambling Act is applicable in 16 states and union
territories, and excludes games of skills from its purview. List II
of the Seventh Schedule of the Constitution of India empowers state
governments to regulate laws in relation to betting and gambling.
Various states have mirrored the archaic provisions of the Gambling
Act and a majority of states prohibit betting on games of chance,
which is construed as gambling, while permitting engagement in
games of skill. Where state legislations exist, they override the
provisions of the PGA. Courts have also mirrored this view,
discouraging society from taking part in games of skill and
historically treated gambling as a sinful and pernicious vice.
Coupled with this, courts have held that gambling is excluded from
the ambit of Article 19 (1) (g) of the Constitution of India which
provides that the freedom to conduct business is a fundamental
right. The lack of certainty in permitted activities makes it
extremely difficult for gaming companies to operate in
India. 

To further complicate matters, states also have divergent views
for online and physical versions of the real money games, e.g., in
Kerala betting with stakes for rummy is permitted in physical
parlours but not online. The State Law Commission of Uttar
Pradesh³ has introduced a draft bill including online
gaming. Press articles indicate that the State Government of
Karnataka also made a submission to the Karnataka High Court of its
plan to enact a legislation on online betting and gambling
soon.

Multiplicity of legislations in the country is currently proving
to be a challenge for gamers and the gaming companies alike. Since
all online gaming requires is a phone, tablet, PC or laptop and
internet, the location and legality of different state laws is an
inconvenience and deterring to many. This is not at all encouraging
and makes it difficult to promote growth in a sector that can
create incomes, both as employment income and professional gaming
income – a very lucrative new age career. Subjective tests
for poker, rummy, bingo, horse-racing, fantasy sports, etc.

The gaming industry is witnessing a paradigm shift with the
evolution of television, digital and online gaming models. Post
demonetisation, digital online payment systems have provided a
boost to the online gaming industry. The Madras High Court had
urged that it is essential to have a regulatory framework to deal
with online gaming⁴.

A step in the right direction – the Advertising Standards
Council of India (“ASCI”) introduced
guidelines to make real-money gaming advertising safer and more
responsible including highlighting the financial risks associated
with real-money gaming. Additionally, an advisory from
the Ministry of Information and Broadcasting requires gaming
advertisements to carry adequate disclaimers, not advertise to
minors, and not pose gaming as an income opportunity. Niti Aayog
has published a draft of the guiding principles for the uniform
national-level regulation of online fantasy sports platforms in
India and recommended that there should be uniformity and certainty
in the legal framework in this sector.

Gaming or Gambling – Legal or Illegal? That is the
Question

Games in any form are enjoyed by all age groups as a form of
recreation including gambling. Certain games such as hockey,
football and cricket to name a few are also played professionally
for large amounts of prize money, for many years. The Indian epic,
the Mahabharata, has a wager at its crux. The Pandava’s loss
in a game of dice elucidates how playing a game of chance for
stakes is addictive and can be a lifechanging experience. Despite
the loss of the Pandavas, playing cards for stakes, e.g., Teen
Patti on Dhanteras still remains a time revered tradition in
parts of the country.

India’s current gaming laws are dated and based on
morality stemming from principles prevalent in the 1800s, which are
not applicable in current times. Today, addiction is the heart of
the problem with gaming. If individuals could exercise restraint
and play games in moderation, regulation would not be required.
However, human nature is not such. Therefore, the government steps
in to regulate and restrict activities which require control. Most
jurisdictions, do however, focus on the distinction between games
of chance and games of skill to regulate this area. But do we need
a big brother to protect the few who cannot control themselves? To
what extent should our laws impinge on our freedom of choice? These
are all very relevant questions to be considered in today’s
tech world and online gaming takes the center stage. It provides
both recreation to the public at large and income to employees and
professional gamers. The first step, therefore, is to understand
the difference between a game of chance and a game of skill.

