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INTRODUCTION

In India, the online gaming market has exploded in recent years, raising concerns about its legality and the need for regulation. The legality of numerous games, including Rummy, online poker, and fantasy games like Dream 11, has been in question. Moreover, playing real-money games comes with a lot of psychological and financial risks. Numerous states and courts have made vain attempts to control the gaming industry. Understanding and creating appropriate regulations is crucial to establishing some order in the gaming industry.

Large Indian gaming enterprises now face a hefty financial burden because there is no unified national gambling regulation. One of India’s fastest-growing businesses would get a great boost from the creation of a harmonious national gaming industry with clear actionable guidelines. 

On April 1, 2022, the Online Gambling (Regulation) Bill, 2022 (the “Bill”) was introduced in the Lok Sabha to create an efficient regulatory framework for the online gaming business to stop fraud and abuse. The Bill proposes the establishment of a regulatory body to oversee the online gaming business, acknowledging the impacts of online gaming’s addictive qualities and the sector’s significant national influence.

ASPECTS OF THE ACT

With the help of the Bill, an Online Gaming Commission (referred to as “the Commission”) will be created, and a licensing system will be put in place that would require licenses from the Commission to provide and run gaming enterprises in India. According to the Bill, it is now illegal to sell and run gaming companies without a license. There is also a bond requirement. Anyone found to have participated in gaming on an unlicensed website will also be subject to legal repercussions under the Bill.

The Commission will have the authority to keep an eye on the operation of websites that offer online gaming and to take action to stop illegal online gaming. Additionally, the Commission will create rules and regulations governing the license and permit requirements, authorization for players to use gaming websites, requirements for providing gaming services, terms for player credit facilities, fines or penalties, and any other matter it may deem appropriate.

The Bill’s highlights

Any game played on an electronic device, such as a personal computer, a mobile phone, a tablet, or another device, is considered “online gaming” under the Bill. It is clear that the Bill seeks to regulate all games played on these electronic devices because the term does not distinguish between “game of skill” and “game of chance.”

The bill calls for the establishment of an oversight body called the Online Gaming Commission (OGC), which will have five members appointed by the central government and include at least one expert in each of the fields of law, cyber technology, and law enforcement. The OGC will have the authority to, among other things, supervise the operations of online gaming websites, produce periodic or one-time reports on related subjects, recommend appropriate steps to control and stop illegal online gaming, grant, suspend, and revoke licenses for such websites, and set fees for license applications and renewals of such websites.

Playing online games without a website and a non-transferable, non-assignable license would be prohibited under the proposed legislation. Without the appropriate license, operating an online gaming server or website is punishable by up to three years in prison and a fine. Six years will pass before the license expires.

If the licensee violates any of the license’s terms or Bill’s provisions, the license that is proposed to be issued under the Bill may be suspended or revoked. The Bill does not, however, apply to anyone who offers backend services in India, such as hosting and upkeep for any international gaming website based outside of India.

QUESTIONS ABOUT THE BILL

Although the Bill seeks to regulate online gaming in India through numerous checks and balances, it currently suffers from several drawbacks:

  1. The difference between “games of skill” and “games of chance” is absent from the Bill. Furthermore, it is unclear from the Bill if its rules exclusively apply to for-real-money games or also apply to games played for free.
  2. Although this Bill intends to be the primary piece of law controlling gaming in India, it will eventually be subject to court review because, according to the Indian Constitution, neither gaming nor gambling are federal topics and may only be regulated by state governments.
  3. The conflict between the present licensing system and the state gaming laws of Meghalaya, Nagaland, and Sikkim is not addressed by the Bill.
  4. The Know Your Customer (KYC) standards, customer complaint procedures, advertising and marketing regulations, user data protection, responsible gambling rules, and other issues have not been addressed by the bill.

Games of chance versus games of skill

The Constitution’s seventh schedule, List II (state list), section 34, is titled “Betting and Gambling.” the states alone have the authority to enact laws governing “games of chance.” Contrary to “games of chance,” “games of skill” are protected by Article 19 (1) (g) of the constitution.

Games of skill are not considered gambling under the gambling regulations of several states. There are several uncertainties when attempting to distinguish between a “game of chance” and a “game of skill.” In the absence of legislation defining a “game of skill,” courts have occasionally established definitions for the term.

RMDC v. State of Bombay and KR Lakshmanan v. State of Tamil Nadu

The supreme court ruled in RMDC v. State of Bombay and KR Lakshmanan v. State of Tamil Nadu that a game of skill is one in which the element of talent outweighs the element of chance. A game can be categorized as a game of skill or chance depending on the facts and circumstances of each case, the court ruled in Manoranjitham Manamyil Mandram v. State of Tamil Nadu.

