Framing India’s Online Gaming Policy: Is Central Government Putting Cart Before The Horse?

States like Tamil Nadu and Karnataka want a blanket ban on real money gaming and their petitions are lying in the Supreme Court.

Online gaming industry is facing lot of issues from high taxation to lack of sound regulations.

The Central government, led by Union Minister of State for Electronics and Information Technology Rajeev Chandrasekhar, and representatives of several government departments, in a welcome move, held a consultative meeting with stakeholders from the online gaming industry on June 7, 2022 to understand ways in which the Central government can facilitate the industry and enable a regulatory framework. (More Sports News)

An inter-ministerial taskforce has also been setup by the Central government to identify a nodal ministry, understand international best practices and recommend a uniform regulatory mechanism.

Although the minister has reportedly not made any commitment on unveiling a regulatory framework for the sunrise sector, but asked stakeholders to get back with written workable suggestions on the regulatory model that the central government may follow to identify and distinguish games of skill from gambling/betting; measures to curb addiction and violence, responsible gaming features that can be built in and framework of self-regulatory organisations, who can co-regulate the industry along with the government.

With skill-based online real money games like fantasy sports, rummy and poker facing the brunt of blame of various state governments, political and social activists claiming that wagering on any game, especially if done online is akin to gambling and betting and should be banned; and several states like Tamil Nadu, Karnataka, Andhra Pradesh and Telangana passing laws to prohibit all online games played for money, the Central government’s move to initiate a dialogue on regulation of online gaming is a positive step for the industry.

Centre vs States: Who will regulate?

Currently, state laws in Andhra Pradesh, Arunachal Pradesh, Telangana, Odisha and Assam prohibit all forms of real money games, including online games for stakes. Recent amendments in gaming legislations passed by Tamil Nadu and Karnataka banning online games for stake or wager were struck down as being illegal, unconstitutional, manifestly arbitrary and violative of the right to trade and commerce guaranteed under the constitution by the respective state High Courts, while a notification issued by the Kerala government prohibiting online rummy for stakes was also struck down by the state’s High Court on similar grounds.

Despite these apparent legal victories for the real money gaming industry, the situation appears far from clear as the governments of Tamil Nadu and Karnataka have appealed against the High Court’s decision in the Supreme Court claiming that states have the right to ban online games, even if skill-based played for stakes, which are akin to gambling or betting when played for stakes or wager.

The state governments have harped about financial losses suffered in such online games by a large section of people and alluded to problems such as suicides, mounting debts and addiction due to such games.

Further, these states have even contended that online games like rummy and poker are susceptible to manipulation and fraud and disputed whether such games are skill-based. Notwithstanding the High Court ruling and pending matter in Supreme Court, worried about a spate of suicides reportedly caused due to online rummy, the Tamil Nadu government has even formed a committee headed by a retired High Court judge to consider recommending a fresh law after examining various aspects of the functioning of online games, their advertisements and addictiveness.

Supreme Court: The Final Arbiter?

The Central government has decided to look at ways of regulating the online gaming industry even as a few states continue to press for a blanket ban on all real money online games.

States, such as Tamil Nadu and Karnataka contend that they have the legislative competence to regulate online gaming under its power to regulate ‘gambling and betting’; ‘sports, entertainment and amusements’; ‘law and order’ and ‘trade and commerce’ under the state list of the constitution.

On the other hand, the central government could also argue that it has power to regulate online gaming under its legislative powers to regulate forms of communication, inter-state trade and commerce as well as general residuary powers.

Since the issue of jurisdiction to regulate online games and gaming is pending before the Supreme Court, the question arises whether it is appropriate for the Central government to step in at this stage, when the matter is sub-judice?

Advantage Centre?

If one were to look at the issue pragmatically, Central government is obviously better placed to regulate the online gaming industry given that state-level policing and enforcement of an activity on the internet, which traverses inter-state and international boundaries is almost impossible.

However, given that the precise issue of legislative jurisdiction vis-a-vis Centre and states, and whether a blanket ban is constitutionally permissible is pending before the apex court, it would be appropriate if the central government impleads itself in the pending Supreme Court matters and clearly state that it intends to bring a regulatory framework for the sector.

This would enable the court to expeditiously decide on the pending issues bringing policy certainty and stability, while ending the quagmire of perennial litigation and disputes plaguing the industry.

One hopes that the apex court as well as central and state governments work in a collaborative manner to ensure clarity and stability for all stakeholders involved in the online gaming industry.  

(The writer is a technology and gaming lawyer based in Mumbai. Views expressed are personal).