• CRSPL

  • 05 Aug 2023

  • 40
  • 10 mins

Understanding The Necessary Laws And Compliances Of Online Gaming In India

The way the online gaming industry operates has changed dramatically as a result of technological advancements and the growing number of internet users. Rummy, poker, fantasy sports, and other games are now played and watched online, but there is still a lot of confusion around the legality of these activities in India. Online gaming can be separated into three main categories: games for real money (like poker), games tailored for mobile devices (with pay walls to speed up play), and e-sports (like FIFA). 

Interest in fantasy sports has increased dramatically in India as a result of Dream 11, a fantasy sports platform, sponsoring the Indian Premier League in 2020. In addition to Dream 11, the Online Fantasy Sports Platform (OFSP) features a number of other players who have become more well-known in recent years, including My 11 Circle, My Team 11, and Howzat Fantasy. Sports fans can create virtual teams using players from forthcoming matches and award points based on how well they perform on the field using these services. Courts in India have debated the legitimacy of fantasy sports, with the majority coming to the conclusion that it is a game of skill rather than chance. The Rajasthan High Court's ruling that Dream 11 is a platform that includes expertise and talent and is not one that involves gambling or promotes gambling was upheld by the Supreme Court of India in the month of August 2021.

All states save Goa, Daman & Diu, Sikkim, and Nagaland prohibit gambling as a practice. Under Entry 34 of List II of the Indian Constitution, games of chance are classified as gambling in India and are therefore outlawed in ordinary families, with the exception of those states with gaming regulations, such as Sikkim and Nagaland. This is because these games only minimally call for learning capacity, strategy, physical coordination or strength, technical expertise or specialized knowledge, and the exchange of money depends on the outcome of some unforeseeable future occurrence. According to the Public Gambling Act of 1867, a game of pure skill is not considered gambling.

Precedent on the Online Gaming in India

The Supreme Court defined "mere skill" as games that primarily rely on skill in The State of Bombay v. R.M.D. Chamarbaugwala. A game would need to incorporate a considerable degree of skill practice and expertise in order to be considered anything other than a game of chance. In K.R. Lakshmanan v. State of Tamil Nadu, the court went on to say that knowledge, practice, focus, experience, etc. all play a crucial role in winning a game of skill. The "preponderance of skill" test is used in this situation.

When deciding whether Rummy was a game of skill or chance in the State of Andhra Pradesh v. K. Satyanarayana & Ors, The Supreme Court came to the conclusion that players had to learn cards, retain them, then discard them, requiring considerable creativity. The court noted that rummy is not a completely random game. It is primarily and predominately a skill-based game. Any game in which cards are combined and dealt has a component of chance because the deal of cards does not follow any predetermined pattern and instead depends on how the cards are mixed. Rummy cannot be dismissed as a chance-only game with no element of skill based only on this.

The Punjab and Haryana High Court found that fantasy sports are distinct from online gaming because they require the use of skill when drafting teams by assessing the relative worth of players, including also taking into account other crucial real-world factors like pitch, climate, player health, etc. The Supreme Court of India reviewed an appeal against the decision of the Punjab and Haryana High Court in the Fantasy and Online Games case. However, the Supreme Court swiftly rejected the appeal, upholding the state high court's ruling.

The Supreme Court of India's decision in the famous case of Gurdeep Singh Sachar v. Union of India, which concluded that, unlike betting, winning or losing in fantasy sports did not depend on the performance of either team, was the one that the Bombay High Court most notably cited. As a result, Dream 11 could not be found responsible for engaging in gambling or betting under the guise of online fantasy sports gaming. In Ravindra Singh Chowdhary v. Union of India & Ors, the High Court of Rajasthan reached a similar conclusion.

State Laws For Online Gaming in India

The 276th Law Commission Report advocated for the exclusion of skill-based games from the definition of gambling but did not define the term, leaving room for debate. States that allow internet gaming that can be considered gambling, like Tamil Nadu, Telangana, and Karnataka, have passed laws outlawing it or changed existing ones to do so.

The Gaming (Amendment) Act of 2017 in Telangana has broadened the definition of wagering and betting to encompass actions that involve placing money at risk on uncertain outcomes, even when the game at hand is a skill game. The Telangana High Court has received a challenge to this change but has not yet reached a decision. A rule that was established in Tamil Nadu makes it illegal to bet online or in any other way that involves computers or other communication tools, traditional gambling venues, or the electronic transfer of money to award rewards. A fine of up to Rs 10,000 or both are possible penalties for breaking this rule, along with a sentence of up to two years in prison. The Karnataka Police (Amendment) Act 2021 forbids both offline and online gambling and gaming. For violations of its terms, it offers a maximum sentence of three years in prison, a fine of up to Rs. 1,000,000, or both. Lawyers for the petitioners have contended that the state has the authority to enact regulations for skill sports. The most well-known case related to online and fantasy games, All India Gaming Federation v. State of Karnataka, was delayed by the Karnataka High Court due to several petitions contesting the legality of the statute. 

