The past few years have witnessed a steep rise in real money online gaming platforms. This steep rise has given birth to the well-talked question of – whether Real Money Online Gaming Platforms (“Gaming Platforms”) surpass the test of ‘Gambling’ in India.
Where various State Governments have mostly seen to have taken an anti-staking stance, the courts in India have taken a more liberal approach keeping staking for games that require substantial skills out of the purview of gambling activities.
This article roughly outlines the unfolding legal thresholds a real money online platform must surpass to see the day of light in India.
Gambling and Betting in India is a state subject and thus the power to make laws to govern it has been conferred on the respective states in India.1 A central enactment governing gambling in India is the Public Gambling Act, 1867 (“PG Act”) which criminalises the act of gambling in a public forum in India.
While many states have adopted the PG Act as their state laws, other states have come up with their legislation(s)/ ordinance(s)/rule(s) to govern and regulate gambling. Consequently, the legitimacy of gambling/gaming platforms differs from state to state and must be determined in terms of the respective state laws.
Broadly, the central PG Act penalises the keeping of a ‘common gaming house’, i.e., any enclosed space, in which instruments of gaming are kept or used for profit or gain, however, it marks an exception for ‘games of mere skill’. Following the same path, the Apex Courts in K.R. Lakshmanan v. State of Tamil Nadu2 and State of Andhra Pradesh v. K.Satyanarayana3 have laid down that games which involve substantial skills are not gambling activities.
Games of mere skill, as defined by the Hon’ble Supreme Court in K.R. Lakshmanan v. State of Tamil Nadu4 , is one in which success depends principally upon superior knowledge, training, attention, experience and adroitness of the player. Rummy,5 Horse Racing,6 fantasy sport (Dream 11),7 poker8 have all been held as games of skill by the courts.
In contrast to games of skill are ‘games of chance’. A game of chance is played by mere luck and the result is wholly uncertain. For instance, no human mind knows or can know what it will be until the dice are thrown, the wheel stops its revolution or the dealer has dealt with the cards.
The Supreme Court has acknowledged that games may be of chance, or of skill or of skill and chance combined. Therefore, to be considered as a game of mere skill an online platform shall have to qualify the predominating nature test laid down by the Supreme Court in the K.R. Lakshmanan Case: “..there are few games, if any, which consist purely of chance or skill, and as such a game of chance is one in which the element of chance predominates over the element of skill, and a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element – “skill” or “chance” – which determines the character of the game.” The expression “mere skill” is interpreted to include a substantial degree or preponderance of skill.
Therefore, for a gaming platform to keep itself outside the purview of gambling, it must establish that the characteristics of the game are predominantly guided by skills than chance.
To sum up, the two-fold test can be concluded as; a. the games where success depends on a substantial degree of skill are not ‘gambling’; and b. despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of mere skill.
Where most of the state enacted gambling laws are applicable on games of chance, there are a few exceptions. As of 10 October 2021, the States of Odisha, Assam, Andhra Pradesh, Telangana, followed by Karnataka, prohibit all forms of gaming that involve staking of money (irrespective of whether skillbased or not).
The State of Sikkim, Nagaland and Meghalaya have enacted legislative regimes requiring a license for conducting Online Staking Games. Without a license, businesses may not operate an online gaming platform in these States or offer the services or participation thereof.
The Kerala High Court vide order22 dated 27 September 2021, held that the State Governments power under Entry 34 in List II of Schedule 7 to make laws legislating Betting and Gambling cannot include powers to regulation subjects/ games that do not fall under “gambling”. Kerala High Court held that via decisions delivered by the Apex Court in Satyanarayana23 and K.R. Lakshmanan24, games that require substantial skills are not gambling and therefore, the State cannot regulate or ban games of mere skill. Thus, the Kerala High Court quashed the Kerala Government’s amendment to notification under Kerala Gaming Act, 1960 which sought to ban online rummy.
On the same line, the Madras High Court struck25 down Part II of the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021 on 03 August 2021 which imposed a ban on all forms of online gaming, including games of mere skill, if such game is played for a wager, bet, money or other stakes. The Madras High Court struck the enactment on four grounds:
Games that are guided predominantly by skill than chance do not come under the purview of Gambling.27 Playing for stakes or not for stakes cannot be a criterion to analyse if a game is a game of skill.28 The games of substantial skill are kept out of the purview of Gambling. Therefore, as per the rulings of the Madras29 and Kerala High Court,30 the State Governments cannot legislate games of skills, whether or not played for stakes, under Entry 34 of List II of Schedule VII to the Constitution. However, in the absence of a judgment from the Apex Court, as of date, the rulings from Madras and Kerala High Court shall act as a guiding light for other states and other High Courts adjudicating over the subject.
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