Gaming has been practised both legally and illegally all over the world for possibly as long as civilization has existed. From playing ‘the Royal Game of Ur’ on a board in Mesopotamia in 177 BC to playing PUBG on smartphones in 2022, humans have come a long way in the realm of recreation.
As a result of the digital revolution, the gaming industry also moved online and now consists of three sizable segments: Real Money Games, Mobile Centric Casual games & e-Sports.
Games with bets on the results are referred to as Real Money Games (RMG), while Casual Games are free-to-play, simple games with relatively short sessions that primarily rely on in-app advertisements for revenue. e-Sports is the term for competitive online gaming, which is typically done by professionals in tournaments. e-Sports are often Massively Multiplayer Online Role-Playing Games (MMORPGs) like FIFA and their players are virtual athletes.
But, why are we even talking about online gaming?
For starters, there are a lot of people involved, along with a lot of money.
The recently introduced Online Gaming Bill, which was tabled in the Lok Sabha on April 1, 2022, notes that there are about 420 million (42 crores) active online gamers in India, with the market being valued at $1.5 billion and expected to reach $5 billion (39,000 Crores in INR!) by 2025.
According to a recent Deloitte report (March 2022), the industry is expected to generate INR 16,000 crore in revenue for the government over the next three financial years. Additionally, the industry has drawn more than INR 10,000 crore in Foreign Direct Investment (FDI) and is expected to draw another INR 15,000 crore in the coming three years, making the sector a substantial contributor to the expansion of the economy.
With Games24x7, Dream11, and Mobile Premier League as its three unicorns, with millions of people and billions of dollars at stake, it is clear that the gaming industry is expanding and must be regulated.
Understanding Skill & Chance in Online Gaming
To understand online gaming regulation, we must first grasp the concepts of ‘Game of Skill’ and ‘Game of Chance’ and their significance. I have made an effort to explain both using three games that are popular in Indian households: Chess, Ludo, and Snake & Ladder.
Simply put, it is lawful to bet money on a game’s outcome if you can establish that it is a “game of skill.” It is gambling and against the law, if the result of the game depends just on luck (chance). However, if there is a mixture of both—a little bit of talent and a little bit of luck—and you place a wager on the result, then, my friend, welcome to the grey area of online gaming regulation.
Arguments for classifying Fantasy games as ‘Game of Chance’
Gambling, as defined by Black’s Law, is the act of putting anything valuable (particularly money) at risk in exchange for the possibility to gain a reward. According to the definition, fantasy gaming apps should be regarded as games of chance since they require players to put money at risk in exchange for the possibility to win a prize. The New York Supreme Court cited the same justification when it ruled that fantasy games are illegal, noting that users’ talent in fantasy gaming apps is limited to team selection and that users have no control over an athlete’s performance.
Arguments for classifying fantasy games as ‘Game of Skill’
Fantasy sports are not a game of chance because while playing a fantasy game, a variety of skills are put to the test, like digital literacy, statistical analysis, knowledge of the strengths and weaknesses of the real-world sports person, as well as knowledge of the environment, weather, ground conditions, and the sport itself.
Therefore, the primary legal challenge faced by online gaming companies in India and around the world is determining whether the game is one based on skill or chance. Different nations have adopted different meanings of chance and skill. Now let’s attempt to understand, case by case, the position of Indian courts on the matter.
Stance of Indian Courts on the matter- Legal Precedents
- 1957, R.M.D. Chamarbaugwalla vs. Union Of India Case: The Supreme Court of India established a two-step process for differentiating sports from betting or wagering based on their predominate characteristics:
- First, where the success of the player depends significantly on their skill, and
- Second, even where there is an element of chance, success in the competition dominantly relies on skills of the player(s)
The court determined that a game would be regarded a game of skill if it comprised both chance and skill.
- 1967, State of Andhra Pradesh v. K. Satyanarayan Case: According to this ruling, “Rummy” is primarily and preponderantly a game of skill that requires memory and judgement skills, hence it cannot be criminalised under the Public Gambling Act.
- 1996, Dr. K.R. Lakshmanan v. State of Tamil Nadu Case: It was concluded that games of chance are those that are decided entirely by luck and “without any application of the human mind,” and horse racing was found to be predominately a game of skill. Thus, the “preponderant factor test” or “dominant factor test” was established. The Supreme Court of India has interpreted the words “mere skill” to include games which are preponderantly of skill and have laid down that
- (i) the competitions where success depends on a substantial degree of skill will not fall into the category of ‘gambling’; and
- (ii) 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”.
Hence, games which satisfy tests of skill are not regulated under gambling legislations.
- 2017, Shri Varun Gumber Vs UT of Chandigarh Case: (High courts of Punjab and Haryana). The court said “Playing of fantasy game by any participant user involved forming of a virtual team by him which certainly required considerable skill, judgment and discretion. The participant had to assess the relative worth of each athlete/sportsperson as against all athlete/sportspersons available for selection. He was further required to study the rules and regulations of the strength of athlete or player and weakness also.”
- 2019, Gurdeep Singh Sacchar Vs Union of India Case: Bombay High Court observed that “The participants do not bet on the outcome of the match and merely play a role akin to that of selectors in selecting the team. The points are scored by the participants for the entire duration of the whole match and not any part of the match.”
