Akanksha Chowdhury
Gambling has been a part of India’s cultural heritage since time immemorial. It has special significance in Indian Mythology. The Hindu gods, Shiva and Parvati are portrayed playing a game of dice. Hinduism also vaguely talks about a game that happens on two levels – godly and immortal which is called “Lila”. A pivotal point in the epic of Mahabharata is the game of Chausar which eventually caused the Battle of Kurukshetra.
With the advent of technological innovation and advancements in the sphere of the Internet and telecom, online gambling has received recognition and popularity as a mode of entertainment. India’s online gaming has witnessed phenomenal growth, given the population of Youth and expansive reach of technology. The industrial revenue is expected to grow from around USD 600 million in FY18 to USD 1.6 billion by FY23, at a CAGR of 22.1%.[1] Apart from generic games that involve gambling, fantasy sports in particular have received much interest from Indian and foreign investors. Dream 11 reportedly became India’s first gaming Unicorn recently.[2]
Legislations concerning Online gambling in India
The first legislation concerning Gambling was the Public Gambling Act, 1867 which was Central legislation modeled on a pre-independence era. It stated that gambling is illegal in any place, enacted to provide for “the punishment of public gambling and the keeping of common gaming houses in the United Provinces, East Punjab, Delhi, and Central Provinces.” However, the Act did not define ‘public gambling’ and only defined the term common gaming house for the same,[3] but carved out an exception to the extent that the given provisions should not apply to a game of mere skill wherever played.[4]
India does not have, as of yet, a unified law that deals with gaming/gambling. The Indian Constitution empowers each state to make its laws concerning gambling since gaming finds its place in the State List.[5] This implies that there are several state-specific deviations.
While several states have adopted the Central Legislation, such as Bihar, Chandigarh, Chhattisgarh, Haryana, Himachal Pradesh, Jharkhand, Madhya Pradesh, Manipur, Punjab, Uttarakhand, etc. many other states have enacted statutes to govern gambling and betting, including but not limited to:
- The Andhra Pradesh Gaming Act, 1974
- The Assam Game and Betting Act, 1970
- The Goa, Daman and Diu Public Gambling Act, 1976
- The Gujarat Prevention of Gambling Act, 1887
- The Kerela Gaming Act, 1960
- The Bombay Prevention of Gambling Act, 1887
- The Rajasthan Public Gaming Ordinance, 1949
The states of Tamil Nadu, Telangana, and Andhra Pradesh have banned online games. Poker and Rummy are excluded from the definition of gambling in West Bengal. The Kerelan Government vide notification exempted rummy from gambling if no side-betting is involved. Sikkim and Nagaland necessitate a license for online games.
The Central Legislation mostly concerns gambling in physical places and does not consider online gambling. However, certain states are taking measures to regulate this space.
The issue of Online gaming/gambling was discussed in detail in the case of Gaussian Network Pvt. Ltd. v. Monica Lakhanpal[6]. The District Court of Delhi held the following:
- Game of skills, if played with stakes does not involve gambling.
- Playing games of skill for money is considered real and legal; online games cannot be compared to real games.
- Gaming sites partaking in a slice on the winning hand are illegal as they constitute a virtual gambling house in that case.
However, the above ruling was rendered infructuous since the parties withdrew their petition during the final arguments n the Revision Petition. As a result, there stands no ruling as such that can be treated as a precedent with regard to online gambling.
Sikkim is the only state to have legislation on online gaming. The Sikkim Online Gaming (Regulation) Act, 2008 allows licenses to be obtained for conducting online gambling in India, like Roulette, Blackjack, Pontoon, Bingo, Casino Brag, Punto Blanco, Baccarat, Poker, Poker dice, Backgammon, Chemin-de-for, Keno, and Super Pan 9. However, the state amended the law and restricted online games to physical gaming parlors in Sikkim through the Internet.
Definition of Gambling: Chance vs. Skill
Gambling has not been defined in the Act of 1867. However, the question of whether a game is considered gambling is ascertained by determining whether the game is one of skill or chance. The Supreme Court of India held the following, inter alia, in the matter of Dr. K.R. Lakshmanan v. State of Tamil Nadu & Anr.:
“Gambling in a nutshell is the payment of a price for a chance to win a prize. Games may be of chance, or skill or skill and chance combined. A game of chance is determined entirely or in part by a lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling of the cards, are all modes of chance. In these games, the result is wholly uncertain and doubtful. 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. A game of skill, on the other hand – although the element of chance necessarily cannot be eliminated – is one in which success depends principally upon the superior knowledge, training, attention, experience, and adroitness of the player. Golf, chess, and even Rummy are considered to be games of skill. The courts have reasoned that 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.”[7]
Poker
Different High Courts have given different decisions on whether Poker constitutes gambling. The High Courts of Gujarat on December 4, 2017, in the case of Dominance Games Pvt. Ltd. Ltd. v. the State of Gujarat,[8] held that Poker is a game of chance and therefore amounts to gambling under Gujarat Prevention of Gambling Act, 1887. The High Court of Bombay also held the same.[9]
However, the Calcutta High Court held that poker is not covered under the State’s gambling laws and hence, is not restricted.[10]
The Supreme Court observed that there is no scope of skill in the game of poker and hence it falls within the ambit of Gambling.[11] However, it is important to note that all such observations have been made on factual findings of the Lower Courts, which implies that there is no decisive ruling on Poker.
