Real-Money Gaming (RMG) is basically the act of betting or wagering or investing, money or any other monetary entity, on any sort of contest in which one party wins while the other one loses, so as to claim the winners prize and earn more than what was originally invested or betted or wagered. So it is quite imperative that RMG is a sophisticated business structure. In a normal and typical RMG setup, there is a manager or operator who overlooks the entire setup, a pool of investors who are hoping to maximise their profits, a pool of money that contains all the investments from each investor. Now, the investors, as well as their investment, are divided into different groups based upon the contestant they wager upon or the outcome of the contest that they wager upon, depending upon the situation. Finally, when the contest is complete and the winning contestant has been announced, the entire pool of investment money is divided among the investors who had wagered upon the winning contestant, proportionate to their wager amount. Thereby, the investors who had wagered on the losing contestant lose the entirety of their investment. The most common examples of such a setup include, Horse race betting, Poker, Cricket betting, Football Betting, Online game betting, etc.
It is critical to understand here that the RMG has several angles. Upon preliminary glance, it might seem that RMG is just another gambling contraption. This view might be substantiated by the fact that RMG shares many features of typical gambling mechanisms like winner-takes-all, pool of money, addiction to earn-money-fast idea, etc. , however it is crucial to understand and analyse the concept of RMG without being obliged to any such prejudices.
RMG may be classified into 2 divisions depending upon the factors that determine the outcome of an RMG. The First division includes the concept of ‘game of chance’ in RMG, wherein the RMG involves such a contest, the outcome of which is totally dependent upon the sheer luck of the investor. For example, Roulette, slot machines, etc. The Second division includes the concept of ‘game of skill’ in RMG, wherein the RMG involves such a contest, the outcome of which is possible to be calculated and predicted out of sheer skills, intuition, experience and aptitude of the investor. For example, Poker, Fantasy sport betting, etc. Therefore, we can see that, RMG does not absolutely imply a setup based upon the principles of gambling, it can also include a mechanism of business that rewards the investor who has higher skill or aptitude in that particular game.
It seems, therefore, that imposition of any restrictions upon RMG would not be a reasonable choice since the same might hamper the opportunity of many skilled and able investors to earn what they deserve. The same logic has been adopted by many countries worldwide including USA, EU, UK, and subsequently they have legalised the business structure of RMG by adding certain regulations and safety measures for the investors. RMG operators go above and above to safeguard the user when it comes to “trust” and “bots,” employing “Random Number Generation” (RNG) methods that have been independently verified by a third party as a standard instrument for guaranteeing procedural fairness of cards. They also include very powerful machine learning-based “anti-fraud” algorithms that ensure high game integrity and player safety against intra-player collusion. Every participant’s KYC has been verified, and the industry is moving to “video KYC,” which will verify the end user’s identity and age.
Further, Skill-based games like “Poker” are gaining in popularity, says Shivanandan Pare, Executive Director & CEO of Gaussian Networks, since they have a good possibility of making some money. It truly is a component of a bigger ecosystem. According to him, the scale of the global gaming market has already surpassed that of the music and film industries combined. I think the decade for streaming websites would be 2010–2020, while the decade for gaming would be 2020–2030. According to a joint report by Sequoia India and BCG, the market for mobile gaming now generates around $1.5 billion in revenue, and by 2025, it is anticipated to reach $5 billion. Given that it has shown the aptitude and skill sets necessary to meet international gaming standards, India will soon be seen as one of the industry’s leaders. Gamers are progressively entering competitions to showcase their gaming prowess and to represent their nation internationally. Mobile gaming has enabled many Indian players and streamers to support themselves and mix their interests with their jobs.
Therefore, it is quite reasonable that India must step into the shoes of aforementioned countries and become a leading player in RMG. Under the Section 30 of The Indian Contract Act, 1872, any agreement made by way of wager is void in nature and unenforceable in the Indian Courts of Justice. However, the same section provides an exception to the wagering on horse racing. This shows that the enactment is strictly in favour of the second division of RMG that includes the concept of ‘game of skills’. Being a matter of the State List according to the Schedule 7 of The Constitution of India, gaming and gambling laws in India are governed by regulations that vary from state to state. This would imply that something that is legal in one state may be illegal in another. Gambling is severely banned in India, with the exception of a few specific activities like lotteries and horse racing. While proponents of regulated gambling contend that it may be a significant source of state revenue, critics of gambling assert that it promotes crime, corruption, and money laundering.
In India, there are two types of games: games of skill and games of chance. The state of AP vs. K. Satyanarayana case from 1968 found that rummy is a game of skill. However, the Court stated in its ruling that it might constitute a crime under AP legislation if there is gambling present or if the gambling establishment is profiting from the game of rummy. SC also noted that the three-card game, often known as brag, flush, and other names, is just a game of chance. This rationale was reflected further in the judgements, M.J. Sivani v. State of Karnataka (1995) and Dr. K.R. Lakshmanan v. State Of Tamil Nadu And Anr (1996).
Further, In the matter of G. Network Private Limited vs. Monica lakhanpal, the Delhi District Court, after relying upon order 36 rule(1) of CPC, declared that:
- Playing a game of skill for stakes does not constitute gambling;
- Online games cannot be compared to actual games since playing skill games for money is only permitted in its physical form;
- It’s against the law to lure customers or gamers with promises of prize money;
- Gaming websites that share a portion of the winnings are prohibited since they operate like an online casino.