- 2021, Junglee Games & ors. Vs. State of Tamil Nadu Case: The Hon’ble Madras High Court completely struck down a Tamil Nadu Government law that put a blanket ban on all forms of online gaming, including games of skill. The Court was of the view that imposing a blanket ban fell afoul of Article 19(1) (g) of the Constitution of India and hence, completely quashed the amendment that brought about the ban on all forms of online game.
- 2022, The Karnataka High Court on 14th Feb 2022 struck down a state government law that banned online gaming.
While the debate of whether online fantasy sports platforms host games of skill or chance has been settled to be of the former, there still exists no clear guideline as to what may constitute a game of skill.
The stance of Indian State Governments on the matter
In India, betting and gambling are covered by the second list of the 7th schedule of the Indian Constitution, making them a matter for the states to control and regulate. Here is a breakdown of how various states’ attitudes toward fantasy games varies according to India’s varied and rich cultural heritage.
| States that include games of skill in the ambit of gambling | Assam, Odisha, Telangana |
| States that disallow residents from engaging in online games (be it skill, chance, or a mix of both) | Assam, Odisha, Telangana, Andhra Pradesh |
| States that are unclear only games of skills that may be played for a fee | Assam, Odisha, Telangana, Andhra Pradesh, Tamil Nadu, Nagaland |
| States that do not explicitly prohibit any sort of gambling, betting or wagering on games of chance |
Goa, Sikkim & Union Territory of Daman |
Current Regulations in India
There are three bills at the centre level, one guideline document issued by Niti Ayog in 2021 and two self-regulating bodies in regulating Online Gaming Ecosystem in India as of now
- Federation of Indian Fantasy Sports (FIFS): The industry’s self-regulatory body for fantasy sports in India. The FIFS publishes a Charter for Online Fantasy Sports Sites, which lays out the ground rules for its members. Operators offering Fantasy Sports in accordance with the Charter of the FIFS shall be accorded protection under Article 19(1)(g) of the Constitution of India, as a legitimate business activity.
- Advertisement Standards Council of India (ASCI): It released certain guidelines in December 2020, on advertisements for fantasy sports and online gaming.
- Public Gambling Act, 1867: Online games that involve the use of skill, such as skill-based online gaming, are permitted, while games of chance are prohibited under the Public Gambling Act. The Public Gaming Act, 1867 is a central law that prohibits running or being in charge of a public gambling house in India.
- The Online Gaming (Regulation) Bill, 2022: Herein after referred as “The Bill” was introduced in Lok Sabha on 1st April 2022 by Adv. Dean Kuriakose, a congress member from Kerala as a Private Member’s Bill.
IT Act 2000: In response to a Parliament Question, the Ministry of Electronics and Information Technology stated that “Online gaming platforms are intermediaries, and they have to follow the due diligence as prescribed in the Information Technology (IT) Act, 2000 and the Rules thereunder”. The platforms are currently regulated under the IT Act, 2000 and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.
Challenges related to Online Gaming Ecosystem
- Unclear Control: Let the federal government be in charge of the subject because it is now quite simple to enter contests on Dream11 while residing in Odisha (or any other state where doing so is forbidden) by simply entering the wrong address while registering for the platform. Apart from requiring users to comply with the law, different regulations also result in users having varying rights and remedies against platforms, which leaves consumers uncertain and perplexed when it comes to dispute resolution.
- Restrains on Expansion: Fantasy Sports is prohibited in the Google App Store because Google does not allow mobile apps that offer pay-to-play contests on its platform, which is legal in just 19 countries, subject to sufficient official clearance and license.
- Money laundry through microtransactions: In India, by 2025 the gaming market is expected to value $7 billion with the in-app purchase being the fastest growing segment. Criminals buy virtual currency using illicit funds and purchase in-game items. Then they sell these in-game items to players across the globe for convertible virtual currencies. The money is then exchanged for fiat & withdrawn as legitimate money.
- Radicalisation of young minds: Another issue for the online gaming industry is the spread of radical ideas and terrorist propaganda via features like in-game chat, particularly among a young and impressionable audience.
- Unregulated Lootboxes: As mystery boxes that players pay for with the expectation of winning something more valuable, lootboxes fit within the traditional definition of gambling. An illustration of this is the 2019 decision by Counter-Strike to stop allowing the trading of container keys on the Steam Community Market, which followed the discovery that almost all key purchases were made to exchange illegal currency.
Suggestions & Way Forward
- A comprehensive federal regulation or policy that applies to all states is urgently needed, even though online gambling sites are considered intermediaries under the IT Act 2000.
- A robust framework for differentiating games into skill-based and chance-based games should be developed.
- It should be decided whether to classify lootboxes as a separate game or a game of chance.
- Online games should include a Graded Age Rating System, similar to the ESRB’s (Entertainment Software Rating Board), so that parents and players may make well-informed decisions.
- Interventions that reduce harm should be implemented rather than outright bans. Lawmakers in the region must acknowledge that fantasy sports stimulate fan interest in real-life sports leagues.
Very well researched and written! Insightful.
Greetings! Very helpful advice within this post! Its the little changes that make the greatest changes. Thanks a lot for sharing!
Very well-researched article Meghna! My favourite part is knowing about the Games of Skills & Games of Chance. Since learning and playing have a very strong relationship, can skill games be made a part of formal education? Looking forward to knowing more in your future research. Keep up the good work 🙂