Legal Issues Surrounding Online Card Gaming

[Meenal Maheshwari Shah is the legal counsel for Brand Capital, the investment arm of the Times of India Group]

A vast population in India likes to engage in card games, especially rummy and poker. It naturally follows that with the advent of internet, they are fixated on the websites which host such games for stakes.    

Legal Framework

Gaming with stakes falls within the purview of gambling because the act of ‘wagering’ or ‘betting’ is considered gambling (with some prescribed exceptions, if at all). The Constitution of India entrusts the state legislatures with the power to frame state-specific laws on ‘betting and gambling’.[1] While some states have adopted the central statute[2] on the subject, most of the states have codified their own law.

As the emergence of online gaming succeeded the enactment of gambling laws, most of the Indian gambling laws primarily deal with gaming at physical premises. Therefore, when gambling laws are read in the context of online gaming, complex legal issues arise. Some states have expressly excluded certain games from the purview of gambling or have legalised playing certain games after obtaining a license. For instance, West Bengal’s gambling laws[3] expressly exclude ‘games of cards like Bridge, Poker, Rummy or Nap’ from the definition of ‘gaming or gambling’.[4] However, they require obtaining of a permit from the Commissioner of Police in Calcutta or the District Magistrate to play a game of skill.[5] This could be interpreted to say that playing of rummy and poker requires obtaining a license. Similarly, the Goa, Daman and Diu Public Gambling Act, 1976, was amended in 1996 to allow playing of certain table and board games on off-shore vessels upon obtaining an authorisation from the Government and payment of a fee.[6] 

Certain states such as Maharashtra,[7] Delhi,[8] Karnataka,[9] and Goa[10] have expressly excluded games of ‘mere skill’ or ‘pure games of skill’ from the purview of the definition of ‘gaming’ or ‘gambling’. Sikkim[11] and Nagaland[12] are the only states in India which have enacted specific laws on internet gaming and contemplate the issuance of licenses for certain online games. However, in 2015, the state of Sikkim curtailed[13] licence-based online gaming only within the geographical boundaries of Sikkim through intranet terminals.   

Legal Issues

Whether online gaming is prohibited by gambling legislation?

While states like Orissa[14] and Assam[15] prohibit gaming for money or other stakes anywhere, most other states prohibit gaming only in common gaming houses. It is unclear if websites hosting online games will be caught within the claws of the definition of common gaming houses because generally gambling legislation loosely include gaming at a place[16] where instruments of gaming are kept or used for the profit or gain of the person owning such a place, within the definition of common gaming houses. A website can be interpreted to be a place where instruments of gaming are used for the profit of the website owner. Seeking clarity, certain online rummy websites owners intervened in a special leave petition in the Supreme Court, where the Supreme Court upheld the Madras High Court’s view that playing rummy for stakes amounts to gambling, will not impact online rummy websites. However, to the dismay of the interveners, the writ petition in which the intervention was made was subsequently withdrawn and therefore the observations made thereunder fell.   

Whether certain online card games can be exempted from being considered as gambling on account of being games of ‘mere skill’?

Most gaming legislation provide that restrictions imposed by them will not apply to games of ‘mere skill’. The Supreme Court of India has laid down the test of preponderance to determine if a game is that of ‘mere skill’ according to which, in spite of an element of chance, if a game is also based on skill it would not qualify as gambling.

Rummy: The Supreme Court has held that ‘rummy is not a game entirely of chance’, but is preponderantly a game of skill as it ‘requires certain amount of skill because the fall of the cards has to be memorised and the building up of rummy requires considerable skill in holding and discarding cards’. It is curious that in spite of concluding that rummy is a game of ‘mere skill’, the Court said that if ‘the owner of the house or the club is making a profit or gain from the game of Rummy or any other game played for stakes, the offence may be brought home’. If restrictions contained in gambling legislation do not apply to games of ‘mere skill’, then playing of such games in a common gaming house which is providing the gaming instruments for profit or not is irrelevant.

