The Fate of Online Gaming in India: Game of Chance versus Game of Skill

With the advent of technology, there have been a lot of developments and inventions which have blurred the concepts of physical presence and boundaries that were prevalent a couple of decades ago. Today, even traditional games like rummy, flush, poker, ludo, cricket, etc. are played online, some of which include real money as stakes.  

Prohibition on Gambling

In India, the central legislation governing gambling or wagering is the Public Gambling Act, 1867 (“Gambling Act”) and many States in India have adopted similar legislation for prohibiting gambling and wagering (collectively “Gambling Laws”). These Gambling Laws were adopted prior to the existence of online gaming and therefore, Courts have tried to interpret the provisions to extend the same to online gaming as well.

Sections 3[1] and 4[2] of the Gambling Act prohibit the organising of any games or keeping any gaming instrument, and playing such games for any money, wager, stake or otherwise. Surprisingly, the Gambling Act does not define the terms “wagering”, “gambling” or “betting” and hence these terms are to be construed as per their meaning in common parlance. ‘Gambling’ or ‘Wagering’ as per most Gambling Laws and in common parlance, are understood to mean “the act of betting” for money or money’s worth, “game of mere luck and chance”.

However, Section 12 of the Gambling Act provides an exception which states that the Gambling Act shall not be applicable in the event the game played is a game which requires skill. Similar exceptions have been provided under most Gambling Laws as well. Further numerous judicial pronouncements have made the distinction between “game of skill” on one hand and gambling, wagering or a “game of chance” on the other.  

Game of Chance vs. Game of Skill

In India, online gaming has transformed physical sports into virtual sports. For example, online rummy, PUBG and Pokemon Go, have entry fees and offer cash prizes for winners. Would such online tournaments be considered illegal? Hitherto, majority of the States have no dedicated online gaming laws. Therefore, the answer to such questions has to be drawn out from judicial pronouncements. Any game whether played online or physically has to go through the test of “game of skill versus game of chance”.

The clarity to the meaning of phrases “Game of Chance” and “Game of Skill” has been elucidated by a plethora of judgments by the Indian Courts which have been delivered prior to the internet era. Nevertheless, their ratio have been extended in context of online gaming as well.

The Supreme Court of India in K.R. Lakshmanan vs. State of Tamil Nadu and Ors.,[3] described what a game of chance is in the following words:

“… 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.”

Again, the Apex Court in the landmark judgements of State of Bombay vs. R.M.D. Chamarbaugwala,[4] and State of Andhra Pradesh vs. K. Satyanarayana,[5] has interpreted the expression “game of mere skill” to mean “mainly and preponderantly a game of skill”.  

The Test for Online Gaming

As online gaming industry gains in India, advertisements and media show such games as a pass to make quick money and thereby, allegedly, create a resemblance to gambling which is prohibited. A recent illustration of the same are the cases filed against the Dream 11 Fantasy competition in Punjab and Haryana High Court[6] (“Dream 11 Punjab Case”) and Bombay High Court[7] (“Dream 11 Bombay Case”), alleging that the Dream 11 Fantasy competition is not a game of skill and is prohibited as per Gambling Laws.

In the Dream 11 Punjab case, the Punjab & Haryana High Court extended the “skill vs chance” test applied by the Apex Court in State of Bombay vs. R.M.D. Chamarbaugwala[8] and State of Andhra Pradesh vs. K. Satyanarayana[9], to test the legality of online gaming as well and held that the online game, Dream 11 Fantasy competition, is a game of skill as:

“…playing of fantasy game by any participant user involves virtual team by him which certainly requires a considerable skill, judgment and discretion. The participant has to assess the relative worth of each athlete/sportsperson as against all athlete/sportspersons available for selection.”

A special leave petition was filed in the Supreme Court of India against the judgment passed in the Dream 11 Punjab case, which was dismissed, thereby providing a finality to the Punjab & Haryana High Courts’s order.[10] Further, in the Dream 11 Bombay Case, the Bombay High Court relying upon the on the Dream 11 Punjab Case, held that Dream 11 Fantasy competition is a game of skill.  

Further, contentions may be raised against online games such as PUBG, that these are a “game of chance” and not “game of skill” because of the features of the game where a player might get certain ammunitions or health benefits or vehicle randomly, that might give a player an unexpected advantage over others ‘by chance or luck’. In this regard, a counter argument which has, till date, been accepted and reiterated by the Apex Court is that there are no or only a few games, if any, which would be completely and solely game of skill, destitute of any iota of luck or chance.[11]

Even sports like cricket and tennis start with ‘toss’, which is nothing but mere luck and may put one team/player in a favourable situation but it would not make such sports a game of chance merely by negating the insurmountable practice, knowledge, technique and skills put in by the players. Extending the same principle to online games like PUBG or Counter-Strike, a player needs to practice, have shooting skills, knowledge of the weapons, maps, etc. in the game, which would render such games as ‘substantially and dominantly a game of skill’.  