Rummy
Whether the game of rummy would fall under the ambit of gambling was observed in the case of State of Andhra Pradesh v. K. Satyanarayana & Ors.[12], wherein the Supreme Court inter alia held that:
“The game of Rummy is not a game entirely of chance like the ‘three-card game mentioned in the Madras case to which we were referred. The ‘three cards’ game which goes under different names such as ‘flush’, ‘brag’ etc. is a game of pure chance. Rummy, on the other hand, requires a certain amount of skill because the fall of the cards has to be memorized and the building up of Rummy requires considerable skill in holding and discarding cards. We cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill. The chance in Rummy is of the same character as the chance in a deal at a game of bridge. In fact, in all games in which cards are shuffled and dealt out, there is an element of chance, because the distribution of the cards is not according to any set pattern but is dependent upon how the cards find their place in the shuffled pack. From this alone, it cannot be said that Rummy is a game of chance and there is, no skill involved in it. Of course, if there is evidence of gambling in some other way or that the owner of the house or the club is making a profit or gain from the game of Rummy or any other game played for stakes, the offense may be brought home.”[13]
The decision in the case of 1968 came with a disclaimer that there should not be any evidence of gambling involved in any other way. i.e. the game owners should not make profits or gains from rummy, and the same should not be played for stakes.[14] This disclaimer potentially implied that online rummy games would not profit from the decision.
In 2012, a Division Bench of the Madras High Court, in the matter of The Director General of Police v. Mahalakshmi Cultural Association (“Mahalakshmi case”)[15] acknowledged rummy to be a game of skill, even though an element of chance is involved, adding that rummy, when played with stakes, amounts to gambling. The Mahalakshmi Cultural Association (MCA) thereafter filed a Special Leave Petition in the Supreme Court and many companies intervened. The Apex Court dismissed the applications of the companies on the ground that the Madras High Court in the above judgment did not include online rummy games or companies of the like in its judgment. Ultimately, vide order[16] in 2015, the Supreme Court allowed the MCA to withdraw the original Writ Petition on the ground that the members of MCA were not playing rummy, but a local game ‘ulle, velliye’.
The Kerela High Court in Play Games 24×7 Private Limited & Ors. v. Ramachandran K. & Ors.[17] held that RummyCircle (online rummy game) does not amount to gambling, since the laws in Kerela do not treat rummy as gambling if no side-betting is involved. This implies that other Courts may not cite the judgment as precedent.
Lottery
It is quite an irony that Lotteries, which are entirely games of chances, are permitted in several states, albeit strictly regulated and criticized by onlookers of law as a “disastrous evil”. The Lotteries (Regulation) Act, 1998 permits the organization, conduction, and promotion of lotteries in India subject to certain terms and conditions.
The State of Madhya Pradesh has banned lotteries in the state. Punjab recently announced that to generate revenue of Rs. 150 crores through the sale of lottery tickets, it intends to start online lottery schemes.
The Supreme Court in the case of All Kerela Online Lottery Dealers Association v. State of Kerela[18]which involved the matter of selective banning of online lotteries held that it was constitutionally valid to discriminate between online and paper lotteries as two distinct classes of lotteries in terms of Lotteries (Regulation) Act and hence, the government may ban online games of lottery regardless of the paper lottery schemes. The Apex Court held that as long as the state does not conduct a particular class of lotteries, it may ban within its territory that class of lotteries conducted by other states.
Spot Fixing
After the incident of spot-fixing in 2013 in the Indian Premier League (IPL) the Supreme Court appointed two panels to look into the matter – the Mudgal Committee and the Lodha Panel. Both panels were of the view that sports betting should be legalized in India. The Supreme Court in 2016 asked the Law Commission to examine the matter and make recommendations to the Government. The Law Commission of India released its 276th Report titled “Legal Framework: Gambling and Sports Betting including Cricket in India” and after weighing the pros and cons it was concluded that regulated betting and gambling is not desirable in India in the present scenario. State authorities were directed to enforce a complete ban on unlawful betting and gambling. Regulated gambling would involve three strategies: (a) reforming the existing gambling market, (b) regulating illegal gambling, and (c) introducing stringent and overarching regulations.
