India’s Gaming Laws – Challenges and Solutions

India’s gaming laws are out of sync with its Constitution, giving states the power to legislate on ‘betting and gambling’ and thereby exposing the nation’s legal sector to controversy.

Up to a certain extent, ‘skill-based gaming’ is excluded from the applicability of gambling bans across most of the states in India. However, whereas states like Goa allow licensed on-ground operations of gaming activities, states like Meghalaya, Nagaland, and Sikkim have a regulatory regime for the online gaming environment.

While the Apex Court agreed, in the case of RMD Chamarbaugwala & Anr v Union of India & An, that games of skill are well within the purview of Article 19(1)(g) of the Constitution, ambiguity still persists in respect of the laws applicable to skill-based gaming. For instance, states like Telangana, Andhra Pradesh, Kerala, and Karnataka have been working towards prohibiting skill-based gaming. However, the High Courts in these states have set aside such amendments to legislation, given that they have ascertained that while states are not entitled to ban skilled gaming, yet they have sanctioned the implementation of certain  controls on the gaming activities.

Several debates, ranging from financial losses to addiction and even suicides, have cited valid grounds for banning cash-based gaming activities by concerned state governments. However, these have, time and again, been challenged as being unconstitutional. The earliest move in this direction was by the High Court of Madras, relying upon the case of KR Lakshmanan v State of Tamil Nadu & Anr. In this case, the Hon’ble Supreme Court had recognized that games of skill were distinct from games of chance and were business activities protected under Article 19(1)(g).

The Court held that skilled players had the right to exploit their skills and make a living off their skills, and only reasonable restrictions should be imposed on such right. The ban introduced in the State completely prohibited any opportunity to exercise such skills in respect of online games eing manifestly arbitrary, especially in the background of the Supreme Court’s pronouncements, and fell afoul of Section 19(1)(g) of the Constitution.

This categorical legal standpoint is in stark contradiction to the disparate rules governing gaming activities from one state to another where portal operators of enforcement agencies across the country carry regulation books that vary in their individual directives.

 While we agree with the proposition for certain controls for reasons discussed hereafter, the question that arises is: how do such limited rights promote ease-of-doing business in India if ‘Gaming’ as an industry is to be considered one of the most aggressively growing sectors globally?

Another aspect that needs to be examined is the applicability of laws constituted by Parliament in respect of Indian citizens questioning the governance and relevance of offshore individuals and operators in the gaming domain.While it would sound obvious that a unified law is what the Indian gaming industry needs,  it is necessary to delve deeper to understand the factors that prove this to be the best option.

Of course, these factors and evaluations should consider that a one-sizefits-all approach is not viable for all skill gaming formats. It would be more feasible to have variations to the standard set of regulations and guidelines, depending on the particlar format of gaming that is being legislated.

While states can and must exercise their legislative powers in respect of any aspect of gaming other than complete prohibition, several precautionary  measures, such as awareness campaigns and necessary disclaimers, need to be in place to ensure the credentials of skill-based gaming as against gambling or betting or wagering on games of chance, which runs foul of lawful sanctions.

For instance, the Kerala High Court, in the case of Head Digital Works Pvt. Ltd. v State of Kerala & Ors, struck down a notification that intended to include online rummy in the ambit of games of chance or betting per se. The Court clarified that rummy is, indeed, a game of skill, as is online rummy.

Further clarification in this regard has been offered in the several citations that enjoin states not to legislate on skill-based games, not even in respect of ‘public order’, given that skill-based games are business activities protected under Article 19(1)(g) of the Constitution. However, states may continue to believe and regulate such business activities under ‘trade and commerce’ as a legislative head. Skill-based games have been further insured by the Right to Freedom of Speech and Expression and even the Right to Life & Personal Liberty under Articles 19 (1) (a) and 21 of the Constitution, respectively.

Courts have also stressed the intent of the Constitution with regard to prohibition or a complete ban on harmful activities. The Directive of Principles of State Policy of the Constitution have unquestionable mention of the prohibition of liquor, dangerous drugs, etc., and even cow slaughter. However, in the absence of any mention of prohibiting gaming activities, it is advisable to consider the ramifications of implementing a blanket ban.

No doubt, certain ‘reasonable restrictions’, such as public order and morality, should remain in check but these are the only limited grounds that states can probably legislate upon. Only then can the gaming sector flourish within the ambit of the applicable rules and laws.

