Online Gaming/Gambling Regulations - A Pressing Priority In The Indian Domain

ABSTRACT:

While gaming in itself is no harm, the real problem begins when the thin line between gaming with and without stakes is crossed due to the hybrid designing at the structural and aesthetic level of the two, consequently reaching the tipping point i.e. gambling or betting. More often than not the demarcation between the two complicate due to uprise in promotion & referring of certain gambling activities as ‘gaming’, hence resulting in an overlapping and confusion among the commoners. The alleviation in the digital mechanizations and the rapid advancement in technology due to which any data could be shared and connected on multiple devices & with multiple users at the same time has resulted in mushrooming of the gaming mania. While the need for gambling laws was recognized with the enactment of the Public Gambling Act, 1867, however due to it being introduced in a technologically handicapped environment, it lacks rules for the current online gaming scenarios and is close to being redundant.

INTRODUCTION:

Even though the Supreme Court originally held that gaming is associated with being skill based primarily and gambling involves elements of chance based results with involvement of money, however in the recent times many chance based games have been held as skill games and hence legal and therefore each case has to be discussed on merit.[i] It is this flexibility which has led to rise in cases of exploitation and bending of existing gaming laws. Since gaming/gambling is a state subject, only few states like Uttar Pradesh, Bihar, Delhi, Manipur, Madhya Pradesh etc. have adopted the central enactment i.e. the Public Gambling Act, 1867 while the others such as Goa, Gujarat , Sikkim, Andhra Pradesh, Nagaland etc. have enacted their own regulations.

While the position of physical gaming houses and arenas is relatively established, it is the emergence of complex virtual games with and without stakes like online poker, online rummy, virtual betting etc., which augment the demand for online gaming precepts. If one goes by the statistics, it is speculated that the gaming industry in India has the potential to grow into a $ 1.1 billion industry by the end of 2021.[ii] On an approximate in the year 2019, India had more than 300 million online gamers which researchers expect to proliferate to 440 million gamers by the fiscal year 2022. Since the existing gaming act dates back to 1860s, it falls short of provisions to regulate the online gaming actions and hence gives an advantage to the cyber spaces to create gaming spaces which involve games of chance clubbed with monetary aspects. The surge in users of internet is also characterized with the rise in criminal activities related to gaming due to lack of rules & precedents which makes structured and updated cyber space gaming laws the need of the hour. It is only the states of Nagaland, Sikkim and Telangana who have established a clear picture regarding their stance on virtual gaming/gambling, but the other states still have a long way to go.

STATUS OF SOCIAL/SKILL BASED GAMES:

The need for a codification for online gaming/gambling has been felt time and again with eminent personalities voicing their concerns and ministers articulating their arguments in support of the recommendations of the experts and the law commission. During his previous tenure in the Lok Sabha, Shashi Tharoor even introduced a private member’s bill in December 2018, known as the Sports (Online Gaming & Prevention of Fraud) Bill, however the bill never saw the light of the day as the tenure of the 16th Lok Sabha ended and the proposed legislation lapsed.[iii] While gambling in both modes are illegal, however increasingly online games are being invented which involve combination of stakes and skill as an advantage of unclear technological laws and end up shoving the unemployed & employed into this deep trench where players rush to level up in the game by spend their money blindly.

In the states of Orissa and Assam the actions of gambling and gaming is an offence regardless of the medium they are offered. The state of Sikkim has introduced a license regime for carrying online games activities by way of intranet under the Sikkim Online Gaming Act,2008 (“Sikkim Act”). In Sikkim certain prescribed games such as punto, bingo, black jack, sports betting, poker, punto banco, chemin-de-for etc by are allowed to be conducted, negotiated, managed, promoted & played online with bets after receiving due permission in the form of license. It is only Nagaland which aims to prohibit gambling and lays down guidelines for conducting only online ‘games of skill’ by way of license by the State government under the Nagaland Prohibition Of Gambling and Promotion & Regulation of Online Games of Skill Act,2016 (“Nagaland Act”). The Telangana Gaming Act, 1974 vide its 2017 amendment has also bought in provisions to expand the scope to online gaming with its aim directed towards banning them only.

