What’s Brewing for the Indian Gaming Industry?

By Gambling Insider
Ranjana Adhikari & Shashi Shekhar Misra, Partner and Associate at IndusLaw respectively, offer a round-up of the latest regulatory updates in the Indian gaming market

Littérateurs have often referred to India as a land of dichotomies. The current legal landscape that is visible in India as regards gaming and gambling is a case in point. On the one hand, while the courts are slowly and rightly affirming the constitutional legitimacy of the industry through a purely legal lens, there is on the other hand a constant litany of litigations calling for restrictions and prohibitions on gaming, based largely on their moral view and sensibilities. Though legal developments over the past few months have been positive for the industry, there is also the nagging worry whether countering such frivolous petitions could end up being a Sisyphean task.

In this article, we provide a brief roundup of some recent cases and the legislative efforts of certain states in India, which are of relevance and interest to the world gaming community.

Challenge to the legislative competence of states to regulate or prohibit skill-gaming: Madras High Court paves the way

In a significant judgement delivered in the first week of August, the Madras High Court (“Madras HC”) held that the blanket ban imposed by the state of Tamil Nadu on all forms of gaming, when played for stakes, is unconstitutional3 and thereby struck down the impugned amendments to the Tamil Nadu Gaming Act, 1930 in their entirety.

The judgement also attempts to set out clarity on the issue of the legislative competence of the state's vis-à-vis skill games. The Madras HC held the amendments to be manifestly arbitrary, disproportionate to the objects they set out to achieve and failing the ‘least intrusive’ measure test.

The Madras HC agreed with the contention of the petitioners that the legislative competence of the State, under the legislative head of “betting and gambling,” cannot be enlarged so as to include within it the power to legislate on games of skill; but observed that the State could, however, reasonably claim such competence under other heads of legislation available to it such as ‘public order;’ ‘trade and commerce within the state;’ or ‘sports, entertainment, amusements;’ provided it could justify the need for such a law and the extent thereof. The Madras HC made it amply clear that the legislative head of “betting and gambling” has to be read as empowering the State Government to only legislate on betting related to gambling, which in turn meant betting on games of chance, and should not be read so as to provide the state with  betting as a separate legislative head.

However, with a new State Government with a different political affiliation now  at the helm in Tamil Nadu, the state is once again considering yet another law to ban online rummy and poker for stakes, despite the Madras HC quashing the previous amendments (as discussed above).  It is anticipated that post the Madras HC verdict, the state would have to pass the muster of the tests identified by the court - i.e. the law should be proportionate to its objects, should be based on proper background research and empirical evidence; and should pass the ‘least intrusive’ measure test if impinging upon a fundamental right.

Reaffirmation of fantasy sports as a game of skill

The fantasy sports industry in India, and Dream11 in particular, celebrated some key orders recently. By way of background, Dream11 is one of the most successful fantasy sports operators in India and a unicorn within this sunrise industry. Over the years, there have been a number of public interest litigations in which the legality of the Dream11 format came into question. In July of this year, the High Court of the state of Rajasthan (“Rajasthan HC”) rejected a writ petition filed by a private citizen which had, inter alia, sought regulation or prohibition of online fantasy games played for stakes. The Rajasthan HC, relying on earlier judgments on the issue, rejected the petition and held that offering of online fantasy sports in accordance with self-regulation guidelines of the industry body, Federation of Indian Fantasy Sports (FIFS), had already been judicially recognised as a game of skill; and hence a legitimate business, entitled to protection as a fundamental right under the Constitution of India (“Constitution”).

Towards the end of the same month, the Supreme Court of India (“Supreme Court”) in a vital judgement held that the issue of legality of fantasy sports was no longer res integra. Though the court acknowledged that a matter on the same issue was pending before a different and larger bench of the Supreme Court, it nevertheless affirmed that Special Leave Petitions on the issue of legality of fantasy sports were being rejected by the Supreme Court since 2017.

Also, in a recent official reply to a Right to Information application filed, the Prime Minister’s Office (PMO) has indicated that draft guidelines for fantasy sports platforms, formulated by a government recommendatory body, as well as the need for a central regulatory framework for online gaming in India, may soon be deliberated upon by the Union Council of Ministers.

Activity in various states to regulate online gaming

One of India’s most populous states, Uttar Pradesh, is considering either amending or repealing its colonial-era gaming statute, as per the recommendations of, and the draft bill formulated by, its State Law Commission. The draft bill, inter alia, applies to the online medium by including cyberspace as one of the sites covered by the definition of ‘common gaming house.' The said Commission also has rightly recommended that skill games continue to be an exception under the new law/amendment, if any.

In February this year, the Government of one of India’s largest states, Madhya Pradesh, had sought time, on being prodded by the state High Court, to make its stance clear on online gaming and gambling. The Court had granted the State Government time till April earlier this year, to formulate and present its views; but the matter has not received a hearing thereafter owing to pandemic restrictions. Madhya Pradesh is also one of the populous states in India and, therefore, of great interest to the gaming community.

The Government of Rajasthan has reportedly been considering a new law on gaming and gambling for the past few months, with more stringent punishments, and is currently in the process of drafting the same.

Meghalaya, a state in the north-eastern part of India, enacted a new law around March this year, prescribing a licensing regime for gaming operators; and also setting up a state Gaming Commission for facilitating the enforcement of the provisions of said law.

In Karnataka, a petition was filed late last year by a social activist, seeking a ban on all forms of online gambling or online betting, till the State comes out with a mechanism to regulate these activities. In the latest hearing on 10 August 2021, the State Government has submitted that a draft bill has been prepared, and the same would soon be presented to the Court after due approval of the State Cabinet. The industry is awaiting this development with bated breath, as Karnataka is an important market for most gaming operations.

The Kerala State Government had earlier this year revoked the express statutory skill game protection for ‘online rummy when played for stakes’ vide an executive notification under its state gaming law. This had muddied the waters for rummy operators in an important market and made it less conducive for them to operate in. The Kerala High Court has reserved its judgement on a petition challenging this notification and it is likely to pronounce the same soon.

Spate of ‘Public Interest Litigations’

Finally, the past few months have also seen multiple frivolous petitions being filed in different High Courts of the country.

A petition filed in the Madras HC in July this year sought a direction to the relevant authorities, to ban all online and offline video games, which were ‘spoiling’ the children. Rejecting the petition, the Madras HC observed that constitutional courts ought to be wary of entering into such areas and matters, based on the personal sense of morality of the individual complainant, or of the judge or judges concerned.

Recently, a petition was filed before Delhi High Court (“Del HC”) seeking a direction from the Court to the Central Government to formulate a national policy to protect children from online games ‘addiction,’ and also to constitute a regulatory authority to monitor, and rate the content of both offline and online games. The Del HC disposed of the petition with a direction to the relevant central government departments, to consider the representations made by the petitioners.

Similarly, an advocates association in Bengaluru, in the state of Karnataka, recently filed a petition in the Karnataka HC (“Kar HC”) seeking a direction to the State Government to ban apps posing a ‘threat to children’s health’. The matter is currently pending at the preliminary stage before the Kar HC.

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