Fantasy Sports
Online fantasy sports gained popularity in India. The format typically involves participants playing the role of an owner/manager having a limited budget and the authority to buy, sell, transfer, substitute players before each game per match day, based on players’ availability. Accordingly, points are allocated to participants based on the outcome of the real matches, particularly the performance of the selected players in their team. In 2016, the Indian online gaming market value was estimated at USD 300 million which is expected to rise 3.4 times by the end of 2021 to USD 1 billion.[19]
The question of whether fantasy sports can be considered as gambling was decided in the matter of Varun Gumber v. Union Territory of Chandigarh & Ors. by the High Court of Punjab and Haryana which studied the model of Dream 11. It held that online fantasy sports do not constitute gambling for the invocation of the State legislation and stated, inter alia, that:
“…playing of fantasy game by any participant user involves virtual team by him which would certainly require considerable skill, judgment, and discretion. The participant has to assess the relative worth of each athlete/sportsperson against all athletes/sportspersons available for selection. He is required to study the rules and regulations of the strength of athlete or player and weakness also. The several factors as indicated above submitted by the respondent company would affect the result of the game…The respondent company’s website and success in Dream 11’s fantasy sports arise out of users’ exercise, superior knowledge, judgment, and attention. I am of the further view that the element of skill and a predominant influence on the outcome of the Dream11 fantasy than any other incidents are and therefore, I do not have any hesitation in holding any sports game to constitute the game of “mere skill” and not falling within the activity of gambling for the invocation of 1867 Act and thus, the respondent company is, therefore, exempt from the application of provisions, including the penal provisions, in view of Section 18 of 1867 Act. Equally so, before I conclude, I must express that gambling is not a trade and thus, is not protected by Article 19(1)(g) of the Constitution of India and thus, the fantasy games of the respondent company cannot be said to be falling within the gambling activities as the same involves the substantial skills which is nothing but is a business activity with due registration and paying the service tax and income tax, thus, they have protection granted by Article 19(1)(g) of Constitution of India.”
Other games
The Courts of India have by and large adopted the ‘Dominant Factor Test’ or ‘Predominance Test’ as followed by the Courts of USA to distinguish between games of skill and chance.
Certain categories of gaming/gambling are regulated by specific legislation, including but not limited to:
- Lotteries (Regulation) Act, 1998 (“Lotteries Act”) read with the Lotteries (Regulation) Rules, 2010
- Prize Competitions Act, 1955 (“Prize Competitions Act”)
Conclusion
The Indian gaming industry stands with a size of Rupees 30 billion today, which is expected to double in the next five years. Institutional investments such as the investment by Sequoia capital in Dream 11, a cricket and football fantasy game; participation of China-based Tencent Holdings in the funding of Dream 11; Nazara Technologies, popularly known for its games on world crick championship, ‘Chhota Bheem’ and ‘Motu Patlu’ series recently received funding from IIFL Asset Management; and the acquisition by the Goa-based Deltin group of Adda52, a leading online poker website, has brought this sector into the limelight.
Most of the laws concerning lotteries and gambling were enacted at a time when online platforms were non-existent and online gaming was not envisaged. There is a lacuna that leaves room for ambiguous interpretations which is both an opportunity and a legal risk to online gaming institutions and companies.
Analyzing the facts laid above, it is appropriate to conclude that games that are preponderantly that of skill do not constitute Gambling. Considering the ambiguity in this field it is imperative to draw up guidelines and legislations to govern online gambling in India.
[1]https://www.mondaq.com/redirection.asp?article_id=1022086&company_id=25502&redirectaddress=https://assets.kpmg/content/dam/kpmg/in/pdf/2019/03/online-gaming-india-fantasy-sports.pdf.
[2] BusinessToday.in, Dream 11 becomes India’s first gaming unicorn with investment from Steadview Capital, https://www.businesstoday.in/current/corporate/dream-11-gaming-unicorn-steadview-capital-dream-11-becomes-indias-first-gaming-unicorn-with-investment-from-steadview-capital/story/335465.html, April 9, 2019.
[3] Section 1 of the Central Legislation.
[4] Section 12 of the Central Legislation.
[5] Article 246(3) and Entry 34 of the State List (i.e. List II) of the Seventh Schedule to the Constitution.
[6] Suit No. 32 of 2012.
[7] Dr. K.R. Lakshmanan v. State of Tamil Nadu and Anr. (AIR 1996 SC 1153).
[8] Dominance Games Pvt. Ltd., v. State of Gujarat (2018 1 GLR 801)
[9] Nasir Salim Patel v. State of Maharashtra & Ors., WP (Criminal) 427 of 2017.
[10] Indian Poker Association v. State of West Bengal, W.P.A. No. 394 of 2019.
[11] M. J. Sivani v. State of Karnataka (AIR 1995 SC 1770).
[12] State of Andhra Pradesh v. K. Satyanarayana (AIR 1968 SC 825).
[13] Supra.
[14] Supra.
[15] The Director General of Police v. Mahalakshmi Cultural Association, W.A. No. 2287 of 2011
[16] Special Leave to Appeal (C) No. 15371 of 2012.
[17] Play Games 24X7 Private Limited and Ors. v. Ramachandran K. and Ors. (2019 4 KLT 542).
[18]All Kerela Online Lottery Dealers Association v. State of Kerela, AIR 2015 SCW 6210.
[19] Online Gaming Market Value across India in 2016 and 2021, STATISTA, https://www.statista.com/statistics/754586/india-online-gaming-market-size/.
Disclaimer: The views and opinions expressed in the articles on this website are those of the authors and do not necessarily reflect or represent the views and opinions held by the website owner.