Contrast in the Stance of State Governments

Though the majority of state legislatures in India have categorically recognised the nature of game of skill and provided exception thereof, however, a few States provide that if a game is played with stakes even though it qualifies as a “game of skill”, still it would be considered gambling and hence punishable. For example, Orissa and Assam do not recognise “games of skill” as a separate and distinct category from “games of chance” and therefore do not provide for any exceptions for the former under the Orissa (Prevention Of) Gambling Act, 1955 and the Assam Game and Betting Act, 1970, respectively.

The Andhra Pradesh Gaming Act, 1974 as applicable to the State of Telangana (“Telangana Gaming Act”) has been amended[12] to specifically incorporate the provisions related to online gaming played for stakes and to remove the protection granted to the “game of skill”.

As opposed to the above examples, the States of Sikkim and Nagaland have passed the Sikkim Online Gaming (Regulation) Act, 2008 and the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016, respectively, which not only recognise the concept of online gaming but also take a progressive stance of regulating them by issuing licenses.  

Conclusion

The Courts in India have in many cases discussed at length and laid down the law wherein to qualify as game of skill, a game has to be ‘preponderantly a game of skill’ involving considerable knowledge, expertise or skills. Therefore, irrespective of whether a game is played online or physically, the test for its legality remains the same. Further, where a substantial degree of skill is exercised, such competitions/games/sports may not fall under the ambit of gaming/gambling under the Gambling Laws, unless such games are specifically included within the ambit of gambling under the respective state legislations or a specific license is required to be obtained under such state legislations.

The views and opinions expressed in this article belong solely to the author and do not reflect the position of Tatva Legal Hyderabad.

[1] Section 3 - Penalty for owning or keeping, or having charge of a gaming-house: Whoever, being the owner or occupier, or having the use, of any house, walled enclosure, room or place situate within the limits to which this Act applies, opens, keeps or uses the same as a common gaming-house; and whoever, being the owner or occupier of any such house, walled enclosure, room or place as aforesaid, knowingly or willfully permits the same to be opened, occupied, used or kept by any other person as a common gaming-house; and whoever has the care or management of, or in any manner assists in conducting, the business of any house, walled enclosure, room or place as aforesaid, opened, occupied, used or kept for the purpose aforesaid; and whoever advances or furnishes money for the purpose of gaming with persons frequenting such house, walled enclosure, room or place; shall be liable to fine not exceeding two-hundred rupees, or to imprisonment of either description, as defined in the Indian Penal Code, for any term not exceeding three months.

[2] Section 4 - Penalty for being found in gaming-house: Whoever is found in any such house, walled enclosure, room or place, playing or gaming with cards, dice, counters, money or other instruments of gaming, or is found there present for the purpose of gaming, whether playing for any money, wager, stake or otherwise, shall be liable to a fine not exceeding one hundred rupees, or to imprisonment of either description, as defined in the Indian Penal Code, for any term not exceeding one month, and any person found in any common gaming-house during any gaming or playing therein shall be presumed, until the contrary be proved, to have been there for the purpose of gaming.

[3] K.R. Lakshmanan vs. State of Tamil Nadu and Ors., AIR 1996 SC 1153

[4] The State of Bombay vs. R.M.D. Chamarbaugwala, AIR 1957 SC 699

[5] State of Andhra Pradesh vs. K. Satyanarayana, AIR 1968 SC 825

[6]  Shri Varun Gumber vs. Union Territory of Chandigarh and others, 2017 CriLJ 3827 (P&H HC)

[7] Gurdeep Singh Sachar vs. Union of India and Ors., Criminal Public Interest Litigation Stamp No.22 Of 2019, decided on April 30, 2019.

[8] The State of Bombay vs. R.M.D. Chamarbaugwala, AIR 1957 SC 699

[9] State of Andhra Pradesh vs. K. Satyanarayana, AIR 1968 SC 825

[10] Shri Varun Gumber v. Union Territory of Chandigarh and Ors., Supreme Court Order dated September 15, 2017, Supreme Court of India, Record of Proceedings, Diary No. 27511/2017

[11] K.R. Lakshmanan vs. State of Tamil Nadu and Ors., AIR 1996 SC 1153

[12] Telangana Gaming (Amendment) Act, 2017