D Donna Gadiel, Rithu T
ABSTRACT
Gambling has existed in India for centuries and has been monitored and penalized by various statutes. With technological and economic developments in society, there is increased availability and affordability of the internet and smart devices. Online gaming industries are thriving especially, Real Money Games (RMGs) such as Rummy, Poker, and Fantasy games. Although almost all States have banned online gambling, there is only a fine line between real-money gaming and gambling. The lack of central legislation regarding internet-based gaming has allowed various interpretations by courts regarding what falls under the category of games of skills and chance. Considering recent events, RMGs are in the spotlight for their destructive ill-effects on individuals while simultaneously promoting the economy. This article aims to cover the key issues relating to the illegality of gambling and the interpretation of the courts. Understand the basics of online games involving money stakes and whether wagering amounts to gambling. Additionally, contextualise the merits of online games to India’s economy and its wounding side-effects on the players and society. The article also intends to provide suggestions relating to the current legal system surrounding online gaming with hopes to cover the grey areas prevailing in law and analyse certain gaming laws and regulations implemented in China to control gaming addictions.
1. LEGALITY OF GAMBLING AND BETTING
Gambling and betting are deep-seated in the progression of society. Its presence can be felt from pole to pole among various cultures and is believed to have existed before the Paleolithic period, that is, before written history. Gambling and playing with dice can be observed in Mahabharata and other works of literature. Gambling in India dates back to the 7300's BC, yet it is worth noting that its references were made in 430 BC[1]. The increase in its widespread presence resulted in unfavourable social issues like gaming addiction and destituteness. Gambling to this date has a multitude of negative attributes associated with it and it is seen as detrimental to societies and families.
The legislatures understood the undeniable need to regulate gambling activities in India and introduced the Public Gaming Act, of 1867[2] bringing forward a remarkable window of opportunity during the colonial period. The aforementioned Central Legislation prohibited and penalized any games of chance and probability except lotteries. Further, it prohibited owning, possessing, and being present in a common gaming house. It is crucial to bear in mind that the Act did not apply to games of skill, that is, any game or contest where the outcome is a reflection of the judgment or skill of the participant and not chance or probability. After Independence, the duty to regulate gambling activities was transferred to States as per Entry 34 of Schedule 7 of the State List[3]. States have enacted their laws concerning controlling gambling and betting such as the West Bengal Gambling and Prize Competition Act, 1957[4], Bombay Prevention of Gambling Act, 1887[5], Kerala Gambling Act, 1960[6], Goa, Daman and Diu Public Gambling Act, 1976[7], etc. The majority of the States have either prohibited or made exceptions to some games, except Goa and Sikkim where many forms of gambling are legalized including setting up casinos. 2. JUDICIARY'S INTERPRETATION: SUPREME COURT AND HIGH COURTS
As previously mentioned, the Act regulates and penalizes only games of chance. Section 12 of the Public Gaming Act, 1867[8] states that: “Act not to apply to certain games: Nothing in the foregoing provisions of this Act contained shall be held to apply to any game of mere skill wherever played” Due to the unestablished list of games that fall within the said category, the role has been allotted to the courts and the State laws passed expressly mentioned the names of games that were excluded. It has been observed that the courts have legalized elite forms of gambling such as horse racing by giving it the status of a 'game of skill' while outlawing various card games played by the lower and middle-class society. In the case of Dr K.R Lakshmanan vs. State of Tamil Nadu[9], The supreme court held that Horse racing required skills and stated that: "Betting on horse racing or athletic contests involves the assessment of a contestant's physical capacity and the use of other evaluative skills. Horse racing is an organized institution. There is nothing illegal in horse racing: it is a lawful sport. We have no hesitation in concluding that the horse-racing is a sport which primarily depends on the special ability acquired by training. It is the speed and stamina of the horse, acquired by training, which matters. Jockeys are experts in the art of riding. Between two equally fast horses, a better-trained jockey can touch the winning post. Given the discussion and the authorities referred to by us, we hold that the horse-racing is a game where the winning depends substantially and preponderantly on skill." The Supreme Court in Andhra Pradesh vs. K. Satyanarayana & Ors[10] held that Rummy requires a certain amount of skill because the fall of the cards has to be memorised and the building up of Rummy requires considerable skill in holding and discarding cards. It is mainly and preponderantly a game of skill." In the M.J. Sivani case[11], the Supreme Court added that no game could purely be a game of skill but the skill may simply overpower the chance. According to the judgement, there were two categories of games namely, a game of mere chance and a game of chance and skill. The dominant factor test laid down was used to solve the question of whether the dominant factor in determining the winner was their skill or chance. In the decision in Varun Gumber vs Union Territory of Chandigarh & Ors.