Up until December 4, 2017, the question of whether poker is a game of skill or chance was never raised in court. According to the Gujarat Prevention of Gambling Act of 1887, poker is a game of chance and is, thus, considered gambling in the case of Dominance games pvt. Ltd. v. state of Gujarat. Due to the fact that poker evolved from the chance-based game teen patti. Poker wagering or betting entails a stake because it is an essential component of the game.
In a recent case, Justice Sanjay Kishan Kaul and Justice Dinesh Maheshwari, members of the Supreme Court’s review panel, had approved Dream11’s fantasy sports structure as a game of skill. Varun Gumber had filed a review case, which the court summarily dismissed, asking for the reopening and review of the Supreme Court’s dismissal order relating to the 2017 Punjab & Haryana High Court decision declaring fantasy sports to be a game of skill.
The Supreme Court ultimately rejected seven petitions. Three of these petitions centred on the question of whether the GST should be applied based on determining whether fantasy sports qualify as betting and gambling. The Supreme Court determined in one decision that only the question of whether GST should be applied by courts can be raised in relation to fantasy sports’ legitimacy as a legitimate company and game of skill.
Additionally, a court made up of Justice Nariman and Justice Gavai dismissed the petition on legality in July 2021 and stated that the problem of fantasy sports being a game of skill rather than gambling or betting is no longer res integra, meaning the legal issue has been definitively addressed. In September 2022, Justice Gavai and Justice CT Ravi Kumar issued an order based on the 2021 order to reject a further SLP on the subject. Varun Gumber filed a review petition, claiming that the Punjab and Haryana High Court’s decision contained an obvious mistake. After careful consideration, the petition was dismissed on the merits as well as for tardiness, with the bench observing that the judgements appear to be error-free. Accordingly, the order stated that no revisiting of the subject is necessary.
Senior Attorney Gopal Jain offered the following statement in response to the latest development: “It is crucial to note that the Supreme Court of India dismissed this review petition on the basis of merits and unequivocally said that there was no mistake apparent in the decision of the Hon’ble High Court of Punjab and Haryana. The legality of the fantasy sports format provided by Dream11 in the nation has now been examined by a total of 9 Supreme Court justices, who have all consistently concluded that it is an activity protected by Article 19(1)(g) of the Constitution as a game of skill. It should be emphasised that the argument against categorising fantasy sports as gambling for the purposes of taxation has already been resolved, leaving the court to consider simply whether or not the GST should be applied to fantasy sports as a legal form of commerce. As a result, any attempt to classify Fantasy Sports as “betting” in the eyes of the law is no longer under discussion because the matter has been decided upon based on both the facts and the law”.
The Rajasthan High Court decided that Fantasy Sports did not constitute gambling in 2019 in the Ravindra Singh Chaudhary vs. Union of India case since its players would require abilities like those of a genuine sports team management. The State’s prohibition on playing online card games like rummy, poker, etc. has been overturned by the Tamil Nadu High Court in a recent decision. These favourable advances about the distinction between “games of chance” and “games of skill” will go a long way toward establishing a narrative in favour of gaming as opposed to gambling.
The latest development in this regard is the amendment done by the Ministry of Electronics and Information Technology (MeitY) in the IT Rules, 2021, that were scheduled to be executed on April 6, 2023. The Amendments mark a turning point for India’s real money online gambling sector, which has long sought national regulations in place of state-specific legislation. While the Amendments offer centrally administered rules, they do not take the role of state-level anti-gambling legislation. As a result, State-level activity may continue despite the Amendments. In accordance with the Government’s overarching goal of eliminating prescriptive legislation and improving the ease of doing business in India, the Amendments propose a light-touch, co-regulatory framework between MeitY and registered self-regulatory bodies (SRB). The Amendments differ from the prior draft proposed by MeitY in January (“Proposed Amendments”) in that they weaken or loosen a few requirements for online gaming intermediaries (or “OGI”). However, other requirements that the sector had criticised in the Proposed Amendments, such strict KYC standards, have been kept.
Real money gaming providers are required by MeitY’s Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023, to register with a self-regulatory body (SRB) that will evaluate whether the game is “permissible” or not. In a press conference on Wednesday, Minister of State for Electronics and Information Technology Rajeev Chandrasekhar said that three SRBs will shortly be acknowledged. “There will now be more governmental oversight on how SRBs function,” Shambhavi Ravishankar, an advisor at Ikigai Law, told The Hindu. Most of the standards in the guidelines are already included in the industry’s best practices for responsible gaming. According to Mr. Chandrasekhar, if these games are not declared “permissible,” they will not be covered by the amendment and the States may be able to retaliate against them for being betting or gambling sites. As a result, games that are approved will be permitted to function lawfully, even if they need deposits in the hopes of winning. Mr. Chandrasekhar stated that video games without monetary exchange do not require consulting an SRB, allaying the conventional gaming sector’s worries about the current form of the Rules. The real-money gambling sector embraced the change. Joy Bhattacharjya, the director general of the Federation of Indian Fantasy Sports (FIFS), described the Rules as a “pivotal moment” for the sector. As our members begin the compliance process, “We look forward to engaging with MeitY to seek necessary clarifications,” the speaker stated. The I&B Ministry’s advice should not apply to real money games that are validated by SRBs and are thus permitted by IT standards, according to Ms. Ravishankar.
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