The Kerala High Court ruled that playing for stakes or not is not a factor in assessing whether a game is one of skill or chance when it dismissed a notification that sought to outlaw online Rummy when played for money. “Players have the right to support themselves with their talents.”

Online skill-based gaming is legal.

Using their jurisdiction under Entry 26 of List II, the states of Karnataka, Andhra Pradesh, Telangana, Tamil Nadu, and Kerala made changes to outlaw all types of internet gaming, including skill-based games, in their respective states. They cited an increase in cases of youth suicide, gaming addiction, and financial loss.

States are outlawing online gaming for the reasons listed below:

  1. Online games are prone to addiction, and if played for money, they can cause users to commit suicide.
  2. instances of children committing murder and crimes to make up for losses from online gaming
  3. Websites can manipulate online gaming.

Because they violate the basic right to engage in commerce, business, and occupation, these changes have been brought up in court as being unconstitutional.

As a result, the rules outlawing skill-based gaming have all been overturned by the Madras High Court, Kerala High Court, and Karnataka High Court. Although governments have the sole authority to enact laws governing skill-based gambling, courts have cited the following as key justifications: 

  1. A complete prohibition on skill gaming is arbitrary, unlawful, and in violation of Article 19 (1). (g).
  2. Additionally, both Article 19 (1) (a) and Article 21 mention participating in games and sports of skill.
  3. Such a ban is out of proportion to the goal that governments are trying to accomplish.
  4. There are no scientific studies or data about the negative effects of real-money gambling supplied by the states to support complete prohibition.
  5. The stakes in the game do not affect a player’s ability to use their skills to their advantage and support themselves financially.

India needs to regulate internet gaming

There are no regulatory frameworks in place for India’s online gaming sector. There is uncertainty over tax rates and revenue collection in the lack of any comprehensive legislation. Currently, several states have rules governing online gambling inside their borders, but due to the industry’s rapid expansion, there is a need for federal legislation that would apply to the entire nation. An effective regulatory system would also promote economic growth and other advantages.

The Online Gaming (Regulation) Bill 2022 has been introduced in Parliament to address the issues and guarantee the expansion of the online gaming sector. According to Article 249 of the Constitution, the Center may pass laws on state subjects provided they are in the “national interest.” This legislation aims to establish a central body for regulating and supervising internet gaming in India.

The 2022 ONLINE GAMING (REGULATION) BILL

A private member’s bill titled Online Gaming (Regulation) Bill, 2022 was presented in Lok Sabha.

While preserving the integrity of online gaming, the measure aims to establish a regulated framework for it.

Online gaming is defined as games played on any electronic device in Section 2(e) of the bill. A central government-created “online gaming commission” would be established under the proposed legislation as an oversight body to develop guidelines for online gaming, including licensing requirements and reporting requirements. Playing without a license is a crime that carries a fine. Any license requirement that is broken will result in license revocation.

The Know Your Consumer (KYC) requirement, the grievance redressal system, data protection or privacy, and one of the key reasons for bringing forth such a bill, mental health issues including addiction and depression, are not addressed in the bill.

The current regulations also have a lot of problems. The distinction between “game of chance” and “game of skill” is not mentioned in the definition of online gaming, which is essential given the conflicts that have arisen in the past as a result of this lack of demarcation. Furthermore, real-money gaming needs to be regulated due to its rising popularity and potential for an increase in unlawful transactions, but the bill does not offer any precise guidelines in this regard.

There is a lack of a thorough licensing structure with precise rules. Although the bill represents a big step, it does not effectively address the problems related to online gambling. The bill must be clearer and more open.

CURRENT SCENARIO

Currently, the majority of businesses that offer real money games are supervised by charters given by the All India Gaming Federation (“AIGF”) and the Federation of Indian Fantasy Sports (“FIFS”), two self-regulatory organizations created to oversee online gaming in India. The lack of enabling national legislation is felt deeply even though these charters help to streamline the conduct and governance of online gambling platforms.

CONCLUSION

Since the start of the epidemic, online gaming has grown in popularity and involvement, especially among young people. While it has been good for the economy, there are societal, psychological, and legal ramifications for online gaming in India. The internet gaming sector is in a “grey area” because there aren’t clear distinctions and rules.

For a long time now, courts have dealt with these ambiguities. The country needs a well-regulated gaming industry if it is to fully realize its enormous economic potential. The recently proposed bill does not seem to be sufficient; the only way to guarantee everyone’s safety and privacy in one of India’s fastest-growing businesses is through a thorough legal system.


References:

  1. India’s Online Gaming Bill: Regressive Regulation – JURIST – Commentary – Legal News & Commentary [Online][Cited: 3 September 2022] https://www.jurist.org/commentary/2022/05/nishka-kapoor-online-gaming-bill-india/

This article is written by Kanika Arora from Delhi Metropolitan Education (Affiliated to GGSIPU).

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