The game of Poker has been a vexed issue but it has been ruled that certain variations of it are games of skills and hence legal under certain jurisdictions. The states of Karnataka under the Karnataka Police Act,1963, the state of West Bengal under the West Bengal Gambling and Prize Competitions Act,1957 and even under the Nagaland Act, it has been excluded from the definition of gambling. The High Courts of Gujarat[iv] and Bombay[v] are however known for their disagreement with this view in certain instances. The Supreme Court has also observed that games like pacman, poker & blackjack which are played on electronic machines have possibility of human intervention by way of tampering the results and then leaves no scope of utilization of skill.[vi]

The casino gaming which is composed of games of slots and table games including betting in form of blackjack and roulette is considered as an act of gambling and is restricted for both offline and online modes. However, casino gaming in physical mode is only allowed by Goa, Daman& Diu under the Goa, Daman and Diu Gambling Act, 1976 (“Goa Act”) & by Sikkim under the Sikkim Casinos (Control and Tax) Act, 2002(“Sikkim Casino Act”).

It has been held that betting on physical horse racing is a game of skill and hence if it is in consonance with certain conditions then it can be excluded from the group of gambling however there subsists no regulation regarding online horse sports betting.[vii] In India there are mainly 6 Turf Clubs which regulate the offline activity and can operate by obtaining a license by their state governments.

It is to be highlighted here that the grounds of determination relied on by the Supreme Court when classifying the game as a game of skill includes a) that when the end result is achieved by means of substantial degree of skill then it is not gambling and b) that the games which have elements of ‘chance’ will not amount to gambling as long as they are dominantly skill based. 

The other hot shots in virtual gaming are Fantasy games such as Dream 11, Halaplay & Cricplay etc. which are gaining popularity by the minute and have witnessed a 25 times growth from 2 million users in 2016 to 70 million in 2019.[viii] The case of determination of Dream 11 as a wagering or skill based game has been an interesting one where the court after many deliberations and arguments ruled it to be a game of skill[ix] however only recently an order of interim stay was passed when a SLP was filed in the Apex court regarding the taxation aspect of the game and that matter is still pending.[x]  It is only the state of Nagaland which has expressly allowed virtual team/league selection by way of obtaining license for the same.

Social games such as Farmville, Mafia Wars and Gardens of Time etc. which are played in interfaces such as Facebook are also regulated by laws. As long as there is no monetary reward or anything equal to money’s value is being offered the games are of legal nature and exempt from the category of gambling. The features, algorithms and content of these gaming are governed by laws of Intellectual Property, The Indian Penal Code, 1860, The Indecent Representation of Women (prohibition) Act, 1986, The Prize Competition Act, 1955 and the Information Technology Act, 2008 etc. However, even these games have to be within certain bounds and ensure that no harm is caused to the players so that they do not end like the Blue Whale game.

Another skill based game is rummy which is quite famous both in the online and offline world. The position of rummy become controversial when in the case of Director General of Police, Tamil Nadu v. Mahalakshmi Cultural Association[xi] it was decided by the Madras court that playing rummy with stakes would amount to gambling. Once the matter reached Supreme Court, various online gaming websites also intervened and various questions regarding the position of online rummy were raised. However the Supreme Court refrained from laying guidelines as the impugned order of the court did not deal with the virtual factor. Moreover later in the case, the original writ was proved infructuous due to which the Madras court’s order was also struck down making only offline rummy legal and the status of online rummy still questionable in all states due to lack of rules, except under the Nagaland Act. The relevant para from the Mahalakshmi case has been reproduced below:

“24. On the basis of the above discussions, we arrive at the following conclusions:

(1) The game of rummy (13 cards) is only a game of skill even though an element of chance is also involved…..”

Even in the M/s Gaussian Networks Pvt. Ltd. V. Monika Lakhanpal & State of NCT[xii], it was expected of the High Court that they will set the guidelines for online gaming, however here also the petitions were withdrawn and no action to this effect was raised.