Black’s Law Dictionary defines gaming as
“[t]he practice or act of
gambling”and further states that “the presence
of price or consideration, chance and prize or reward”
are the elements of gaming⁵. Gambling has been defined
by the Black’s Law Dictionary⁶ as
“making a bet” and the elements of gambling
are “a payment of a price for a
chance⁷ to win a price.”

It is therefore clear that the key ingredient of gambling is the
element of chance. What then is chance? Chance would be something
based on luck which does not require skill or effort being
expended. One could, however, argue that waking up each morning is
a chance, crossing the road without being hit by a truck is chance
– though the odds of this happening may be low. Similarly,
trading on the stock market is based on luck, though coupled with a
large element of skill there is still a smaller element of chance.
Getting a bumper crop in agriculture may also be based on a higher
element of chance due to a good monsoon. However, these activities
are neither banned nor controlled.

Games of skill are largely permitted globally. But the test is
subjective. In India, where gaming is regulated by the states which
all have differing positions on gaming. Gaming companies face large
uncertainties. It is essential therefore, to have a unified
framework for certainty on permitted activities, on an objective
basis for the gaming sector to grow.

The landmark judgment in interpretation of gaming laws in India
is of R.M.D. Chamarbaugwalla v. Union of
India⁸ where the Supreme Court held that the
competitions in which skill is the main deciding factor of the
outcome of the competition are not prohibited under the provisions
of the Prize Competition Act. This test has been honed further in
the case of  Dr. K.R. Lakshman v State of Tamil
Nadu⁹  where the court held that the: (a) test
of predominance of skill is applied as set out in to validate the
nature of the game; (b) where skill was the predominant factor the
activity would be protected by Article 19(1)(g) of the Constitution
as a permitted business activity. Subsequently, games in which the
element of skill predominates would be permitted as business
activities. For example, all card games have an element of chance
– luck of the cards being dealt to you but then skill is
applied to use those cards to win. Where the outcome of the game is
dependent more on skill than chance, the game passes muster.
Applying these tests set out by the judiciary, rummy, bridge,
chess, horse-racing, etc. where the element of skill is greater
than the element of chance are permitted – even for stakes.
Conversely games like bingo and slot machines, etc. have a higher
element of chance than skill are permitted – but only if not
played for stakes. The test is subjective – evaluated on a
case by case basis and dependent on the views of a judge evaluating
the challenge. Till the legality of a game is tested in court,
there will always be a slight level of uncertainty. There are no
objective standards that a court must apply either and each game
must be evaluated on a case by case basis bearing in mind differing
court opinions.

Self-Regulatory Bodies – Their Role

The All India Gaming Federation
(“AIGF”), the apex gaming body focuses
on policy, advocacy, research and self-regulation for its member
gaming companies. Their self-regulation framework is based on the
principles of transparency, integrity and responsible gaming,
implements their Skill Games Charter
(“Charter”) to ensure compliance by
stakeholders and members of the AIGF. The AIGF concentrates on
games of skill played in a pay-to-play format and aims to meet the
evolving needs of the gaming industry through its policies and
advocacy with the government on framing more relevant legal
framework.

AIGF in its Charter, extends memberships to gaming companies
which operate online fantasy games, online rummy and poker, casual
games and esports. The Charter aims to self-regulate its members by
rules, one of the most significant being stipulating objective
standards for various games such as rummy, poker, etc. If the games
comply with all the criteria set out in the Charter, they are
automatically approved creating uniformity and certainty for gaming
companies. The Charter inter alia mandates that gaming
companies are transparent in their approach regarding rules,
regulations, payments and winnings. Gaming companies must be
responsible, i.e., they must: (a) restrict games for persons under
the age of 18; (b) contain a time-out feature where the game cuts
out after a specified time limit; (c) provide counselling for
gaming addicts; (d) not target persons who have opted out through
the self-exclusion mechanism for gaming, etc. Members of the AIGF
must also comply with the ASCI guidelines for ‘Online Gaming
for Real Money Winnings” which inter alia mandate
that advertisements for online gaming should contain disclaimers,
warnings for risk of loss and should not suggest that a gamer will
prosper, etc.

