GAMING OR GAMBLING – Indian legal position

Part 1 of 3

This 3 part post has been prepared by a passionate legal student who joined us earlier this year as an intern. The object of the post is to consolidate and provide an overview of gaming laws and position of state v. judiciary in light of several recent developments combined with development of gaming especially online gaming sector. Any questions in relation to this Article can be sent to archana@agamalaw.com.

Introduction

Fantasy gaming is one of the fastest growing sectors in India. The market keeps increasing by the day due to the integration of the most crucial part of life with the fun element. It has combined gaming with earnings. However, there are multiple legal questions that arise out of it in the present day. In the eyes of conventional as well as modern-day laws there is only a minuscule difference between gaming and gambling when the element of money is involved. In that light, in this post, we will briefly address the genesis of this legal conflict, then explain the contemporary developments in the industry following which it shall highlight the judicial stance on these questions and then address the other lacunas in the law. Our previous posts on this subject can be found on https://agamalaw.in/2019/12/12/gaming-laws-in-india-current-scenario/ , and here https://agamalaw.in/2020/09/04/online-gaming-laws-in-india-recent-judgement-of-madras-high-court/.

Growing need for a universal approach

A discussion about gambling and gaming laws needs to be conducted because of a lack of uniformity between states when it comes to laws regarding gambling. The biggest problem is that even though the Apex Court has laid down the predominance of the skills test, the States are not universally applying the same while codifying the law. It is also to be noted that with the advent of online gaming and the provision of playing games for money, it becomes immaterial where the company is situated and where the player is operating from. The legislation would target the company providing such games within its territorial limits even if the user is an outsider. For instance, if Dream 11 servers are in Karnataka they will be penalized even if a player in Sikkim plays on Dream 11 even though it is legal there.The lack of uniformity between States also makes it difficult to adjudicate an offence given that the territory where offence can be said to be committed ‘cyberspace’.

Laws that impose a blanket ban on gaming – both online and offline – without having regard to the nature of the game would jeopardize the interest of the investors in the online gaming industry. Online gaming should be regulated in contrast with the current blanket ban. The State will be able to tax this, and considering the high scale revenue, the gains for the States are also going to be hefty. If criminalized, such sources of revenue will not just deplete but may also give birth to black marketing.

Legal Background

In India gambling and betting is a subject matter of legislation under entry 34 and 62 of State List in the Seventh Schedule of the Constitution. This means every State is allowed to have its laws concerning gambling, betting, and taxation. However, before independence, the British brought out a Public Gambling Act in the year 1867, which is a central law that is also applicable in addition to State Laws. No States besides Sikkim, Goa Daman, and Diu have legalised and regulated gambling in their States. Section 12 of the Gambling Act of 1867 exempts a game of skill from being penalised unlike a game of chance. Therefore, it would be correct to understand that the premise of this discussion is based on differentiation based on skill and chance.

The Legal Conflict

With the advent of technology and the gaming culture, a lot of mobile and computer applications have been developed that treat cyberspace as a gaming platform that provides them with the opportunity of playing including with real currency. Online gaming today has become a huge industry and is expected to have around 500 million active users and revenue of roughly $143 billion in this year (2022). The presence of the element of earning / losing money through fantasy games is causing great amount legal confusion – where courts are required to review each game carefully to assess whether the game in question is a game of pure chance and whether the earning of or losing monies can be seen as gambling. Even prior to the advent of technology, with respect to crossword puzzle with price money, the Apex Court in State of Bombay v. R.M.D. Chamarbaugwala[1] and Dr. K.R. Lakhshmanan v. State of Tamil Nadu & Anr.[2]propounded the concept of “Test of Skill”. It was held that if the result of the game is dependent upon the predominance of skill, then the same should be protected under Section 12 of the Public Gambling Act and the protections under Article 19(1)(g) of the Indian Constitution would extend to such game and the same would not be considered gambling. This test is still widely used by the courts to distinguish between gaming and gambling. Therefore, even though the test is 70 years old, it is being used to tackle modern-day technology-based games thereby leaving multiple loopholes.

End of Part 1

Intern Drishti Jain (Mentored by Archana Balasubramanian and Avantika Singh)

Part 2 of 3


[1] AIR 1957 SC 699.

[2] 1996 AIR 1153.

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