Clear Parameters To Distinguish Between Games Of Skill With That Of Chance In E-games
2.7 billion e-gamers across the globe with businesses to tap the potential of e-gaming from exciting USD 1.5 billion to that USD 5 billion by 2025. In India, the number of developers, and platform operators has increased with a CAGR of 38 per cent with the number now being nearly 275.
India has an opportunity to become a hub for developers and that needs a facilitating atmosphere in the policy sphere. The initiative of MeitY is welcome because they have come up with rules and settled that the ‘game of skill’ will be governed by the centre under the Information Technology Act 2000 and the ‘game of chance’ will continue to be dealt with under the Public Gambling Act, 1857 and Indian Penal Code provisions by the state. The concern of the government is well founded in terms of social impact in terms of addiction and too much of time spent.
The Rules have recognised the fast-changing technology; the first tier is ideally the SRO (Self Regulatory Organization) for the peer review mechanism on agreed parameters. Besides an SRB (Self Regulating Board) is also to be constituted that will enable to have a non-partisan mechanism to monitor and review the execution of agreed principles besides grievance redresses, if not addressed by the game developer or platform. The Government is the next tier that will accordingly take calls for cancelling the license or granting the license.
Game startups have now agreed to team up with two SROs (Self Regulatory Bodies) peer group review AIGF (All India Gaming Federation and the two joining EGF and FIFS (The E Gaming Federation and the Federation of Indian Fantasy Sports) and come up with a third party as board of directors an SRB. The major task is to define the ‘testing framework’ to distinguish the game of skill and that of chance. For the Government, it is very important that there is crystal clear clarity of distinguishing parameters between the games of ‘SKILL’ that of “CHANCE’, which becomes paramount. The court judgments in the past have defined a few principles like the classification of ‘game when played on the ground will be the same when it is in the platform of e-gaming. That is the first yardstick that will need to be adopted. The on-ground games have been defined as legitimate business activities protected under Article 19(1) (g) of the Constitution of India.
With that settled, it is important as the e-Gaming spread is wider there are some additional checks that will need to be provided. A “game of skill” is based mainly on the mental or physical level of expertise of a player, rather than a game of chance. (ref: Manoranjithan Manamyil Mandram v. State of Tamil Nadu (2005); the Hon’ble High Court of Karnataka, in the case of Indian Poker Association (IPA) v. State of Karnataka (2013), observed that Poker is a game of skill; Hon’ble Punjab and Haryana High Court in Varun Gumber v. Union Territory of Chandigarh (2017), has held that games such as horse, boat and foot racing, football, baseball, chess, golf are games of skill and significant judgment and not a game of chance; Bombay High Court in the case of Gurdeep Singh Sachar Vs. Union of India and Ors. (2019)10 wherein the Court observed that it was evident that the success in Dream 11 fantasy sports depends upon the user’s ability to exercise his skill based on superior knowledge, judgment and attention, the latest being that of Karnataka High Court has ruled on taxation based on classification of game of skill for High Court of Karnataka has ruled that online/electronic/digital game of rummy and other online/electronic/digital game of skills are not taxable as 'betting' and 'gambling' under the Central Goods and Services (GST) Act. ), The concern therefore of the government to specially focus on paid games based on whether the ‘player’ is with knowledge, expertise and capabilities or it is of mere chance. The outcome is dependent on the knowledge and skill of the player and its opponent. The communication between the players is limited as per the rules of the game. The need is all the more as now big players like Apple and Google are entering the arena of the metaverse that will create more startups in gaming.
India is home to a gaming industry that already generates over 130 billion rupees and the ever-growing field is only expected to add to such revenue and seeks to touch the 200 billion mark by 2025. While there exists a plethora of games that are contributing to such revenue generation, the king of games when it comes to real-money casual gaming in India is Fantasy Sports.
According to Deloitte India, India is the single fastest growing market in the world for Fantasy Sports, highlighting how the game has been embraced by the masses and also serving as an indicator for the popularity of sports, particularly Cricket, in India. The rapid rise of the Fantasy Sports gaming industry has also sparked widespread legal debate in India, where the laws governing the activities of gaming haven’t really caught up with the quick rise of the industry.
Fantasy Sports is to have the acid test as to whether it is a game of skill or a game of chance. Such a discourse is primarily fed by the fact that Fantasy Sports is dependent on the outcome of future events in the world of sport, a widely recognized common factor associated with games of chance, thereby leading to unavoidable comparisons of Fantasy Sports to the activity of prediction in sports[AS1] (PIS).
As things stand, the legality associated with Fantasy Sports is clear. The activity has been recognized as a ‘Game of Skill’ by various courts of law including the Supreme Court of India. However, the Ministry of Electronics and Information Technology (“MeitY”) notified the introduction of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023 (“IT Rules 2023”) and permitting the operation of only games that do not involve wagering on any outcome, an apparent contradiction arises. A conundrum therefore arises as admittedly in various cases before high courts, the game of skill operators have argued that their games involve wagering on a game of skill, in fantasy sports this would to some extent involve also the outcome of an event in which the player/user does not participate in for e.g a cricket match. The MEITY needs to be cognizant of the fact that in order to promote the daily fantasy sport-based online gaming industry, it will have to clarify that wagering on Daily Fantasy Sports will not be prohibited.
However, should the MEITY allow wagering on Daily Fantasy sports, to what extent can it curb games, which are put forth as different versions of Daily Fantasy Sports and games of skill? To this extent, a study of the games offered by some of the players in the ‘Daily Fantasy Sports’ industry varies from the selection of 11 members for a cricket game, to the selection of five members, to a fantasy sports game for one inning or parts of a match, to opinion based wagering or player and team exchange’ market.
It is to be observed that most operators do provide for Daily Fantasy Sports, which is a regulated activity worldwide owing to the fact that it walks a tightrope between a ‘Game of Skill’ and ‘Game of Chance’[AS2], while certain providers offer engagement on their platforms on single-game outcomes. Some other portals pose a different issue in the fact that the future outcome that is wagered in these platforms pertains to the performances of individual players and investments on such individual players comprises the stake or wager in the platform. [AS3]With bodies like the Federation of Indian Chambers of Commerce and Industry, the Confederation of Indian Industry, Startup India and various self-regulatory bodies in the gaming sphere affiliating with these entities despite characteristics that align certain offerings towards games that may be prohibited within the regime of the IT Rules 2023, the line between Daily Fantasy Sports and games involving predictions in sports appears to be vanishing in front of our eyes.
Considering how entities engaging purely in the provision of sports betting are not regulated, it needs to be stated that eventually, blurring the divisive line perceptible in law between games offering prediction in sports and Fantasy Sports is necessary. With various offerings, including “prediction for rewards” offered by food delivery applications, teasing the legal status granted to Fantasy Sports in India, the need to evaluate how games involving predictions in sports are also to be regulated within the framework of Daily Fantasy Sports needs to be considered.
There will always be a black sheep and regulations to deduct them by enabling Self Regulation and the law of the land to curb such elements is welcome but it should not suffocate the opportunity of potential of India to become a hub for billions of dollars start-up industry from Indian developers. SRO be formally recognized (as was done by RBI for microfinance institutions the MFIN) by enabling them to discuss and reach a consensus to strictly follow KYC norms and also evolve for grievance redress system and ensure anti-money laundering norms are followed.
The author is Practitioner Development Economist and Ex-Secretary GoI
