Monday, March 4, 2024

Chance versus Skill

A bench headed by the Chief Justice of the Madras High Court, Sanjay Vijaykumar Gangapurwala, partially granted relief to online gaming companies challenging the existing Act, emphasising the distinction between games of skill and chance. Despite rejecting the plea to set aside the entire Act, the Court limited its application to games of chance, recognising the government’s right to regulate gaming aspects without a total ban on skill games. 

The petitioners had argued that the Act was unconstitutional and infringed upon the fundamental rights, but were denied interim relief by the Court. The arguments centred on whether the state or central government had the authority to legislate on online gaming, with varying opinions on the definition of games of skill and the potential arbitrariness of the Act’s provisions.

The decision of the High Court is the second in less than three years on constitutionality of money gaming ban laws. In August 2021, the High Court held that online gaming ban provisions brought in as the amendments to the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, by the then AIADMK government is unconstitutional and violative of the fundamental right to practice a profession, occupation or trade under Article 19 (1)(g) of the Constitution. An appeal before the Supreme Court is currently pending, clubbed with a similar appeal from the Karnataka government.

The Court held that an online version of a game of skill played for real money does not turn into a game of chance. It was also held that a ban on online games of skill is akin to the prohibition of both the user and platform’s fundamental rights and that a blanket ban is excessive and amounting to paternalistic behaviour. Further, the Court said that the state cannot legislate on games of skill under the ambit of Entry 34 of the State list, as it is only concerned with betting and gambling, which, by their very nature, exclude any sort of skill.

The Tamil Nadu government in April 2023 banned online gambling after Governor RN Ravi gave his assent to the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Bill. The ban includes advertisement in any form which promotes online gambling or playing online games of chance with money or other stakes in Tamil Nadu. The specified online games of chance are rummy and poker. The Bill passed by the Tamil Nadu government also included the following penalties:

  • Any person indulging in online gambling/online games of chance with money or other stakes shall be punished with imprisonment for a term that may extend to three months or with a fine up to Rs 5,000 or both.
  • Those inducing people to play online gambling/games of chance will face punishment with imprisonment of up to one year or with a fine, which may extend to Rs 5 lakh or both.
  • Any person who provides online gambling services or games of poker and rummy with money or other stakes shall face punishment with imprisonment for a term which may extend to three years or with a fine which may extend to Rs 10 lakh or both.

Following popular outcry against online gambling with several persons choosing to end their lives after landing in a debt trap and losing money heavily by playing such games, the government came out with an ordinance last year to ban online gambling.

Recently, the Karnataka High Court in All India Gaming Federation vs State of Karnataka was posed with a similar question. The constitutional validity of the amendments to the Karnataka Police Act, 1963, which would have led to the criminalisation of playing and facilitating online games, was challenged in the Court. Quashing the unconstitutional provisions of the amendments, the Court said: “In any organised society, knowledge, wisdom, talent, and skill are invaluable tools for wealth generation” and are the “unseeming ingredients of economic rights such as rights to profession, property.”

The online skill-based gaming industry has had to contend with legal battles for decades, resulting in a long history of precedents from both the Supreme Court and various High Courts. It has all come down to one thing—real-money games of skill, such as rummy, fantasy, poker, and bridge, cannot be considered gambling or betting. Various state governments, especially in the country’s south, have sought to impose a ban on the gaming sector. However, jurisprudence has remained consistent in reminding governments of the unconstitutionality of doing so.

The centre has been rather encouraging of the gaming industry, of late. Both Finance Minister Nirmala Sitharaman (in her Union budget 2022 address) and Prime Minister Narendra Modi have spoken about the potential of the gaming industry. The main test to determine whether a game amounts to gambling or not is, what preponderates, whether skill or chance. Games of chance are those where the winner is predominantly determined by luck; the result of the game is entirely uncertain and a person is unable to influence such result by his mental or physical skill.

The person indulging in a game of chance wins or loses by sheer luck and skill has no role to play. On the other hand, the result of a game of skill is influenced by the expertise, knowledge and training of the player. In India, games of chance fall under the category of gambling, and are generally prohibited, while games of skill, falling outside the ambit of gambling are usually exempted.

In RMD Chamarbaugawala vs Union of India, the apex court relied on the “skill test” to decide whether an activity is gambling or not. The Court held that competitions which substantially involve skills are not gambling activities, but are commercial activities, protected under Article 19(1)(g) of the Constitution. 

Relying again on the “skill test”, the Supreme Court in State of Andhra Pradesh vs K Satyanarayana & Ors, held that, rummy is preponderantly a game of skill and not of chance. The Court further observed: “It requires certain amount of skill because the fall of the cards has to be memorised and the building up of rummy requires considerable skill in holding and discarding cards”. The expression “mere skill” means presence of skill of a substantial degree.

Distinguishing between the terms “games of skill” and “games of chance”, the Supreme Court in KR Lakshmanan vs State of Tamil Nadu & Anr, stated: “In a game of skill although the element of chance necessarily cannot be entirely eliminated, is one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player.” 

In this case, the Court was considering whether horse-racing was a game of skill or chance. It observed that the outcome in a horse race depends on several factors like form, fitness and inherent capacity of the animal, the ability of the jockey, the weight carried and the distance of the race, which are all objective facts capable of being assessed by persons placing the bets. Thus, unlike lottery, the prediction of the result of the race is an outcome of knowledge, study and observation. 

In Pleasantime Products vs Commissioner of Central Excise, Mumbai, the Supreme Court, while considering whether “scrabble” is a puzzle or a game, held that scrabble is a game. It was also observed that, unlike puzzle where the outcome is fixed, scrabble is a game of skill as the skill of player influences the outcome. 

—By Abhilash Kumar Singh and India Legal Bureau


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