Skill vs chance in online gaming

This opinion was published in Times of India on December 6, 2022.

Year 2022 has been an attention grabbing year for the online gaming sector in India. It started with an overspill effect of increase in gameplay pivoted through Covid leading to multiple landmark judgements in favour of skill-based online gaming and also regulatory bans in certain states in the form of amendments to their respective state police acts.

While on one hand, we saw the government encourage gamers and developers by encouraging them to make more Indian games, and gamers winning medals in international tournaments, including the recent Commonwealth Championship, we also saw the GST department send large tax notices and certain states criminalising skill-based pay-to-play gaming platforms as well as its players.

The three noteworthy steps taken by the government in the last one year were:

(a) Setting up of an inter-ministerial taskforce, with the aim to establish a uniform central regulatory framework within which gaming platforms are required to operate; (b) Setting up of a GST council which will decide the quantum of GST to be paid by gaming companies; and (c) Setting up of an AVGC task force to oversee the growing animation, visual effects, gaming and comics by the Ministry of Information and Broadcasting.

According to a recent report, India has 507 million gamers and more than 900 companies in the gaming sector. Its market was valued at $2.6 billion in FY 2022 and it will be worth $8.6 billion by 2027, as it clocks a compound annual growth rate (CAGR) of 27 per cent.

This sector includes a large number of skill-based professional gamers, developers, game designers, analysts, shout casters and social media influencers; for some of them, there is a large dependency on skill-based online gaming for their livelihoods.

Despite the involvement of people in gameplays, investments, and start-ups, this sector continues to operate in the grey. The impact of all of this is severely visible on the gaming industry and gamers; companies have to geo-block their platforms in states that issue amendments for a ban and eventually, it is the community of gamers that faces the brunt even more harshly as playing pay-to-play games ends up being a criminal offence.

The reason being states continuing to ban gaming in the garb of gambling whereas it has been established through enough judicial precedents and by the law that they do not have jurisdiction over skill gaming at all.

This makes a poker player a criminal in Gujarat but a professional in other states, a chess player a criminal in Tamil Nadu if they pay any token fee to pay an online chess tournament, and till very recently a FIFA player, who has paid money to make a team online, a criminal who could go to jail for up to three months in Karnataka.

Blanket bans on online gaming is the result of absence of a regulatory sandbox for gaming because of which states have used their respective Gambling and Police Acts, thereby handling gamers as gamblers.

This skill vs chance debate, however, is not new. There is over 60 years of Supreme Court jurisprudence including cases such as R.M.D. Chamarbaugwalla vs Union of India (1957) and K.R Laksmanan vs State of Tamil Nadu (1998), which has established that where there is a preponderance of skill, and the outcome is in control of the player; the gameplay must be considered a skill and not the result of chance.

More recently, the Karnataka High Court in its judgment in All India Gaming Federation vs the State of Karnataka (2022) detailed the following principles: firstly online games and sports of skill with or without stakes are not construed as betting or gambling; second states only have the power to make laws and regulate gambling, and betting on the activity of gambling, and third playing online games and sports of skills forms part of article 19 (1) (g) and Article 21 of the constitution.

At a time when game development is a use case for upcoming technology like blockchain, NFTs, visual effects and high user engagement, it struggles with issues like data privacy, cybercrimes, wagering and criminality: all because of the lack of discrimination between skill and chance.

The inter-ministerial task force set up by the central government must consider this differentiation and a mechanism to reach it. Data suggests every third person in our country is involved in playing some or other kind of game online be it pay-to-play or not. When PUBG banned its operations in India, it lost over 50 million players and has seen 175 million downloads from the country; this suggests the depth and involvement of the mobile-first gamers.

With the advent of new formats of games and platforms, this will only set to increase. It is now becoming an imperative duty of the government to protect this class of users by understanding that not all form of gaming is a product of chance; thereby not all gamers are gamblers.

All of this has been overlooked by the state government while making laws, however, the central government must use this opportunity to bring about some comfort for this growing community and clearly differentiate between skill games, which are constitutionally protected and chance games, which are res extra commercium activity.

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