[12] , a learned Single Judge of the High Court of Punjab & Haryana held that an online game Dream fantasy 11 is a game of skill, applying the principles laid down by the Hon'ble Supreme Court in Satyanarayana and K.R.Lakshmanan.[13] Subsequently, It was held that players would need skills similar to that of a real sports team manager. [14]
3. ONLINE GAMES INVOLVING REAL MONEY
As mentioned earlier, gambling and betting can be found in Indian Mythology. Although, there are rigid laws relating to gambling that penalize and regulate games involving chance. Online gaming in India had a rampant growth during the Covid-19 lockdowns, especially due to low-cost internet service and the widespread popularity of games on social media platforms. Real Money Gaming (RMGs) has diversified, adapting and profiting off of the loyal mindset of Indians and the craze towards sports teams. Fantasy sports in India are expected to touch $3.7 billion by 2024[15]. Although the covid-19 pandemic and internet access have supported the growth of RMGs, the most crucial reason would be the lack of legislative regulations relating to online gaming. In the case of KR Lakshmanan v State of Tamil Nadu & Anr,[16] the court ruled that online fantasy games involve substantial skill and is a business activity, and thus protected under the Constitution[17]. Article 19 (1) (g) of the Indian Constitution states that all citizens have the right to ‘to practise any profession, or to carry on any occupation, trade or business 4. ARE RMGs PART OF ONLINE GAMBLING?
The Public Gaming Act being enacted during the pre-internet ages fails to mention online gambling, therefore, making this branch of games a grey area in the law. Several loopholes can be utilised to bet and gamble. People residing in India can freely participate in betting and gambling in casinos situated abroad. VPNs (Virtual Private Network) can be used to avoid tracing their IP address (Internet Protocol). Because the internet did not exist during the time of the enactment of the Act, it is disappointing that there have not been clarifications and amendments now that online gambling and betting are prevalent on a global level. Moreover, even the Information technology Act[18] failed to mention online gaming. Gaming and Gambling are differentiated based on the predominating factor that is, whether the chance of winning is based mostly on skill or chance. An additional argument used while debating the difference is the motive for the play. Game of skill is often played for the sake of entertainment and relaxation. Whereas, Gambling is done purely with the motive of earning and the pleasure received from earning money. Sometimes it becomes increasingly difficult to distinguish between gaming and gambling because of a serious lack of knowledge regarding the mechanism of games. In India, monetary stakes can be placed on online card games like Rummy, Poker and Fantasy sports. However, they are not legally considered gambling as even though chance may play a part, the skill the player needs to possess to win is greater[19]. Nevertheless, as previously mentioned, the interpretation regarding what games fall under the category of gambling depends on the courts and it varies often. Apps that involve monetary stakes are strictly monitored by app stores like Google Play Store, but despite that, it is popularly speculated that these games use algorithms that predetermine the winners and make the game appear to be a game of skill. There is an ongoing popular theory that online Rummy games use a random number generator that generates true as well as pseudo numbers. Although, it is also believed that not all RMGs are taking advantage of the players the possibility of misappropriation cannot be ignored. Research papers show that Game Action Information Mining (GAIM) framework for multiplayer online card games is possible and can yield valuable information about the players.[20] Through the decisions taken by the player, it is possible to determine whether they are “conservative, skilled or risk-taker” and also see if they exhibit addictive tendencies.[21] Though this may tremendously help the game makers to improvise the application, it can also be used to prey on innocent players by psychologically manipulating them to continue playing. Cyber laws still being a new and improving field in India, make it difficult to regulate and investigate the loopholes.
