Thursday , September 29 2022

Online Gaming Laws In India: An Obstruction In Path Of Prospective Investment

Innovation has invariably continued to find wide acceptance in India, primarily in the form of technological advancement. The Indian gaming industry is no exception to such acceptance. There has been an exponential growth in the gaming industry reflecting India’s potential as a global online gaming hub. As per a report by Deloitte1, India with 368 million online gamers is amongst the top five mobile gaming industries. If the projections are correct2, Indian gaming industry is on its way to $8.6 billion by 2025.

Indian online gaming industry can be categorised into skill based and chance-based games. Under the Indian legal regime, purely chance-based games fall within the purview of gambling and are consequently barred in most of the Indian states, while there are no restrictions on ideation, conduction, and promotion of “mere skill-based games”.

Such implicit interplay of “skill-based” and “chance based” games, in addition to the quasi-federal nature of Indian legal regime, translates into an explicit ambiguity reflected in the form of disjunctive and inconsistent legislations across states. Such ambiguity can lead to challenges for India’s flourishing online gaming industry.

Power dynamics of Centre-state relationship concerning gaming laws

As “gambling and betting” are state subjects, the powers to restrict, regulate or curb such practices lies in the hands of state legislative machinery. Further, the distinction of skill-based and chance-based games is fact specific because of which multiple states have varied interpretation of the term “gambling”.

While there are two central legislations concerning the regulation of chance-based games, there is a multiplicity of state legislations aiming to regulate online gaming through licenses, bans and steered restrictions.

The states that have mandated obtaining a license for luck-based games are Sikkim, Meghalaya and Nagaland. The licensing regime of Nagaland and Meghalaya is equally applicable to some specified games of skills, excluding “merely skill-based games”, while Sikkim mandates offering online games via intranet terminals post obtainment of a license.

States such as Karnataka, Andhra Pradesh, Kerala, Telangana and Tamil Nadu contain provisions in their respective legislations that aim at restricting and regulating chance-based games, without any objective criterion relevant for determination of such games. Such lack of objectivity further adds to the ambiguity concerning the regulation of online games in India.

Lack of legal consistency in regulations

In the recent past, states of Tamil Nadu and Kerala16had imposed blanket bans on games of stakes, identifying the act of staking as a part of “betting and gambling”. The bans were imposed regardless of the attribution of some games of stakes as “skill-based games”.

As skill-based games fall outside the purview of gambling, the blanket bans on all games of stakes (including skill-based games) were declared unconstitutional by the High Courts of respective states. Considering the imposition of such ban in the state of Tamil Nadu, the Madras High Court, in the case of Junglee Games India vs State of Tamil Nadu characterized the ban as irrational, excessive, and grossly disproportionate. Similarly, the Kerala High Court, in the case of Gamekraft Technologies vs State of Kerala declared the ban on staking as “illegal”, “arbitrary” and “violative of fundamental rights”, thereby declaring such blanket ban as unconstitutional.

Despite the evident judicial rectification of legal inconsistencies in the laws concerning online gaming in India, the Karnataka state government notified an amendment19 in the Karnataka Police Act, 1963 to the effect of banning online games of stakes, thereby adding to the convoluted jurisprudence governing online gaming. The amendment has been challenged in the Karnataka High Court, where orders have been reserved for declaration at a future date.

While the Indian judiciary would, in all probability rectify the legal inconsistencies related to amendments to the State legislations, the reluctance of states to frame laws in alignment with the legal interpretation governing online gaming is problematic. Such reluctance might lead to challenges for the gaming industry by hampering prospective investments in such a promising commercial space.

Way Forward

An achievable solution can be materialised in the form of a central substantive law with concrete, emphatic and objective definitions of “skill based” and “purely chance-based” games, accompanied by a schedule exhaustively explicating a list of such games. Analogous to the Centre-state interface concerning gaming laws in Spain (which closely resembles India’s quasi-federal structure), the power to frame procedures regulating betting and gambling can be retained by states as an extension to the Central Act, thereby resolving the challenges posed by innumerable interpretations of the substantive provisions of the act across the states.

A possible obstruction to the implementation of the proposed central law is the presence of sports as a state subject in the Indian Constitution. However, the ideation of “online gaming” is sufficiently distinct from “sports”. Further, as “online gaming” as a subject has not been mentioned in any of the three lists of the Seventh Schedule of the Indian Constitution, the powers to legislate on such a novel subject rest with the Centre. The exercise of such powers by the centre, with the provision for states to legislate on procedural regulations would certainly help in resolving the incoherence of state legislations and facilitate prospective investments in the Indian online gaming industry.

The article is written by Gaurav Arora, Partner, J. Sagar Associates and supported by Aditi Richa Tiwari.

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