Indian laws on games involving element of money
Updated: Jun 6
The pandemic has seen a steep rise in people turning to online gaming in India. According to a Deloitte India study, from $1.1 billion in 2019, the sector has been expanding at a compounded annual growth rate of 40% and is projected to reach $2.8 billion by 2022. Indian and foreign investors have shown a keen interest in fantasy sports games in particular. Mobile Premier League recently became the second Indian gaming unicorn after Dream 11. A lot of these games involve money and border on gambling, which is strictly prohibited in India. It is essential therefore, that gaming companies familiarize themselves with the legal issues that affect their services before jumping into the industry.
The Public Gambling Act, 1867 ("Gambling Act") is the statute governing gambling in India. However, the Indian Constitution, endows the State Governments with the power to legislate on matters concerning gambling and betting and therefore, the Gambling Act has been adopted by certain states in India and other states have enacted their own legislation to regulate and govern gaming/gambling activities within their territory. Despite the popularity and revenue scope of gambling and betting, the Indian laws and courts have been averse to its legalization. Except Goa and Sikkim, where gambling is permitted with prior approval with recurring fee and in notified areas respectively, all the states have a blanket ban on gambling.
However, it is important to note that all the gambling legislations in India have excluded 'games of skill' from the purview of gambling activities in India. A game classified as a ‘game of skill’ will not attract the prohibiting regulations under any of the gambling legislations. The classification of a game of skill from that based predominantly on luck has seen numerous debates in the Indian courts specific to individual games, some of which are discussed below.
The Supreme Court, in the case of State of Andhra Pradesh v. K. Satyanarayana and Ors.,, while deciding on whether rummy is a game of chance or skill, clarified that the distribution of cards being dependent on the card placement in the shuffled pack does involve an element of chance, but that alone does not make the same a game of chance. Hence, the game of Rummy was held to be “mainly and preponderantly a game of skill”.
The Kerala and Tamil Nadu high courts have both struck down their state legislations that specifically banned online rummy, citing the reason that it fell under ‘game of skill’, and declaring the legislations to be arbitrary and violative of the right to trade and commerce guaranteed under Article 19(1)(g) of the Constitution and the right to equality guaranteed under Article 14 of the Constitution.
Different High Courts have given conflicting decisions on whether poker constitutes a game of skill or chance. While the High Courts of Gujarat and Bombay have held poker to be a game of chance and therefore prohibited the game in the respective states, the Calcutta High Court has held that poker won’t be classified as gambling and will therefore not be under the purview of gambling laws. There are stark differences when it comes to the legality of poker in different states, and therefore the laws of the state should be considered in isolation.
Unlike other online games, fantasy sports games have generally been given consistent treatment by Indian courts and have been allowed on the basis that they require skill. Both the Punjab & Haryana and Bombay High Court have ruled that the games offered by Dream 11 (fantasy cricket, kabbadi, football, etc.) require skill, knowledge, judgment and attention and are outside the scope of gambling. The Rajasthan High Court has also upheld the same.
While we have seen some positive developments from the courts, the gaming laws in India continue to be complicated and unclear. While the courts seem to have a liberal view, the states have been seen to be fairly rigid in their approach. Karnataka, for instance, has recently banned all forms of online gaming that includes wagering, betting, and gambling. But in addition to games of chance, the law also bans 'games of skill' where there is a risk of the player losing money. This means that every game where a player may stand to lose money, like rummy or fantasy games discussed above, that have been held to be legal by the Supreme Court, are now illegal in Karnataka. As discussed above, the state of Kerala had also imposed a ban on rummy before it was struck down by the Kerala High Court.
In light of the several new players emerging in the online gaming space, the number of games and the number of players has seen a massive boost. It’s clear that games of this nature are popular and here to stay. In such instances then, it can be confusing and cumbersome for emerging companies to keep track of the laws in every state for every game, more so when these can be fleeting, subject to getting caught in the tussle between the legislature and judiciary.