Anyway, given that the court has held rummy to be a game of skill, it seems likely that the court may hold online rummy to be a game of ‘mere skill’ too and hence the websites hosting rummy should mostly be in the clear.

Poker: Deducing from Supreme Court’s stance on rummy, it is not difficult to one to argue that poker would also qualify as a game of skill. The Karnataka High Court had taken the view that “in respect of the game of poker if played as a game of skill, license is not contemplated”. But, the Gujarat High Court in Dominance Games v. State of Gujarat[17] on 4 December 2017 has held that ‘Texas Hold’em Poker’ is not a game of skill and hence all the restrictions contained in Gujarat’s gambling legislation are applicable to the game. The Court reasoned that in the first stage of poker, i.e. initial distribution of cards, a player has no control and in the second stage, i.e. opening of the cards with betting, the players use a poker face to deceive and bluff, which is not a skill as these are offences under criminal laws of India. The Court then distinguished poker from rummy by stating that while poker is played for stakes, rummy is not. It is difficult to agree with the High Court that rummy does involve stakes. Further, poker does entail elaborate statistical skills. Given that poker has been held illegal by the Gujarat High Court, it is a natural corollary that online poker is also illegal. Therefore, as long as this decision remains, players in Gujarat cannot legally participate in online poker games. This would mean that, all the online poker websites will have to use the geo-location feature to block the players from Gujarat from participating. However, as the geo-location restriction can be easily bypassed by the players by using virtual private networks to change their locations and access websites, it will have to be expressly mentioned on the websites that poker players from Gujarat are prohibited from playing poker by law.   

Contracts by way of wager are void under the Indian Contract Act, 1872.

Even though many states in India have legalised playing of certain card games (online or otherwise), the breach of gaming contracts cannot be challenged under the contract law, as contracts by way of wager are void under the Indian Contract Act, 1872. It, therefore, becomes very important for the card players to settle the games upfront as there is no recourse under contract law for breach. This upfront settlement becomes more tricky in case of online card gaming.  

Conclusion

Online card gaming generates, or can potentially generate, a substantial amount of revenue for the State. Therefore, it is necessary to update the archaic law on the subject addressing the legal issues the industry is facing. This would clear the air of uncertainty and boost confidence of both the entrepreneurs and the players engaging in online card gaming.

– Meenal Maheshwari Shah

[1] Constitution of India, Seventh Schedule, List II, Entry No. 34.

[2] The Public Gaming Act, 1867.

[3] The West Bengal Gambling & Prize Competition Act, 1957.

[4] Section 2(b) of The West Bengal Gambling & Prize Competition Act, 1957.

[5] Section 12 of The West Bengal Gambling & Prize Competition Act, 1957.

[6] Section 13A of The Goa, Daman and Diu Public Gambling Act, 1976.

[7] Maharashtra Prevention of Gambling Act, 1887.

[8] Delhi Public Gambling Act, 1955.

[9] Karnataka Police Act, 1963.

[10] Section 13 of Goa, Daman and Diu Public Gambling Act, 1976.

[11] The Sikkim Online Gaming (Regulation) Act, 2008 and the rules thereunder.

[12] The Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Act, 2016 and rules thereunder.

[13] By way of Sikkim Online Gaming (Regulation) Amendment Act, 2015.

[14] The Orissa (Prevention Of) Gambling Act, 1955.

[15] The Assam Game And Betting Act, 1970.

[16] An example of the definition of Common Gaming House can be that provided in the Public Gaming Act, 1867 which states that “Common gaming-house” means any house, walled enclosure, room or place in which cards, dice, tables or other instruments of gaming are kept or used for the profit or gain of the person owning, occupying, using or keeping such house, enclosure, room or place, whether by way of charge for the use of the instruments of gaming, or of the house, enclosure, room or place, or otherwise howsoever.

[17] Special Civil Application No. 6903 of 2017, accessible via http://gujarathc-casestatus.nic.in/gujarathc/tabhome.jsp.

 

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