While AIGF is the apex industry body for self-regulation, The
Online Rummy Federation (“TORF”) and
Federation of Indian Fantasy Sports
(“FIFS”) are newly constituted
self-regulating bodies, both of who along with the AIGF place
emphasis on KYC checks for every player, an important process for
authenticating and making the experience of gaming more transparent
and secure.

Recent developments in India

The issue on fantasy games being a game of skill has come up a
few times in the recent past. A decision of the Supreme
Court¹⁰ was pending on an appeal from the Bombay High
Court in the case of Gurdeep Singh Sachar Vs. Union of India
and others¹¹. This had again created some
uncertainty on the legality of fantasy sports in India. In its
order dated 30 July 2021 (an appeal from a judgement of Rajasthan
High Court¹²), the Supreme Court ¹³ held that
Dream11 is a game of skill which further endorses prior decisions
on the permissibility of fantasy games in India.

In an order dated 03 August 2021 the High Court of
Madras¹⁴ held that the blanket ban online gaming, both
skill and non-skill based under the Tamil Nadu Gaming and Police
Laws (Amendment) Act 2021 (“Amendment
Act”) was ultra vires the Constitution. The
Madras High Court struck down the Amendment Act entirely on the
ground that though the state government could regulate the area,
the restrictions imposed by the state government were
disproportionate, without proper justification provided by the
state and therefore violative of the freedom provided to
individuals under the Constitution of India. There is hope that
this judgement sets the tone for revisiting the gaming laws in the
country as all the issues have been extensively analyzed and dealt
with in a thorough manner.

According to recent press articles¹⁵, the union
minister for Electronics and Information Technology, in a response
to a letter by Andhra Pradesh Chief Minister, stated that the Union
Government is working on a uniform approach to regulate online
gambling and real money gaming. The consideration for a centralised
method of regulation for the country from the central government is
significant.

Discussion & Analysis on Way Forward – An Environment
of Trust to Foster Growth?

Justice D P Madon had very rightly stated that “[a] s
the society changes, the law cannot remain immutable”
and that “the law exists to serve the needs of the
society which is governed by it.”¹⁶ The
Madras High Court has, in the same vein stated that “..
the understanding of constitutional morality may depend on the
mores of the time since the Constitution is regarded as a living
document and not pegged to the time of its
adoption.”

The Madras High Court has observed that “[m] ore often
than not, laws are enacted in this country without adequate
research or empirical studies being conducted to assess the impact
thereof or the ability of the law to tackle the mischief intended
to be eradicated and far too often the good is clubbed with the bad
as there is no informed alternative to choose from.” The
key question, therefore, is, to what extent do we require
regulation in the gaming sector?

To evaluate this, one needs to ascertain what the purposes of
enacting a law is. Laws should be enacted to enable all people to
live peacefully without detriment. It is well established that due
to human nature, human beings need some form of regulation.
Therefore, if gaming is going to harm someone, then there must be
some guidelines to regulate responsible behavior in the area. The
Madras High Court has analyzed this issue in depth and stated that
“when the State takes a paternalistic attitude, it seeks
to legally regulate private life. This brings about a conflict
between both the authority and the desirability on the part of the
State to legislate in areas where it perceives that the individual
in general or certain classes of individuals require protection and
the private rights of the individual and every citizen’s
freedom of choice. State paternalism, by and large, is understood
to mean the phenomenon in which the State acts as the guardian and
protector of its citizens or a class or classes of citizens who are
perceived to be vulnerable in certain situations or are thought to
be generally weak and incapable of protecting
themselves.” The Madras High Court further went on to
evaluate the freedom of choice of an individual and reasoned that
“…a cost-benefit analysis is called for, not in
mathematical terms, but only to assess whether by and large the
benefit in the form of public good outweighs the cost of the
individual being deprived of his choice…  Pronounced
and excessive paternalism on the part of the State is another
definition for authoritarianism and may even amount to repression,
particularly when a statute prohibits or restricts some activity
that the individual may otherwise have complete and unrestricted
freedom to indulge in.” Thus, it is clear that a very
fine balance needs to be struck by the government whilst regulating
this area. The Law Commission also acknowledged that enforcing a
complete ban on illegal gambling is not possible¹⁷. It
recommended regulation of sports betting with adequate safeguards
to promote responsible gaming.  Such an approach would help
detection of fraud and money laundering and also garner tax
revenues for the governments.

