Gaming: Let’s not do the ostrich act

There are compelling reasons for putting a proper regulatory framework for all genres of gaming. Lakhs of people have lost their lives and their savings to the stock market, yet no one says shut it down.

Gaming, almost everybody has been touched by it in some form or another and the juggernaut has only begun to roll now. India, like the rest of the world, is witnessing an unprecedented growth in the online gaming sector. This growth, however, is not restricted to just the Covid lockdown. In fact, online gaming in India has been witnessing a hockey stick growth curve over the past few years with almost 3 companies touching the coveted unicorn status, and yet, industry analysts believe it’s just the tip of the iceberg.

The reason for such optimism is not hard to find. With a penetration of over 500 million smartphone and internet connections in India and the growing obsession of the younger generation to be hooked onto their mobile phones, the industry is poised for a massive boom. As if those factors were not enough, it goes without saying that we as a society love to wager on almost anything and everything. As they say, “Put your money where your mouth is”.

Having said that, the one single factor that’s impeding its economic explosion and resultantly acting as a road block for millions of potential jobs and billions as value addition to the economy is the lack of clarity of gaming laws in India. “Gaming” itself has many facets to it. Till recently, Gaming was often confused with Gambling. It is misunderstood by many that betting amounts to Gambling. And that is despite the law in this regard being contrary to that very core concept since over five decades.

The Gaming world consists of different genres. From the perspective of legalities, gaming can be divided into casino games, games of skill, sports betting, casual or non-real money gaming (with the revenue model being in-app purchases) and lotteries. Each of the verticals has its own genus and a separate constitutional framework. For instance, betting and wagering is a state subject, therefore you have the likes of Goa which has permitted casinos.

Lotteries are a Central government subject and therefore one has a Central legislation, which, in turn, has provided an option to all the states to choose whether to permit lotteries within their own jurisdiction or not. These two genres are operating in a broadly regulated environment. It starts getting interesting when we come to the genres of “Games of Skill” and, of course, “Sports Betting”. Add to that the recent phenomenon of E-sports and it becomes a lawyer’s paradise.

What a lot of people don’t know is that jurisprudence is well established ever since the judgements of R.M.D. Chamarbaugwala (1957 SC) and Dr. K. R. Lakshmanan 1996 SC 1153 that “Games of skill”, even if played for stake and for earning profit, are regarded as a legal business venture, not amounting to “Gambling”. 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.

The distinction is fine but real. Betting or wagering on “Games of Skill” does not amount to gambling while betting or wagering on “Games of Chance” amounts to gambling and is res extra commercium. The reason for this fine distinction is also important to understand. Games such as bridge, poker, chess, sudoku, quizzes etc have champions like any other sport.

There is an equivalent of a great like a Sachin Tendulkar in poker, bridge and chess as well. There are greats of each of these sports who have won the world championships multiple times which would otherwise be impossible unless they were truly champions at the same. And a champion is not born out of chance, but hard work, intelligence, loads of training and inherent talent.

On the other hand, you would not have champions of the roulette table. You could have someone win a jackpot or a lottery or a round of roulette but that’s entirely by luck, which could go horribly wrong with no safety net of training or skill to fall back upon. There is an argument made by the naysayers, however, that these games could be played without money being involved. It could lead to people losing money.

I often wonder then, how and why would stock markets be legal since skill and potential to earn and lose money are common to both. Another argument thrown at times is “fine, it could be a game of skill, but not until someone becomes really good at the game. Till then it’s not skill and therefore there should be no wagering or betting allowed”. Once again, people tend to forget that it’s like any other investment.

You have to pay for your coaching and your equipment when it comes to physical sports. In gaming, you have to learn your skills by practising and understanding the value of real money. That’s the inherent nature of the beast. Competitions have prize money. This is no different. Then, of course, the most oft repeated argument against regulating betting is a reference to the game of chausar and Yudhishthira betting his wife on a game.

And the best answer to that argument came from the 276th Law Commission Report of India which states, “The argument that had gambling been regulated in the Mahabharat period, Yudhishtir could not have put his brothers and wife as stakes, perhaps Mahabharat could not have been there, is full of substance”. There are compelling reasons for putting a proper regulatory framework in place for all genres of Gaming. Lakhs of people have lost their lives’ savings to the stock market, yet no one says shut down the stock market.

Fortunately, it’s a regulated market which helps mitigate danger, whether from fraud, insider trading or other such evils plaguing the system. It’s clearly the crying need of the hour to put a proper regulatory framework to gaming in India as well now. Some states such as Nagaland have brought about a regulatory framework. Nagaland enacted the “Nagaland Prohibition of Gambling and Promotion and Regulation of Games of Skill Act, 2016”.

It envisages that a company has to go through a financial, legal and technology audit before being granted the license and thereafter on an ongoing basis. However, unless there is a robust regulatory regime for the country, the over 2 lakh crore per annum of illegal and underground betting in India shall only grow, leaving lakhs of people engaging in the same without any safety net. Ever since ancient times, various scriptures have advocated that betting should be regulated.

Kautilya’s Arthashastra, Narad Smriti, Katyayana Smriti and Brihaspati, dealing with gambling in chapter XXVI, verse 199 have advocated that since gambling (not just betting) cannot be stopped, it must be regulated. In recent times, the Justice Lodha Committee Report, the Justice Mudgal Committee Report and even the Law Commission of India Report on Gambling and Sports Betting in India have strongly advocated that betting must be regulated.

Various investigative agencies have consistently stated that legalising it would reduce the element of black money and the influence of the underworld besides helping them in detection and focusing their investigation. It’s time to take the bull by its horns and put a proper regime in place. Let’s not do the ostrich act. Everyone loses otherwise. Advocate Vaibhav Gaggar is Managing Partner, Gaggar & Partners, Solicitors and Advocates.