In an earlier article we wrote about how gambling in India faces a peculiar predicament. The blanket ban in India of any activity that constitutes ‘gambling’ has existed since the British-Era, and has not undergone significant modification since that century. However, practices and businesses have evolved, technology has taken centre stage, and a significant number of India’s youth population has turned to online gaming for its easy availability.
Gambling is a state subject in India, and States have the primary authority to regulate and legislate on the practice of gambling in any manner they deem fit. The Public Gambling Act, 1867 (“Act“) is the only act notified by the Central Government on this subject and is a century old act that pre-dates online gaming. Most states have however notified this Act, with respective state derogations. The Act prohibits all common gaming houses indulging in games of chance, while carving out an exception for games of mere skill1.
On October 5, 2021 the Karnataka government promulgated an amendment to the Karnataka Police Act, 1963 (“Karnataka Act“). The Karnataka Act banned all forms of gambling in the state in connection with a game of chance (with the exception of horse races and lotteries), including all forms of online gambling. The Karnataka Act also stated that “any act of risking money or otherwise on the unknown result of an event including on a game of skill” will be an offence. The Karnataka Act expanded on the definition of gaming including in its gambit all” online games, involving all forms of wagering or betting, including in the form of tokens valued in terms of money paid before or after issue of it, or electronic means and virtual currency, electronic transfer of funds in connection with any game of chance…”. The maximum punishment for violations under the Karnataka Act is imprisonment for three years and a penalty upto Rs. 1 lakh.
Gambling legislations in India typically differentiate between games of chance and games of skill. A game of chance is equated to gambling and is prohibited, while a game of skill is typically distinguished from gambling and is not prohibited, subject to state legislation. Some exceptions to this general rule can be seen in the legislations of Assam, Orissa, Sikkim and Nagaland (both of which require a license to be obtained), Nagaland, Andhra Pradesh and Telangana, which do not carve out exceptions for games of skill from the blanket restriction on gambling. This vital carve-out for games of skill under the central and state legislations has served as the fulcrum on which all instances of potential gambling activities are tried. Since the Acts and its State derogations do not elaborate on the definition of skill or even the required threshold of skill, various Courts have taken it upon themselves to formulate a reasonable principle around the same. The oldest judgment in this regard comes from the Supreme Court of India (“Supreme Court“) in the case of The State of Bombay Vs. R.M.D Chambaugwala 5, in which the Supreme Court, while deliberating on the nature of gambling under the Bombay Lotteries and Prize Competition Control and Tax Act, 1948, asserted that a competition, in order to avoid the stigma of gambling, must depend to a substantial degree upon the exercise of skill. The Supreme Court, while interpreting the requirement of ‘mere skill’, has reiterated at several places that for a game to be adjudged a game of skill, there has to be a preponderance of skill rather than chance. For instance, in the case of State of Andhra Pradesh Vs. K. Satyanarayana & Ors.2, the Supreme Court debated whether the game of Rummy was a skill-based game and stated that the game of Rummy is not a game entirely of chance3 and requires certain amount of skill. It was held a game of skill would include all games where there is a preponderance of skill over chance, including where the skill relates to (i) strategizing the manner of placing wagers or placing bets, (ii) selection of a team or virtual stocks based on analysis, or (iii) the manner in which the moves are made, whether through deployment of physical or mental skill and acumen. The Supreme Court noted that in a game of Rummy while there was an element of chance; as is the case with all games in which cards are shuffled; it was preponderantly a game of skill. Thus, it is evident that the preponderance of skill has evolved to become the litmus test basis which games are able to avoid the tag of gambling.
The Karnataka Act diluted this distinction between games of chance and games of skill and banned all forms of online gaming whether based on skill or chance. The Karnataka Act was challenged before the Karnataka High Court [All India Gaming Federation v. State of Karnataka] and the challenging petitions claimed that games of skill, irrespective of whether they involve the risk of losing money, would not amount to wagering or betting and hence a blanket ban cannot be imposed. It was argued that the State lacked legislative authority to pass the Karnataka Act, which was not only contrary to precedent laid down by the Supreme Court but was also violative of Articles 14, 19(1)(g), 21 and 301 of the Constitution.
On the other hand, the State government asserted that the petitioners had no cause of action and also argued that such games did not require great skill and was in fact, predominantly a game of chance. The State government during the hearing asked “You are placing money over performance of players over which you have no role or control whatsoever. Once you establish this, how is it a game of skill?”
The Karnataka High Court on February 14, 2022 struck down provisions of the Karnataka Act which banned betting on and playing games of skill, including online games. A Division Bench of Chief Justice Ritu Raj Awasthi and Justice Krishna S Dixit pronounced the judgment. “The writ petitions succeed. The provisions are ultra vires of the Constitution and struck down,” the Court said. The Court did not strike down the entire Karnataka Act and only struck down the offending provisions. It however, also made it clear that nothing in the judgment could prevent the state from introducing new legislation to regulate gambling or betting in accordance with the constitution.
The Karnataka High Court is the third court (after the Kerela High Court and the Madras High Court) to observe that the ban on playing and betting on online games of skill was unconstitutional. Last year, the Tamil Nadu government passed the Tamil Nadu Gaming and Police Laws (Amendment) Act of 2021 (“TN Act“), banning online wagering or betting. It also extended this prohibition explicitly to games of skill as well. The Madras High Court vide an order (Junglee Games & Ors. Vs. State of Tamil Nadu) struck down the TN Act. The Court was of the view that imposing a blanket ban fell afoul of Article 19(1) (g) of the Constitution of India (Right to Practise any Profession, or to Carry on any Occupation, Trade or Business) and quashed the TN Act. The Court instead specifically stated that it is necessary to regulate online gaming rather than a blanket ban.
It is apparent that a harmonisation of the various legislations surrounding online gaming has to take place and a coherent framework which takes into account tools of modern gaming, must be established, as the law in its current form somewhat fails to accommodate for the developments of the current century.
1 Section 12, The Public Gambling Act, 1857.
2 AIR 1968 SC 825
3 Paragraph 15, AIR 1968 SC 825
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