Additionally, the Andhra Pradesh Gaming (Amendment) Act, 2020 imposes limitations on internet games like Rummy, which is classified as a game of skill.

Why there is a need for laws and compliance for the regulation of Online Gaming in India?

As a result of lockdowns and restricted outside activities brought on by the COVID-19 epidemic, a sizable percentage of the population now relies on the internet for pleasure. The cost and accessibility of smartphones, tablets, and PCs have also contributed to the rising popularity of online gaming. The Indian market for online sports and games is currently worth over USD 1.6 billion, and it is anticipated to increase to USD 7 billion by the year 2025.

The distinction between skill-based and chance-based games, as well as how each state government controls them, are topics that need to be defined. Games like poker that need math and memory abilities and that many people practice and learn to become proficient at in order to flourish may also be classified as skill-based in the future if fantasy sports entail the evaluation of a variety of elements. Any gambling rule must expressly define the parameters that separate these games from one another, allowing one to be legal while the other is prohibited. Limitations on legal businesses have resulted from the indiscriminate use of the terms "gambling" and "gaming" due to the absence of a distinguishing differentiation.

Having said that, a total ban on gambling may not have the desired effects and will probably lead to the development of other forms of gaming. Given that the contribution to the exchequer from the fantasy sports category alone is anticipated to exceed Rs 13,500 crore by FY2014, governments will considerably profit from taxation if they control the online gaming business. It will be intriguing to see how online gaming platforms and fantasy sports leagues are regulated, as well as how the courts handle any disputes about how to classify them.
 

New Government Rules and Regulations Regarding Online Gaming in India

The Indian government established regulations on April 6, 2023, to control the online gambling market. These regulations forbid games that include wagering or betting with real money. Rajeev Chandrasekhar, the minister of state for electronics and information technology, claims that three Self-Regulatory Organizations (SROs) will be established by the government to formally certify national sports.

Online games that don't feature betting, harmful content, or addictive elements for young players are okay, according to Chandrasekhar. The SROs, which would oversee online gambling in India, will be made up of business representatives, players, and other stakeholders rather than the government.

The SROs must include an educator, a psychologist or mental health expert, and someone who has held a position of leadership or membership in a group dedicated to defending children's rights, per the regulations. "This is a structure that would enable real and considerable growth in the Indian online gaming industry, which is a major opportunity, according to Chandrasekhar.

The IT Rules for 2021 included the government's regulations for online gaming. The Self-Regulatory Authority for Internet Gaming may allow a real money online game as long as "betting on any outcome" is not involved.

Chandrasekhar claims that any SRO that permits online wagering on cricket tournaments like the Indian Premier League will violate the law and be de-notified. A strategy for safeguarding users against gambling addiction, financial loss, and fraud must also be posted on the SROs' websites.

"This is the ideal foundation and the direction that Indian companies that offer online gaming should take. "With the newly established clarity, the sector will garner positive investor interest, fueling its growth as well as fostering new career and economic opportunities," claims Deepak Gullapalli, founder and CEO of Head Digital Works (A23)."

Due to worries about resident suicide and addiction, several Indian states have outlawed online fantasy game sites. Chandrasekhar asserted that the rules would not be in violation of any state's attempts to lawfully prevent gambling or betting.

"The new regulations will support "Create in India" and "Brand India," encourage innovation, and advance India's technology. Dr. Subi Chaturvedi, Global SVP, Chief Corporate Affairs and Public Policy Officer, claims that InMobi Group will ensure that the sector expands responsibly and transparently, defend consumer interests, and curtail the growth of unlicensed offshore gambling sites.
 

Conclusion

Understanding the necessary laws and compliances of online gaming in India is essential for ensuring a secure and sustainable gaming environment. With the rapidly evolving regulatory landscape, staying compliant is not just a legal requirement but a key factor in building trust among players and stakeholders.

At Compliance and Registration Services Private Limited, we are committed to being your trusted partner in navigating the complex world of online gaming regulations. Our expertise and tailored solutions will empower your gaming platform to thrive in a compliant and ethical manner.

Ready to level up your online gaming platform? Partner with Compliance and Registration Services Private Limited today! Let our team of experts guide you through the intricacies of gaming regulations and unlock new opportunities for success. Get in touch now and let's create a winning strategy together!

Enquire Now