Lastly, there is the issue of having a choice to be a
professional gamer and the fundamental right to practice a
profession of choice under the constitution. At a time where
traditional professions involve more work and less money, this is a
very pertinent issue – today influencers on social media
often make more money than Business School graduates without even
obtaining a college degree. The Madras High Court rightly observed
that “[a] person may be gifted in card games or
another’s talent may lie in word games. Rationally, such
persons should be free to exploit their skills; and only reasonable
restrictions that do not completely blunt their chance to show off
or make a living out of their skills may be
permissible.”

There are other sectors where addiction is also a key concern
for regulators. An analogy may be drawn to the alcohol and tobacco
industries – both are addictive, have health hazards, etc.
However, alcohol is a controlled substance and not prohibited in
its entirety. One of the main reasons for this is the large
contribution of tax revenues from sale of alcohol and tobacco
towards the coffers of the exchequer.

Bearing in mind all the factors, the Madras High Court, with
respect to regulation of the gaming sector,  held that
“at the end of the day, a balance has to be struck
between the extent to which the State can impose restrictions to
protect a class or certain classes of persons and the
reasonableness of such restrictions qua the ordinary individual who
may resist the same, whether or not the statutory measure is
intended to protect such individual.”

The industry wishes that the judgement and analysis of the
Madras High Court coupled with the letter from the Ministry of
Electronics and Information Technology to the Andhra Pradesh
government on establishing a unified framework for the gaming
sector in India will set the way forward for setting up a more
conducive environment for growth.

Today’s leading companies are realising that lasting
success comes from having a purpose broader than making a profit. A
business should benefit customers, employees, suppliers, neighbors
and the wider world, as well as shareholders. Enduring value comes
from making business work for everybody. For example, big-pharma
has the reputation of being solely profit driven. Interestingly a
few years ago, Novo Nordisk changed this perception by launching a
global fight against urban diabetes. Though their contribution is
medicine they decided to launch a campaign on lifestyle issues to
get to the root cause of the problem of diabetes and create
awareness on diets, sedentary lifestyle etc. amongst the urban
population. Novo Nordisk CEO Lars Rebien Sørensen topped
the Harvard Business Review’s list of
best-performing CEO’s due to this campaign. Similarly, gaming
industry players globally can erase the stigma associated with this
sector.

India could take a cue from the self-regulatory market in Europe
wherein the European Gaming and Betting Association
(“EGA”), comprising of gaming and
betting operators, represents the gaming industry and frames code
of conduct for its members to promote responsible gaming, ensure
protection of the players and contribute positively to the society.
The EGA closely works with the Governments towards a well-regulated
online gaming market to foster strong culture of safer gambling and
contribute positively to the society.

Gaming companies can strive to establish a sense of
responsibility and work cohesively on standards established by
self-regulatory bodies, e.g., the Charter issued by the AIGF is
both comprehensive and objective – focusing on responsible
growth for gaming companies. Perhaps the government could consider
moving forward on a model of trust with the industry, somewhat
similar to the way the advertising industry functions in India and
ASCI’s role in regulating its members. Validation of payouts
in the sector would bring about best practices. The industry could,
through compliance with certain self-established norms take the
lead of being compliant with interests of society while making a
profit and growing. The government would not need to be excessively
paternalistic in its approach if gaming companies achieved this
goal. People could have the freedom of choice to play for
recreation or professionally, gaming companies could make a profit
and the government would also benefit with taxable income.

