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Online Gaming Regulations In India And Online Gaming (Regulation) Bill, 2022

Online gaming industry in India has grown exponentially in the past few years, with this growth there arise questions of its legality and need for regulation. Many games like Rummy, Online Poker, and fantasy games like Dream 11 have been under controversy regarding their legality. Moreover, there are many mental and financial concerns involved with real-money gaming. Many states and courts have unsuccessfully tried to somehow regulate the gaming sector. It is important to understand and formulate adequate rules for bringing some order in the gaming sector.

Games of skill v. Games of chance
The states have exclusive power to legislate over 'games of chance' under Entry No. 34 (Betting and Gambling) of List II (state list) of the Seventh Schedule of the constitution. The 'games of skill' unlike the 'games of chance' are protected under Article 19 (1) (g) of the constitution.

Various states having their own gambling laws have excluded games of skill from the ambit.  However, there are ambiguities when it comes to distinguishing between a 'game of chance' and a 'game of skill'. In absence of any legislative definition of a 'game of skill', courts from time to time have laid down definitions for the same.

In RMDC v. State of Bombay[1] and KR Lakshmanan v. State of Tamil Nadu[2], the supreme court laid down that a game of skill is where the element of skill predominates over the element of chance. In Manoranjitham Manamyil Mandram v. State of Tamil Nadu[3], it was held by the court that a game can be classified as a game of chance or skill on the basis of facts and circumstances of each case. 

Kerala High court, while striking down a notification seeking to ban online Rummy when played for stakes, held that playing for stakes or not is not a criterion for determining whether a game is of skill or chance. 'Players have the right to make a living off their skills'[4].

Legality of Online skill-based gaming

Citing increase in cases of suicide, gaming addiction and financial loss among the youth, the states of Karnataka, Andhra Pradesh, Telangana, Tamil Nadu and Kerala passed amendments to ban all forms of online gaming, including skill based games in their respective states, exercising power under Entry 26 of List II. 

States are banning online gaming citing following reasons:
  1. Online games are addictive in nature, they lead to mounting debt, suicides among players if played for stakes
  2. Instances of youngsters engaging in theft and murder to recover losses in online gaming
  3. Online gaming is susceptible to manipulation by the websites
 
These amendments have been challenged in courts as unconstitutional on the grounds of violation of fundamental right of trade, business and occupation. 
As a result, Madras High court, Kerala High court and Karnataka High Court, all have struck down the laws banning skill based gaming.

Major reasons stated by the courts are:
  1. Although states have exclusive power to legislate over skill-based gaming, complete ban on skill gaming is arbitrary, illegal and violative of Article 19 (1) (g).
  2. Moreover, playing games and sport of skill is a part of Article 19 (1) (a) and Article 21.
  3. Such ban is disproportionate to the objective states aim to achieve 
  4. There is absence of any empirical data or study regarding the ill effect of real-money gaming provided by the states to justify total prohibition
  5. Players have the right to exploit their skill and make a living off their skills, the stakes involved in the game do not affect the skill in the games.

Need for regulation of online gaming in India

There is a lack of regulatory mechanism for the Online gaming industry in India. In absence of any comprehensive legislation, there is no clarity on the tax rates and revenue collection. At present some states have laws governing online gaming in their states, but with rapid growth of online gaming, there is a need for a central legislation to be applicable all over the country and proper regulatory mechanism would lead to economic growth and additional benefits.

In order to tackle the problems, and ensure the growth of the online gaming industry, Online Gaming (Regulation) Bill 2022, has been introduced in the Parliament. It seeks to establish a central agency for regulating and overseeing the online gaming in India, Centre can legislate on state subject matters under Article 249 of the Constitution if the matter is of 'national interest'. 

Online Gaming (Regulation) Bill, 2022

Online gaming (Regulation) Bill, 2022 was introduced in Lok Sabha as a private member's bill. 
The bill seeks to introduce a regulatory framework for online gaming, while maintaining the integrity in online gaming. 

Section 2(e) of the bill defines online gaming as games played on any electronic device. The bill proposes to establish an 'online gaming commission' constituted by the central government, as an oversight body to formulate rules and regulations regarding online gaming, like licensing, making periodical reports etc. Playing without license will be a punishable offence. Breach of any conditions of the license will result in cancellation of the license. 

The bill is silent on provision for Know your Consumer (KYC), grievance redressal mechanism, data protection or privacy and one of main causes of bringing out such a bill, mental health issues like addiction and depression. 

There also exist many shortcomings in the existing provisions. The definition of online gaming does not provide any distinction between 'game of chance' or 'game of skill', which is crucial keeping in mind the past conflicts due to lack of this distinction in gaming. Moreover, the need of hour is regulation of real-money gaming because of its increasing popularity and risk of increase in illegal transactions, however the bill does not provide any specific framework to govern real-money gaming.

There is absence of a comprehensive licensing regime, with clear guidelines. The bill is indeed a significant step, however doesn't provide an effective solution to the issues associated with online gaming. The bill is required to be lucid and more transparent. 

Conclusion and Suggestions
Popularity and participation in online gaming especially among the youth has increased since the onset of the pandemic, while it has been benefiting the economy there are societal, mental and legal implications involved with online gaming in India. With absence of proper distinctions and regulations, the online gaming industry falls into a 'grey area'.

Courts have been dealing with these ambiguities for long now. A well regulated gaming sector is the need of the hour,  in order to unlock huge economic potential for the country. The recent bill proposed does not appear to be adequate, a comprehensive legal system is the only way of ensuring safety and privacy of everyone in one of India's fastest growing industries. 

End-Notes:
  1. State of Bombay v. R.M.D. Chamarbaugwala AIR 1957 SC 699.
  2. KR Lakshmanan v. State of Tamil Nadu (1996) 2 SCC 226.
  3. Manoranjitham Manamyil Mandram v. State of Tamil Nadu AIR 2005 MAD 26.
  4. Junglee Games India Pvt. Ltd. v. State of Tamil Nadu(2021) SCC OnLine Mad 2762.

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