The Supreme Court of India has settled jurisprudence distinguishing between ‘games of skill’ and ‘games of chance’ by laying down the preponderance test. If skill is predominant, then the game amounts to a ‘game of skill’ and is legally permissible; if there is a predominance of chance, then the game amounts to gambling and falls within the jurisdiction of the State Government to regulate. Despite the settled law, many legitimate platforms are left to navigate a complex regulatory maze, sometimes even at the risk of attracting criminal proceedings.

To address this ambiguity, in April 2023, the MeitY notified amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, (Online Gaming Rules) to add provisions for online gaming. These rules provided the industry with much-needed clarity while ushering in an atmosphere of responsible growth for the online gaming platforms. The self regulatory bodies (SRBs), as defined in the rules, are expected to play a pivotal role in this, to ensure a fair playing field. However, they are yet to be operationalised owing to concerns regarding their independence (or lack thereof). These SRBs are tasked with verifying permissible real money games and are required to ascertain that these games do not fall within the ambit of wagering.  To achieve this, they have the crucial task of distinguishing between games of skill and chance relying on statistical analysis, expert testimonies, and game-theoretic evaluations. These statistical assessments and tools play a crucial role in differentiating between games of skill and gambling, providing regulatory certainty to the real money online skill gaming sector. However, it’s important to note that the unbiased implementation of these assessments by the SRBs is essential for the accurate statistical evaluation of games of skill and chance. In the absence of an oversight mechanism, the powers vested in the SRBs can be misused to create market barriers and restrict market entry, even for legitimate skill gaming platforms, by denying verification to them. An unbiased SRB through regulatory oversight is important not only for online gaming platforms but also to ensure that consumer protection remains paramount.

With most online skill gaming formats being played with real money today, the more pertinent question that needs to be understood is whether a game of skill played with stakes is permissible or would it fall within the jurisdiction of the State to decide its legality? For example, Will Chess remain a game of skill when played for money? The obvious answer to the question is a “Yes” This question becomes important not only for the policy makers and law enforcement agencies but also for the consumers to understand the legality of their actions.

The Supreme Court dealt with this question in the State of Andhra Pradesh vs K Satyanarayana case where it held that a competition which substantially depends on skill is not gambling. Wagering or betting on a such a game of skill would not amount to gambling.  This judgment clarified the position of skill games, ensuring that real money online games of skill are not indiscriminately branded as gambling when played with money. It empowered the platforms that provide online real money games-of-skill to operate as permissible formats.

As online gaming continues to flourish, the legal perspective that skill-based games retain their character, even in the presence of financial stakes, provides a stable foundation for their growth. This understanding ensures that players can engage in these games, hone their skills and partake in competitions with the assurance that the law recognises the prowess they bring to the virtual table. It is a skill that triumphs in these arenas, a skill that does not wane in the face of monetary involvement. It is therefore important for the central government to statutorily recognise the judicial precedent laid down by the Supreme Court in K Satyanarayana and reiterated by the Madras High Court in Junglee Games and recently in AIGF v State of Tamil Nadu that games of skill do not lose their element of skill when played with stakes.

(The writer is a Partner in Corporate Practice, JSA Advocates & Solicitors)

Published on January 14, 2024