Other Issues – Foreign Direct Investment, Payment
Gateways, GST, Artificial Intelligence & Data Privacy

Gaming companies which engage in real money gaming have to also
bear in mind issues arising from (a) foreign exchange regulations;
(b) setting up and operating a payment gateway; (c) data privacy
norms for collecting data on their platforms; (d) goods and service
tax issues; and (e) the use of artificial intelligence in gaming.
The unified gaming regulations should factor all these issues in
one framework.

It pertinent to bear in mind that the issues surrounding gaming
are not limited to games

Conclusion

Self- regulation by organisations in this sector is imperative
because legislations can almost never keep up with the
technological advances. Varying laws in the country often leads to
confusion which is where rules by the gaming companies makes a big
difference. As has already been established by the extremely
comprehensive and well thought out Charter, a self-regulating body
can set out uniform standards in the absence of the centre having
control to legislate this area.  Therefore, the government
should support the industry – industry should do the rest
through compliances set out by its self-regulating bodies and
ethical norms.

In light of the favourable Madras High Court judgement and the
news of a unified gaming framework in the pipeline the industry
players should strike while the iron is hot. Gaming companies
should work with self-regulatory bodies to present their case to
the government on working together to come up with a sustainable
legal and self -regulatory framework which would foster responsible
growth.

played for stakes, artificial intelligence
(“AI”) plays an increasingly important
role as technology advances. For instance, the use of artificial
intelligence software for assistance in winning online games. A
recent chess tournament had an instance of the winner
cheating¹⁸. Therefore, the authenticity of online gaming
championships is sometimes in question. Another issue is that the
BOTs become smarter with experience in gaming and lack human error.
Therefore, a human contestant may be at a disadvantage in online
gaming.

On a more positive note, AI in gaming also helps online
platforms to prevent cheating and AI in immersive gaming is proving
to be creating better storylines and characters. Interestingly, AI
can be used to suppress the problem of gambling addiction as well.
As bizarre as it sounds, it works in a manner where the AI can
recognize issues of addiction when a person is gambling online and
then, depending on the software, either restricts the person from
playing the game altogether or reflects warning to keep the player
cognizant of his/her actions. This is a definite progressive method
to look at online gambling addictions and takes the pressure from
government regulations to keep addictions in check.  
 

Footnotes

1 India – value of the gaming industry 2007-2022 |
Statista

2 EY – FICCI Report – Playing By New Rules –
India’s Media & Entertainment Sector Reboots in
2020

3 State Law Commission’s 18^th Report
along with draft bill

4  D Siluvai Venance vs Inspector of Police
Crl.OP.(MD)No.6568 of 2020 and Crl.MP.(MD)No.3340 of
2020

5 Sixth Edition.

6 Sixth Edition.

7 Emphasis added

8 R.M.D. Chamarbaugwalla vs. Union of India, WP No.
78-80, 93 & 152 of 1956

9 Dr. K.R. Lakhshmanan v State of Tamil Nadu & Anr.
1996 AIR 1153, 1996 SCC (2) 226

10 Special Leave Petition (Criminal) Diary No(s).
42282/2019

11 Gurdeep Singh Sachar vs. Union of India and Ors. 
Criminal PIL Stamp no. 22 of 2019 in the High Court of
Bombay

12 Ravindra Singh Chaudhary vs. Union of India &
Ors., D.B. W.P. (C) No. 20779 of 2019

13 Avinash Mehrotra v State of Rajasthan & Ors., SLP
(C) No. 18478 of 2020

14 Junglee Games India Private Limited v State of Tamil
Nadu & Ors, W.P. No. 18022 of 2020

15 Medianama article dated 19 August 2021

16 Central Water Inland Transport Corporation Limited
& Ors. vs. Brojo Nath Ganguly & Ors., Civil Appeal No. 4412
& 4413 of 1985

17 Law Commission of India Report No. 276 LEGAL
FRAMEWORK: GAMBLING AND SPORTS BETTING INCLUDING IN CRICKET IN
INDIA July 2018

18 Zerodha’s Nikhil Kamath Accused Of Cheating
Against Viswanathan Anand In Chess Game, Banned From Platform
(moneycontrol.com)

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