5. POSITIVE EFFECTS ON THE ECONOMY
Keeping aside the negative connotations associated with gambling in the minds of society due to social evils that have taken place with gambling being the cause. Indebtedness due to losing money on online games has led to murders, thefts and suicides in India. Young individuals are often trapped in the hands of insolvency as a result of online gaming habits and take life-threatening steps including crimes and self-harm. As previously mentioned, the pandemic gave the RMG industry a growth spurt wherein registrations for Poker websites, betting apps and fantasy sports apps hit new highs. Especially the Fantasy sports platforms earned a revenue of Rs 2,400 crore in 2020[22]. India's obsession with sports was triggered with the help of hiring sports celebrities and mascots to advertise their apps. The tax rate for online gaming is planned to be increased from 18% to 28% and this will undoubtedly have an impact on the customers[23]. However, it might still be a positive measure wherein people keep the tax amount in their mind when they win a prize. There is also increased global interest in investments in online gaming companies. Considering the overflowing number of investors, the local companies would need to expand to cater to the demanding international competition.[24] Similar to India, the USA also gives the States to regulate laws relating to gambling. However, unlike India where very few states have legalised casinos, States like New Jersey make millions of dollars because of casinos[25]. Another merit of RMGs and other online games is the increase in employment opportunities.
6. NEGATIVE EFFECTS ON PLAYERS AND SOCIETY
Even if the above-mentioned speculations regarding the algorithms getting tampered with by the companies are proved to be untrue and mere false allegations, it cannot be denied that the real money game industry continues to thrive by fanning the flames of players’ greed for earning money instantaneously with low efforts. Undeniably, the most consequential of the disadvantageous effects is the slow and dangerous development of gambling addiction. When a player receives a cash prize from winning a game, the brain's reward system is triggered and releases dopamine which gives pleasure and the motivation to continue further.[26] Some studies show that some players are more prone to gambling addictions due to their genetic and psychological susceptibility. Gamers often experience a sense of control over the game due to their confidence in their skills.[27] Real Money games and gambling that are played online can be dangerously addicting due to their availability, vast and easy access, ability to place large money stakes, etc[28]. The internet plays the role of a safe space where individuals can play for uninterrupted hours. Players often forget that they are losing real hard-earned money after continuous gaming due to the involvement of digital forms of money like credit cards, net banking, etc.[29][30] When society is concerned, the increased rates of unemployment are a serious issue. Moreover, players who reach stages of addiction and other repercussions slacken the availability of a competent workforce. In recent times, we have experienced crimes that were triggered due to online gaming. Due to the lack of legal regulation on RMGs, fixing the above-mentioned problems seem unattainable. It is not only the individual who suffers because of gaming addictions. When online gaming involving money goes out of hand, its impact is detected on the family as a whole. Irritability due to addictive habits, lack of sleep and decreased financial position leading to a reduced standard of living are common issues faced by families. The chances of divorce rise when the issue occurs between husband and wife. Children also experience abandonment and may feel neglected. Children with parents who have gaming addictions may exhibit the same as they grow older.