Hence, now more than ever, India is waking up to an all-encompassing Central Law on Gaming. From constitutional tools to business imperatives and fundamental rights, the need of the hour is a think tank on this subject, devoted to identifying, evaluating, and brainstorming on the common threads of regulatory know-how across the entire gaming sector in India. Unfortunately, even the Information Technology Act 2000, which may have some connect with the tech and gaming domains as such, does not have any clarity on what the regulatory charter for gaming entities should be to operate, serve, and be controlled.

An improbable provision could be Section 69 and 79 of the Information Technology Act 2000, which again is limited to aspects such as national security and copyright infringement, and seeks a court order or similar summons from related Government authorities.

Towards keeping the excitement that the Government should actively work towards regulating the gaming sector is at odds with the nation’s democratic principles. At the same time, the menace looming around the gaming sector, whether it be the related illegal activities  or incidental public disorders, has no other control body. Skill-based gaming will never see a complete ban such as that imposed on gambling, as has been repeatedly establishedd by the Courts.

However, parliamentarians have several constitutional provisions to knit together a vital legal act at the Central level. This will not only streamline the regulatory mechanisms for states to follow but will also unleash the true potential of the online gaming sector to the fullest. Traditional on-ground gaming activities such as casinos can continue to be regulated, as has been the practice.

 (a) List 1, i.e., the Union List, empowers the Central Government via entry no. 21 to implement a law on online skill gaming, extracted verbatim.

“posts and telegraphs; telephones, wireless, broadcasting and other like forms of communication.” As per the Report by the Law Commission of India on “Legal Framework: Gambling and Sports Betting Including in Cricket in India”, (“Law Commission Report”) as online Gaming operates via the internet throughout the country.

(b) Similarly, under entry no. 42, i.e. “inter-State trade and commerce“.

The High Court of Karnataka and Madras has established thatthe Central Government is empowered to legislate on the skill-based online gaming sector, given that the operations involve inter-state trade and commerce activities..

(c) Through a Resolution Under Article 252

Yet another mechanism that can empower the Centre to enact such a regulation is offered by Article 252 of the Constitution, wherein two or more states approach Parliament to demand the need for such a regulation. This is sufficient to invoke the process of enacting the law by the Centre.

An instance in kind is the Prize Competitions Act of 1955 (“PCA“). Its inception was marked by the states of Andhra, Bombay (Maharashtra), Madras (Tamil Nadu), Orissa, Uttar Pradesh, Hyderabad, Madhya Bharat (Madhya Pradesh), Patiala and East Punjab States Union (Punjab), and Saurashtra (Gujarat) passing resolutions under Article 252(1) to empower Parliament to legislate on prize competitions. As a result, Rajasthan and Karnataka later adopted the PCA when the need arose.

While this resolution did trigger debates in the Rajya Sabha, given that a few states did not favour it, yet, instead of a complete ban,  a consensus was reached  in regulating and introducing a licensing regime via the PCA. A similar approach may also be feasible for online gaming.

Further, a provision under Article 249 may also aid Parliament in legislating on matters in the State List , given that it favours national interest/security.

Regulatory Wish List

Once the Central law on Gaming  is formulated,  certain elements are essential to ensure its impact. Firstin importance  is the definition of what accounts for games of skill or games of chance for the industry to follow. Secondly,  focus needs to be on the setting up an independent regulatory body that understands the nuances of Gaming as a sector with depth and clarity, similar to that of the real estate sector’s dedicated regulatory body. Thirdly, a  streamlined process to obtain licenses and renewals, etc., and a regular watch on ensuring the licenses are not misused for any other illegal activity would need a licensing body. Fourthly, a vital requirement is a proper KYC-driven mechanism for both the gaming operators and the players to ensure, time and again, a conscious effort for immediate access to any foul play by any stakeholder in the chain. Fifthly, given that many gaming operators/apps belong to offshore jurisdictions, the new set of laws has to establish, beyond doubt, the applicability of all offshore players who may have their operations in India or may be targeting Indians as their end users.

In addition, secure platforms, player protection initiatives, awareness-driven campaigns, and many other parallels will need to be included while drafting the law.

Most Important Challenge

The lack of a Central law is only one of the many gaming sector’s setbacks. The need of the hour is a different breadth of discussion on the other challenges that have created a dismal scorecard for the operators and now even the players.These issues range from tax applicability, advertising restrictions, and content control to the criminal procedures that should be invoked in case of mischief.

It would be fair to say that before this massive economic booster becomes a social menace, the law has to act without delay in  bringing in legal insight to the entire world of fantasy, skill, excitement, and of course, the related financial impetus.

The article was first published in Indian Express.