By Vidushpat Singhania, P. Jacob Ninan
While many may consider real money gaming as a recent phenomenon in Indian society, the fact is that it is a phenomenon that has long existed. Indian history is scattered with examples of real money gaming, from the time of epics such as Mahabharata to more recently during the British era and, of course, post-Independence. The British sought to ban gambling via the Prevention of Gambling Act, 1867 (“PGA”), while creating an exception for “games of mere skill”, which would fall outside its ambit.
Lotteries and Real Money Gaming (“RMG”) often fall under similar scrutiny due to the involvement of elements of luck/ chance; however, the regulatory frameworks for Lotteries and RMG differ significantly. While both involve monetary stakes, their classification under Indian law determines their legality and operational restrictions.
The subject of Lotteries falls under Entry 40 of the Union List. Hence, Lotteries is a central subject governed by the Lotteries (Regulation) Act, 1998 (“Lotteries Act”), which is a Central enactment. The Lotteries Act provides a framework for state governments to conduct, regulate, or prohibit lotteries. This legislation allows individual states to decide whether they want to permit lottery schemes within their jurisdiction. For example, Maharashtra, Kerala, Goa, Mizoram, Sikkim, West Bengal, Punjab and Nagaland permit various forms of lottery to be conducted, whereas Gujarat, Madhya Pradesh, Delhi, and Tamil Nadu specifically prohibit the conduct of lotteries. It is also to be noted that by the Lotteries Act and its Rules, private lotteries are explicitly barred from being conducted in India, and all lotteries offered in India are state-licensed and regulated.
‘Betting and gambling’ is a State subject, being Entry 34 of the State List. After the promulgation of the Constitution of India, various States adopted provisions of the PGA to formulate their own betting and gambling acts. Most States, while adopting the principles of PGA, also adopted its exception for ‘game of skill’. Lotteries have been generally excluded from the scope of ‘betting and gambling’.
While considering RMG and its legality, one often gets confused between RMG in skill-based games and RMG in chance-based games. This distinction between skill and chance is crucial in determining the legality of RMG. Courts in India have established that:
However, since each State has the liberty to form its own policy to govern “betting and gambling” activities, the lack of uniform regulations often creates different interpretations across states. While Goa and Sikkim regulate RMG in skill as well as chance-based games under licenses, Andhra Pradesh, Arunachal Pradesh, Assam, Orissa and Telangana prohibit all forms of online gaming for stakes, without differentiating between games of skill and games of chance.
All the other states and territories permit RMG in skill-based games, subject to orders of their respective High Courts. The present legal situation therefore is such that while a handful of states have chosen to regulate chance-based RMG and have created a fledgling industry in that field, the majority of Indian states have an outright ban on chance-based RMG, leading to a situation where there is an immense black market for services which provide chance-based RMG, thereby creating a parallel economy in online gaming in India.
Considering the existing jurisprudence in light of the decisions of the Hon’ble Supreme Court in K.R. Lakshmanan, R.M.D. Chamarbaugwala and K. Satyanarayana cases, for any kind of RMG to be considered and protected as a legitimate business activity in India under Article 19(1)(g) of the Constitution of India, it must be proven that such RMG relies upon a substantial degree of skill rather than mere luck or chance. Furthermore, staking money on skill-based RMG would not amount to gambling, whereas staking money on chance-based RMG would amount to gambling.
Interestingly, a situation has arisen in India where, due to ambiguity on the classification of games of skill vs chance, multiple operators are offering online games, wherein skill elements may be questionable. With no regulator and the availability of games without classification, it would be ideal to have a central regulator regulating all online games.
The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023 amended the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 and, in effect, extended the ambit of the IT Rules to gaming operators in India. The introduction of a system involving a new framework via the IT Rules and the requirement of verification of games means that the process for legally offering online games for stakes is set to be overhauled entirely. As of date, however, a centralized structure for the same is still awaited.
In conclusion, the Lottery is centrally legislated, with power available with each state to decide whether to allow lottery within its jurisdiction or not. RMG skill games for money can be offered Pan-India with some exceptions, whereas RMG games of chance can only be offered under a license. In such a scenario, it would surely be worthwhile to conduct an exercise to create harmonized legislation, which would enable the government to regulate all three facets of online gaming, i.e. lotteries, skill-based RMG and chance-based RMG.
The government could have a central regulation while allowing an opt-out to states, similar to the existing lottery framework, which has existed since the late 90s. Appropriate legislation, coupled with innovation, would surely give an even bigger boost to the Indian online gaming industry.
(The authors are partners at Krida Legal)
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Lottery Vs Real Money Gaming: What Does The Law Say About Chance-Based Games? – ABP Live English
