There has been a recent spurt in the arena of online gaming. Especially during the pandemic, people have resorted to various digital means of amusement and comfort, resulting in the craze for such gaming platforms. However, with everything that involves human action, comes the necessity of the laws that govern human actions, posing a condition for the existence and limitations of such means of lifestyle. Online gaming is no exception. There is a constant effort by lawmakers to provide the utmost protection to the developers and the end users of such games. This article aims to put forth the current status of the gaming sector in India and the relevant laws with respect to the same. Read on!
The status of online gaming in India
The Constitution makes ‘betting and gambling’ a part of the State List, as a result of which the gaming laws differ from State to State. However, the basic difference in the laws finds its base on the kind of games it is dealing with. ‘skill gaming’ is where one uses his intellect, knowledge, training, and attention to influence the ultimate result. The ‘game of chance’ is one where the result depends on mere luck. However, there might be cases where the game shows an overlap between the two. Where we find superior knowledge to be dominating, will be the one game of skill.
The next aspect to consider is whether a particular game is leading to gambling. When there is money at stake in a game of chance, it amounts to gambling and the money at stake in a skill game does not amount to gambling and is kept away from any ban. The same can be observed in the case Head Digital Works Pvt. Ltd. v State of Kerala & others, where the court observed that a Skill game does not depend on the stakes but the skill, knowledge and expertise of the parties involved in it, and at the same time, the State’s power to legislate on the subjects of ‘betting’ and ‘gambling’ must not extend to skilled gaming. The State also does not have the power to legislate upon skilled gaming under the purview of ‘public order and ‘police’ as they are considered to be business activities protected by Article 19(1)(g) of the Constitution.
The States may have the power to regulate the Gaming industry as an instrument of trade Commerce Entertainment and Amusement. The High Court of Madras in Junglee Games India Pvt. Ltd. & Anr. V The State of Tamil Nadu & Ors. held that a skill game is an opportunity for a person skilled in a particular game to display his expertise and earn a living out of the same. The complete prohibition on skilled gaming was absurd, arbitrary, excessive and thereby in contravention of A.19(1)(g). Henceforth, the laws banning skilled games stood to be struck down by the Court and A. 19(1)(g) covered the field of skilled gaming. States like Goa, Nagaland, Sikkim and Meghalaya have introduced licensing in order to regulate gaming activities.
Thus, the status of skilled games, whether online or offline, whether or not there is money a stake stands permitted by way of the backing provided by specific portions of different legislations in India. However, Games of chance is still considered as falling within the ban of betting and gambling laws.
Gaming laws in India
It must be noted that India is yet to have entirely separate legislation for online gaming because of which the courts have been sceptical while interpreting the laws. The grey area that still exists makes the loophole in the Skill v chance criterion even broader and deters the judiciary from coming to a conclusion determining the status of online games in India. State laws can function only within the respective boundaries, but online games go across boundaries, making it a national domain for legislation. There is conflicts and limitations in the laws that are prevailing affecting the gaming industry as well as the public in general.
Following are the laws that play a role when it comes to online gaming:
The Information Technology Act, 2000- The online gaming platforms, gambling and lotteries are not complying with the techno legal compliances under the Information Technology Act, 2000. They are violating the data protection laws available in India in order to reach the target user.
Online gaming service providers are responsible for keeping intact the personal information gathered about their users. The data protection laws in India make it a mandate for the service providers to include, in the terms of the contract, of online or offline nature, the collection, storage, handling and use of collected personal data and a mechanism to resolve any grievances.
The Indian Contracts Act, 1872- The user agrees to enter into a contract with the developer of the gaming platform by agreeing to the terms and conditions put before them. These are fashioned in consonance with the Indian Contracts Act 1872 which governs the nuances of a valid contract. Data Privacy, the liability of parties, redressal mechanism, and consequences of breach of the terms and conditions by either party are matters of significance that control the activities of the users and the developers on a gaming platform. The online set-up of contracts has to be on similar grounds as provided by the Act of 1872, which can cover any risk pertaining to the information accumulated and services provided by the online gaming application.