ANALYSIS:

Broadly, virtual gaming has 3 dimensions where games which involve poker, rummy & other fantasy sports are known as transactional games since payment is involved, then scrabble & quizzes are casual games & lastly there are games having live interactions like PUBG mobile & Counter Strike etc. All these games are shielded by Sec 12 of the Public Gambling Act, 1867 which in essence means that a game can have certain elements of chances but till they are majorly skill based, they are legal. However this provision is being taken advantage of by the gaming providers to their benefit. We would understand this better by taking the example of online Ludo, a multiplayer free game, which is based on probability results but in the absence of any guidance, regulation & restriction, the creator can on any day modify the software to add the feature of ‘betting’ in the name of ‘levelling up’, ‘buying advanced features’ etc. so as to curtail more excitement in the game. Citing wide concerns over misguided youth and harmful impact of games like Pokemon Go, even the Madras High Court ordered recently regarding the need for regulatory bodies to balance games like PokerDangal, RummyPassion etc.[xiii]

Even though no concrete decision has been arrived on in the M/S Gaussian case, certain pointers put forward by the court such as skill based games played online with stakes will be illegal raises certain question that when skill based games are legal offline then why are they illegal online mode? An argument for the same can be made by way of analyzing the role of game providers.  There are many websites which provide skill based games for free, however when stakes are levied and a portion of the money payment goes in the pockets of the service providers, then these skill based games become illegal. Hence this factor helps us to acknowledge the fact that we need regulatory mechanisms to detect the working of these gaming softwares to arrive at a level playing field and code of conduct.

The manner stated in Indian laws & practiced by the authorities to differentiate games on the basis of skill and chance has definitely become redundant and needs to be revamped to come at par with the pace at which technology is moving where wagers can now be put at a phone call from any part of the world. Moreover it is the sense of credibility clubbed with advertisement by popular personalities which the gaming sites provide by twisting legal guidelines to prey upon the players & to remove their doubts. The creators of the game resort to petty tactics and cunning ways to go around the loopholes of the law to benefit their malafide intentions. The matter of fact remains that online gaming has been present in the scenario since a considerable time period and the few regulations and restrictions on them are not enough to deter the providers.

Henceforth, the growing suicides of the players & the rise in people risking their money to gamble has made us question the dangerous nature of the gaming world that whether unregulated online gaming/gambling is on the verge of becoming more harmful than an addiction of drinking where atleast the loss is recoverable since it is caused at a snail’s pace over a long span of time whereas in the gaming world people only think for a second to empty their wallets and take a leap into the unknown. The author concludes the article with the words of the court in the case of D.Siluvai:

“To be noted, if these set of unemployed youth, who are also under frustration, if get trapped into these elements, may go to any level to meet their loss. The most dangerous thing for any Society is educated criminals. If a knowledgeable person turns out to be a criminal, it would be havoc on the society.”

Henceforth, India is in a dire situation for a unified statute for regulation of gambling/gaming in online cyber spaces in order to build a safe, secure and fair platform so that entertainment can be provided to the public without the shadow of criminal intentions and self serving motives and with effective provisions to deal with the same.

[i]State of Bombay v. R.M.D Chamarbaugwala (A.I.R.1957 SC 699).

[ii]https://assets.kpmg/content/dam/kpmg/in/pdf/2019/08/ india-media-entertainment-report-2019.pdf

[iii]Ashish Pherwani,Online Gaming Industry can boost Make In India Initiative, Outlook,Aug 10,2020 at https://www.outlookindia.com/magazine/story/sports-news-opinion-online-gaming-industry-can-boost-make-in-india-initiative/303503.

[iv]Dominance Games Pvt. Ltd. v. State of Gujarat and Ors. (2018)1GLR801

[v]Nasir Salim Patel v. State of Maharashtra & Ors. WP (Criminal) 427 of 2017

[vi]M.J.Sivani v. State of Karnataka AIR 1995SC1770.

[vii]Dr.K.R.Lakshmanan v. State of Tamil Nadu & Anr AIR 1996 SC 1153.

[viii]The Economic Times Mar 04,2019 at https://economictimes.indiatimes.com/tech/internet/indias-online-gaming-ind-eyes-rs-11900-crore-revenue-by-fy23/articleshow/68255662.cms//.

[ix]Shri Varun Gumber v. UT of Chandigarh & Ors.2017CriLJ382.

[x]The State of Maharashtra and Ors. v. Gurdeep Singh Sachar & Ors., CRLPIL No.22/2019.

[xi]Director General of Police, Tamil Nadu v. Mahalakshmi Cultural Association (2012)3 Mad LJ 561.

[xii]Suit No 32/2012, Delhi District Court.

[xiii]D.Siluvai Venance v.State Crl O.P. No.6568/2020