Betting on games of skill and chance in the wake of Madras High Court verdict

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Ever since the pandemic, people have found it difficult to stay indoors. During this period, online games of skills and betting have gained prominence due to people working from their homes.   

Some even got addicted to these games, leading to them to lose a lot of money wagering on games of cricket and rummy.

The Tamil Nadu government’s effort to protect its youth from the temptations of online gambling by amending a gaming law to ban online rummy and poker has not survived judicial scrutiny. Played for a wager, bet, money, or stake these games turned out to be highly addictive to a level where people even placed bets on rooster fights from all over the world.

Lack of restraint and self-control had them landed in debt and penury due to which four residents in Coimbatore died by suicide in the year 2020, according to several media reports.

Meanwhile, the Madurai Bench of the Madras High Court received a First Information Report of a high school teacher found playing cards alongside four others on 24th July 2020. It concluded that large sections of society require guidance and decided that there was a need to have a comprehensive framework to regulate such online games and curb illegal activities. 

Division Bench of Justices N. Kirubakaran and B. Pugalendhi discussed the results of these highly addictive games which even forced many people to suicide due to increasing debt. Many states already had banned these online games and restricted their control to public access and Tamil Nadu’s government was also expected to look into the matter. 

It noted that excessive paternalism could descend into authoritarianism and curb activity individuals are free to indulge in. Therefore, many private companies filed a number of petitions offering online games before the Madras High Court. 

Division Bench of Chief Justice Sanjib Banerjee and Justice Senthilkumar Ramamoorthy approved the petition and laid out Part II of the Tamil Nadu Gaming and Police Laws.

“In the absence of any scientific or empirical study to justify the proposed action, the impugned legislation may be seen to have been born out of a sense of morality and a bid to play to the galleries in an election season in a societal ethos where smoking and drinking are regarded as less immoral than when indulged in before elders; and superstitious notions and false senses of vanity continue to prevail as real education is still at a premium despite literacy rates increasing and thousands qualifying each year to add a few letters after their names. That the Bill faced no opposition in the House has more to do with the optics just ahead of the State elections.”

The AIADMK government banned online games as it was observed that many lives were being snatched away by such gaming/gambling websites. The new DMK Government has also talked about passing a new set of rules to regulate online gaming

For those in the business of online gaming complained of state government to reconsider the pros and cons before laying out a set of regulations. N.L. Rajah, a senior advocate at the Madras High Court said, “In all these cases, the court is called upon to apply the ‘skill versus chance test’ and Indian courts have always applied the ‘dominant factor test applied by U.S. courts. It is by the application of these principles that the Supreme Court in 1996 held horse-racing for stakes to be a game of skill… For a piece of legislation to pass muster before courts, it has to be very carefully drafted.” He further noted that the State should regulate if several youngsters were drawn into this”.

Roland Landers, CEO, AIGF told The Hindu, “We hope the government will come out with a progressive regulatory and policy framework for this sunrise sector. The Indian regulatory framework has clearly differentiated between games of skill and games of chance.” “Just because games of skill entail an entry fee, which is true for several industries including content consumption, they cannot be considered gambling or betting.” He further mentioned the need to regulate the sector. “Regulating this sunrise sector will boost the investment trends in the States, create jobs, and contribute economically”.

“TORF would be keen to collaborate with and support the government of Tamil Nadu in developing a comprehensive regulation that will address all the issues of the State, the players, and the operators alike. We sincerely hope that the government will consider establishing a robust regulatory framework for the online gaming sector as the only sustainable and effective way to address concerns,” said Ameer Barde, CEO, The Online Rummy Federation.

He further exclaimed that banning online games is not the solution, adding that “A case in point, Telangana which had banned Online Rummy in 2017 reported a massive illegal online gambling racket, worth more than ₹1,200 crore, run by a Chinese firm. Similar incidents are possible anywhere, which further underscore the need for a proper regulatory framework.”

TORF also took up the fact that the Madras High Court highlighted in its judgment that rummy involved higher skills and doesn’t come under the umbrella term of “gambling.” Therefore, these games are games of skills, not games of chance. 

Even the suggestions of the Law Commission underlined regulations rather than prohibitions. In the course of several decades, the earlier judgments of the Supreme Court have been considered an artifact and preserved under Article 19(1)(g) of the Constitution.

As per a report titled, ‘Online gaming in India-The GST conundrum,’  launched by EY-All India Gaming Federation (AIGF), “the Indian online gaming sector reached $1.027 billion in 2020, a growth of 17.3% from $543 million in 2016, and with its current trajectory, it is expected to reach $2 billion by 2023 in terms of rake fees earned. Since the online skill gaming business horizontal is made of several gaming formats, the Tamil Nadu market is bigger for some formats than the others. On an average, it will be approximately 10%-12% of the total current market size.”