7. SUGGESTIONS
Notwithstanding the fact that the players give their consent by agreeing to the terms and conditions and are driven purely by curiosity, greed and the intense need for dopamine secretion, the blame is equally shared by the online gaming companies and lack of control. There are no proper regulating bodies for the consolidation and overall regulation of companies. It was previously voiced that there are speculations about the misappropriations of game algorithms. There is a requirement for legal protection for the individuals in such cases. Since cyber laws in India are still developing, it may be difficult to legislate regarding online gaming. When we discuss topics relating to the internet, there is a huge grey area as cyberspace has no boundary. Questions regarding whether taxes are properly paid by the company and the inflow and outflow of foreign exchange and whether it is as per the Foreign Exchange Management Act, 1999[31] (FEMA) and other statutes remain a question at present. Players do not recognise the seriousness of the issue till they lose a significant amount of money and it is often too late to reverse the harm caused. Individuals indulge in desperate measures to play more in hopes of winning to cover their losses, resulting in a vicious cycle. The government must acknowledge the seriousness of the matter surrounding online gaming and spread awareness by conducting campaigns. It is also important that the gaming companies have a strict screening process regarding the player's age. China is an inspiration when it comes to curbing online gaming addiction. In China, Tencent Holdings Ltd uses facial recognition to prevent minors from games during the night. Anyone who fails the facial recognition test is stopped from playing. Minors cannot cheat by using their parents’ identities as they must pass the facial recognition system.[32] Although it is used for all sorts of online games, it can be implemented for RMGs in India because there have been reports of minors committing suicide due to losing money on online gaming platforms. China also limits minors to play only between 8 pm and 9 pm on weekends[33]. There is also a constraint on how much money can be spent on the games. It is no doubt that the type of government in India is inconsistent with that of China but it is not inappropriate to regulate online gaming activities, especially keeping the public interest in mind. There have been multiple other cases relating to minors and gaming addiction. A shocking case took place in Madhya Pradesh where an 11-year-old minor hanged himself after spending Rs. 6000 on a game without his parent's permission. Steps must be taken to prevent minors from using their parent's identifications and devices for gaming transactions. Gaming addictions also lead to other mental issues and children may lose socializing abilities and develop other negative effects. Setting a time frame where gaming can be played can prevent individuals, both minors and majors from staying up at night and skipping work or school. By regulating how much time they could play during weekends, individuals can spend their time socialising with their families and friends. When the amount of money which can be spent in a day is set, it can help avoid impulsive spending on games. It can also benefit people by making them understand the value of money and stop them from mindless gaming.
The States have properly been administering their role of penalising gambling activities in India. However, it would be commendable if central legislation is passed for the sake of online gaming, specifically real money games[34]. A strict screening process should be developed, if possible, to ban or strictly monitor people who have a history of addictions and crimes as psychological factors play a significant role in a person’s gaming problems especially when money is involved. A popular observation is that online gaming involving real money only acts as additional entertainment for individuals and revenue for the economy whereas its negative effects include business losses, and societal degradation through crimes like murder, theft and suicides[35]. It is downright visible that the disadvantages of online gaming outweigh the pros. Inauspiciously, it will continue as long as regulations are made. It is impractical to close down the entire RMG industry considering the fact that people consent to it voluntarily. No matter what the ill effects, the economy needs growth. The steps required to make it safer than it is now lie in the hand of the government.
8. CONCLUSION
Legislation in India has moved towards a progressive and modern approach, which is evident from various amendments and new statutes. Judgements from courts also seem to follow a uniform code and allow for a common interpretation. However, India is still lacking when laws relating to online gaming are concerned. There is a requirement for the modernisation of gaming laws and proper regulatory bodies for the same. The government would also require to bring a middle stance between economic and societal well-being when dealing with the RMG industry. On a positive note, the States have been able to successfully penalize and monitor land-based gambling to a great extent and the same can be done for internet-based gaming.
