Gambling is illegal in India. The Public Gambling Act, 1867 provides some indication of what is permitted and the provisions are quite ancient to comply, by the growing “online” business world. ‘Gambling’ is understood to mean “the act of wagering or betting” for money or money’s worth and typically does not include:
- wagering or betting upon a horse-race/dog-race, when such wageringor betting takes place in certain circumstances,
- games of “mere skill” and
- lotteries (which is covered under Lottery Laws).
Public Gambling Act provides that the Act shall be held to apply to any game of mere skill wherever played. Therefore, if it can be proved that a game is a ‘game of skill’ then it won’t be considered as gambling. However, it would have been nice if ‘skill’ was defined in the Act.
Indian courts have by and large adopted the ‘dominant factor test’, or ‘predominance test’ that has been followed by U.S. Courts to distinguish between games of skill and games of chance. In essence, the test requires assessment and determination of whether chance or skill “is the dominating factor in determining the result of the game”. Unfortunately, the law continues to remain murky in terms of whether the State-wise gambling enactments, clarify “game of skill” and further, the legislations which have covered the physical gambling houses can be extended to cover online gaming sites.
The Supreme Court in 1968 in the Satyanarayana case, tested the game of rummy on “skill” versus “chance” and held Rummy was not entirely game of chance and said preponderance of skill than chance, is the important factor. Here, the Supreme Court has also passingly observed that ‘bridge’ is a game of skill. In Manoranjithan Manamyil Mandram v. State of Tamil Nadu the court has said that ‘mere skill’ includes games based on skill stating that a competition where success depends on substantial degree of skill will not fall under ‘gambling’. It held that, even if there is a certain element of chance, if a game is predominantly a game of skill, then it would pass the test of skill. However, the element of skill is to be decided by the facts and circumstances of each case.
The Law Commission noted that the Public Gambling Act, 1867 is one of the archaic pre-independence law that needs to be studied and if needed, repealed or amended. The Supreme Court has asked the Law Commission and the government to examine possibilities of legalising betting and if a new law needs to be enacted. Recently, the Chairman of Law Commission, Justice (retd.) Balbir Singh Chauhan said that the Law Commission is examining all legal aspects concerning betting in sports.
Interestingly, the state of Nagaland has passed ‘The Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Act, 2016. (“Nagaland Act”), which provides for a definition of ‘game of skill’ as “including all such games where there is a preponderance of skill over chance, including where the skill relates to strategising the manner of placing wagers or placing bets, or where the skill lies in team selection or selection of virtual stocks based on analyses, or where the skill relates to the manner in which the moves are made, whether through deployment of physical or mental skill and acumen.” In addition to this definition, certain specific “games of skill”, including poker, rummy, virtual football and virtual cricket, have been expressly set out in a schedule.
The Nagaland Act provides for extra-territorial application of its provisions. It states that once a license is obtained under the Nagaland Act, making profits from a game of skill will not amount to gambling, so long as the game is being accessed by players operating anywhere from India, where games of skill are permitted.
Thus, on obtaining a license, the Nagaland Act enables a licensee to operate from Nagaland and provide access to users from other states in India, where a game of skill is legal. Given the broad ambit of the definition, the Nagaland Act offers some respite to online gaming companies to include the element of ‘skill’ in their games. Obtaining a license under this Act may provide an added level of coverage. In case there is litigation against a licensed operator, perhaps the defence that such games were part of a legitimate license, may help.
Taking advantage of the extra territorial nature of the legislation, a number of companies are obtaining license for online skill gaming.
Now, it needs to be seen if this progressive legislation is emulated by other States or if the gaming companies just prefer to have their companies registered in Nagaland.
Author: Apurba Kundu
AIR 1968 SC 825
AIR 2005 Mad 261
See Law Commission of India- ‘Obsolete laws warranting immediate repeal (Interim Report), No. 248. Available at http://lawcommissionofindia.nic.in/reports/Report248.pdf.
Board of Control for Cricket in India v. Cricket Assn. of Bihar &Ors. Available at http://judis.nic.in/supremecourt/imgs1.aspx?filename=44255
See http://www.hindustantimes.com/cricket/law-commission-exploring-ways-to-bring-bcci-under-rti-act/story-vBJI4EycKkuVAMj28h6AXK.html. Last visited April 7, 2017.