Online Gaming and Indian Law
In a recent survey, it was found that around 40% of Indian adults have gambled at least once on online platforms. It is not a secret that Indians are fond of gambling activities like card games and sports betting. While online gambling activities are significantly growing in India over the last few years, there are a lot of questions about its legal status.
The truth is that gambling on betting sites is still in a gray area in most of the states of the country. The regulations in place are based on the Public Gaming Act of 1867. Since the current law was passed before the advent of the internet, , online casino and betting activities are then considered neither legal nor illegal. The Information Technology Act of 2000, which is used to regulate online activities has no mention of online gaming/gambling activities. Only the states of Sikkim, Nagaland, and Meghalaya have gaming laws and licensing regimes. In 2020 Telangana and Andhra Pradesh imposed a ban on any online gambling and real money gaming activities.
However, the bans imposed by Karnataka and Tamil Nadu did not last long. The High Courts of both states had to strike down the amendments that prohibit online gaming because they deem these unconstitutional. However, nothing in this judgment can prevent appropriate legislation from being brought about concerning this subject.
The state of Tamil Nadu has gone through the legislative process to ban online gaming in the state, and yesterday the Governor of Tamil Nadu gave his Ok to the legislation passed by the State assembly.
What is the say of the Indian Judiciary on this issue– Although the courts have observed that skill-based games are exempted from the purview of gambling, the District Court of Delhi opined that when skill-based games are played for money in virtual space, the same would be illegal and observed that the degree of skills in games played in physical form cannot be equated with those online as the degree of chance substantially increases because of various manipulations including the randomness, inside cheating, collusion cannot be ruled out, when the same games are played in virtual space.
Although gaming/betting is a state subject, still the Central Government issued a draft amendment to the Information Technology Act 2000, which will cover online gaming/betting platforms.
The government, while issuing draft rules, said that ‘it has proposed self-regulatory bodies for online gaming companies operating in India, but will not allow betting’. The draft online gaming rules issued have proposed verification of users and measures to safeguard users against the risk of gaming addiction and financial loss. The self-regulatory organizations will develop filters and tests to decide permissible gaming, be it a game of skill, or a game of chance, or anything else.
The draft rules further add that “ the intermediary shall, before hosting or publishing or advertising an online game for consideration, ascertain from the online gaming intermediary and verify from the concerned self-regulatory body. Online gaming companies will not be allowed to engage in betting on the outcome of the games under the principle laid in draft rules. All online gaming companies will have to register with a self-regulatory body that will decide on the action required to be taken as per the rules”.
The draft, rule suggests additional due diligence for companies by displaying a registration mark on all online games registered by a self-regulatory organization (SRO), and informing its users regarding its policy related to withdrawal or refund of the deposit, manner of determination and distribution of winnings, fees and other charges payable, and KYC procedure for user account registration.
It has also proposed the appointment of key managerial personnel, who should be Indian residents as Chief Compliance Officers, and the online gaming platform to have a physical contact address in India published on its website or mobile-based application.
After the draft rules were published in mid-January, feedback on these rules was requested by the IT Ministry. After receiving the feedback/suggestions the final online gaming rules will be announced, and all the State Governments/UTs will have to pass these laws in their state assemblies.
In my opinion, it will be very difficult to ban online gaming platforms across the state, because the government will not be able to ban the internet for obvious reasons, to block these gaming platforms. Hence it is always better to regulate these gaming platforms and the activities associated with them by issuing proper rules/guidelines for both game providers and users.
Waiting for your views on this blog.
Anil Malik
Mumbai, India
11th April 2023