[1] How has gambling changed throughout history?, available at:// https://auralcrave.com/en/2019/12/19/how-has-gambling-changed-throughout-history/ (last visited on June 6, 2022). [2] The Public Gambling Act, 1867 (Act 3 of 1867). [3] The Constitution of India, art. 246. [4] West Bengal Gambling and Prize Competition Act, 1957 (Act 32 of 1957). [5] Bombay Prevention of Gambling Act, 1887 (Act 4 of 1887). [6] Kerala Gambling Act, 1960 (Act 20 of 1960). [7] Goa, Daman and Diu Public Gambling Act, 1976 (Act 14 of 1976). [8] The Public Gambling Act, 1867 (Act 3 of 1867), s. 12. [9] 1996 AIR 1153, 1996 SCC (2) 226 [10] 1968 AIR 825, 1968 SCR (2) 387 [11] M.J. Sivani vs State of Karnataka (1995) 6 SCC 289. [12] CWP No. 7559 of 2017 [13] Supra Note 10 at 3 [14] Ravindra Singh Chaudhary vs. Union of India, D.B.Civil Writ Petition No.20779/2019 [15] FPJ Web Desk, “Future of fantasy sports in India” Free Press Journal, May. 24, 2022. [16] 1996 AIR 1153, 1996 SCC (2) 226. [17] The Constitution of India, art. 19. [18] The Information Technology Act, 2000 (Act 21 of 2000). [19] Parth Chadha, “Skill-based real money gaming is not gambling”, The Hindu Business line, Sep. 15, 2021, available at < https://www.thehindubusinessline.com/opinion/skill-based-real-money-gaming-is-not-gambling/article36458914.ece#:~:text=Skill%2Dbased%20real%20money%20gaming%20is%20not%20gambling%20%2D%20The%20Hindu%20BusinessLine> (last visited on Jun. 6, 2022). [20] Sharanya Eswaran, “GAIM: Game Action Information Mining Framework for Multiplayer Online Card Games (Rummy as Case Study).” 12085 Advances in Knowledge Discovery and Data Mining 435–448 (2020) [21]Ibid. [22] Guest, 'The Curious Case Of Indian Fantasy League(S)', Financial Express, May 9, 2021 3:28:05 pm, available at <https://www.financialexpress.com/industry/technology/indian-fantasy-league-fantasy-apps-fantasy-league-indian-mobile-fantasy-game-apps-dream11-mycircle11-dream11-fantasy-cricket-game/2248669/> (last visited on June 6, 2022) [23] “Tax-The Bugbear For India’s Online Gaming Industry”, available at: https://www.medianama.com/2022/05/223-online-gaming-industry-tax-demands-views/ (last visited on June 6, 2022). [24] Ankur Singh, “Emergence of real money gaming in India, and how it has become a massive industry” Times of India Blog, Mar. 4, 2022. [25] “Online Gambling in the United States in 2021” The Daily Gazette, Nov. 30, 2020. [26] Patrick Anselme, “What motivates gambling behaviour? Insight into dopamine's role” 7 Frontiers in Behavarioural Neuroscience 182 Published (2013). [27] Luke Clark, “Langer's illusion of control and the cognitive model of disordered gambling”, 117 Society for Study of Addiction 1146-1151 (2022). [28] Sally Monaghan, “Responsible gambling strategies for Internet gambling: The theoretical and empirical base of using pop-up messages to encourage self-awareness”, 25 Computers in Human Behavior 202-207 (2009). [29] Wood RT, Williams RJ, Lawton PK. “Why do Internet gamblers prefer online versus land-based venues? Some preliminary findings and implications”, 20 J Gambl Issues (2007);20:235–252. [30] Abby McCormack, “A scoping study of the structural and situational characteristics of Internet gambling.” 3(1) Int J Cyber Behav Psychol 29–49 (2013) [31] Foreign Exchange Management Act, 1999 (Act 42 of 1999). [32] Sofia Brooke, “What to Make of the New Regulations in China’s Gaming Industry” Nov. 16, 2021, available at < https://www.china-briefing.com/news/what-to-make-of-the-new-regulations-in-china-online-gaming-industry/> (last visited on Jun. 6, 2022). [33] Matt Haldane, “China vs video games: why Beijing stopped short of a gaming ban, keeping Tencent and NetEase growing amid crackdown” South China Morning Post, Nov. 19, 2021. [34] Tanisha Khanna, “The Time for a Central Law for India's Online Gaming Industry is Now” XII National law review 157 (2022). [35] Earl L. Grinols, “Too Many Negative Side Effects to Online Gambling” The New York Times, Jul. 29, 2010.
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