The Consumer Protection Act, 2019- When the user avails the service of the online gaming platform for consideration, or a beneficiary is allowed to do so on his behalf, then such person can be considered as a ‘consumer’ under the Consumer Protection Act, 2019. An aggrieved consumer may file a complaint with the Consumer Dispute Redressal Commission at the District, State or National level in case of a deficiency in service on part of the service provider.
The Payment and Settlement System Act, 2007, RBI Guidelines and FEMA- The in-game currencies are administered and controlled by the Payment and Settlement System Act, 2007 and the Reserve Bank of India (Issuance and Operations of Prepaid Instruments) Direction, 2017, issued by the Reserve bank of India with respect to Prepaid Payment Instrument (PPI). The in-game currencies are generally within the ambit of Close System PPI which is why their issuance, supply and operation can happen without the approval of the RBI.
Sometimes, the currencies fall under the semi-closed system, in which case, it has to be RBI-approved. But in no circumstances, do these currencies fall within the Open System, where the approval of the RBI is compulsory. Online games such as online Poker, rummy, and card games, generally open a gateway for incidents of Money laundering, FEMA violation, and tax evasion as it encourages online modes of payment, making the in-game currencies go unaccounted.
Online Gaming (Regulations) Bill, 2022
Recently, the Online Gaming (Regulations) Bill, 2022 was introduced in the Lok Sabha which aims to establish an effective regime to regulate the online gaming industry to prevent fraud and misuse of matters that are connected or incidental to it. It has 20 sections spread over three chapters. It seeks to establish an Online Gaming Commission which shall derive its power, function and scope from the Bill itself. The Commission shall have the power of licensing an online gaming server, surrender, cancel, or suspend the same.
This Bill is dedicated to the Online gaming industry since it is a completely different identity in itself and it requires laws that can cope with its existence. With the rapid development in the field of technology, humans have been able to make their lives more comfortable while using the different electronic gadgets available. The world of digitisation is far ahead of the world where only laws applying to tangible things were applicable. The world needs more in terms of legal systems to sustain the competition between technology and law. This Bill is one of its kind as it explains the meaning of terms such as online gaming, online gaming server, and online gaming websites, which require a sui generis system to be controlled and governed.
While the Bill aims to put various checks and balances in place to regulate online gaming in India, the bill in its current form has multiple shortcomings:
The Bill has failed to draw a distinction between ‘games of skill' and ‘games of chance'. The Bill also does not clarify whether its provisions are applicable only to real money games or free games as well.
This Bill envisages itself to be central legislation governing gaming in India, however, it will be subject to legal scrutiny down the road, as gaming and gambling are both state subjects under the Constitution of India, and can be governed exclusively only by state governments.
The Bill fails to address its contradiction with the already existing licensing regime under the state gaming legislations of Meghalaya, Nagaland, and Sikkim.
The Bill has not addressed various factors including without limitation Know Your Customer (KYC) norms, customer grievance mechanisms, advertising and marketing guidelines, data protection of the users, responsible gaming guidelines etc.
This particular Bill also has other drawbacks in that it fails to distinguish between the games that involve money and the ones that do not. The main conflict is between the two genres of gaming, which calls for new laws. If the Bill is unable to differentiate between a game of chance and a game of skill, a game where money is involved and where there is no such transaction, it fails to meet the requirement for a new law in the first place.
The law tends to be a national law, but the core subject of the Bill is to prevent fraud and misuse, leading to betting and gambling. This indicates the Law causes a conflict between the Central and State legislatures with respect to the subject matter on which they can make laws. This overlapping of legislative capacity is a negative for the proposed Bill.
The Bill also vests the Commission with the power to license the server to online gaming websites, however, it does not speak of the interests of the developer of the online gaming platforms and the end users. These two parties play a vital role in the sector of online gaming as they are primarily responsible for the existence and development of the industry. If their interests go unprotected, the Commission assumes more control over the platform than the creators and the users themselves.
Thus, the above discussion shows a view of the status of online gaming, and the various laws that can only provide protection if and only when they surface through judicial interpretation and decisions. The Bill that has been passed has its own specific flaws, without which, it could prove to be fruitful legislation to meet the needs of the modern world. A robust regulatory and legal environment, devoid of uncertainties is the need of the hour for this sunrise industry to achieve its true potential and ensure that the business can scale quickly.