Reconsidering the Legality of Games of Skill in Cyberspace in Tamil Nadu

Mayank Gandhi [*]

Introduction

The Madras High Court in Junglee Games India Pvt. Ltd. & Anr. v. The State of Tamil Nadu & Ors has struck down the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021 which prohibited all forms of online gaming (games of skill and games of chance) in the state, for being unconstitutional. The legality of online gaming apps has been upheld by various High Courts of the country. In recent years, the online gaming industry has grown at a steady pace, new start-ups have emerged and have shown signs of substantially contributing to the GDP of the country. However, the lack of a specific regulatory regime has increased the chances of cybercrime and made the consumers vulnerable and therefore, such judgments play a vital role in clarifying the status of online gamings apps.

Background

In this case Junglee Games India Private Limited has challenged the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, [hereinafter “Amendment”] alleging it to be in flagrant violation of fundamental rights. Three major features of the Amendment have been challenged –

1. Inclusive definition of word ‘gaming’ – The Amendment has enlarged the scope of the term ‘gaming’ by including any game involving wagering or betting in person or in cyberspace which is beyond the scope of original act.

2. Barring online waging or betting under Section 3A of the Act – The Amendment has inserted Section 3A which apparently prohibits all types of games played in virtual mode including skill-based games, if played for bet, money, wage or any other consideration.

3. Imposing liability on skill-based games under Section 11 of the Act – The Amendment has ended the exemption entitled to skill-based games under Section 11 of the original Act and has constituted that skill-based games if played for money, wage, bet or any other consideration, an offence.

Arguments on behalf of Junglee Games India Private Limited

1. Violation of law laid down by Supreme Court on games of chance and games of skill

It was argued that skill-based games are different from mere games of chance and a predominance test is applied to decide the category of a game. The Supreme Court in State of Andhra Pradesh v. K. Satyanarayana ruled that the term “game of mere skill” contained under Section 11 of the same Act would mean mainly and preponderantly a game of skill. Hence, the amendment in question which failed to distinguish between ‘games of skill’ and ‘games of chance’ is clearly against judicial pronouncements.

2. Legislative incompetence of state

The state does not have the legislative competence to regulate games of skill. Entry 34 of List II of the Seventh Schedule empowers the state to prohibit only chance-based events or competitions. The original statute had only made betting on merely chance based games punishable. Hence, the amendment in question is invalid.

3. Restrictions posed by Amending Act on games of skills are not protected under the Constitution

In the case of R.M.D. Chamarbaugwala v. Union of India the Supreme Court held that skill-based games are lawful trade activities, hence they are protected under Article 19(1)(g) of the Constitution. The restrictions posed under Article 19(6) of the Constitution need to be reasonable. However, the blanket restriction imposed on any game played for stake in cyberspace is apparently unreasonable.

4. Failure to meet the test of reasonability and proportionality

Further, in the present facts and circumstances, there is neither any rational nexus between measures undertaken by the state and the purpose supposed to be achieved nor any attempt was made to find alternative measures to achieve the same goal with limited restriction. The Supreme Court in the case of Anuj Garg v. Hotel Association of India held that legislative actions of the state must be proportionate and justified in law. Reference was also made to the case of Indian Hotel and Restaurant Association (AHAR) v. State of Maharashtra. Hence, the impugned amendment has failed to pass the test of reasonability and proportionality.

Arguments of behalf State

It has been argued on behalf of the state that online betting apps increase incidents of suicides. The possibility of addiction, manipulation and fraud in online games is very high. Hence, in order to prevent citizens from falling into the addiction of gambling and betting, online gaming apps have been banned. Additionally, it is stated that the state has the power under Article 19(6) of the Constitution to put reasonable restrictions on such activities. It also argued that it has exclusive authority under the Constitution to legislate “gambling and betting”. Lastly, the amendment has been brought while keeping in mind morality and greater public interest, hence it is in conformity with the Constitution.

Judgment

The Court declared the whole impugned Part II of the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021 as ultra vires the Constitution for being unreasonable, arbitrary, and violative of fundamental rights. The Court ruled that the Amendment failed to distinguish between the games of skill and games of chance. It said that the state failed to demonstrate the intention behind prohibiting skill-based games.

The High Court analysed that when a game involves substantial amount of skill, then it will be regarded as trade activity which will be protected under Article 19(1)(g) of the Constitution and only reasonable restrictions can be imposed but the Amendment had completely restricted the person from displaying his skills in any game in cyberspace. Hence the restrictions were unreasonable and not in public interest and therefore do not come under the ambit of Article 19(6) of the Constitution.

Madras High Court also observed that only “gambling and betting” activity can be legislated by the state but the impugned Amendment has prohibited skill-based games which are not within the purview of legislation. The expanded definition of gaming is in violation of law recognised by the Supreme Court and other High Courts of the country. In this context, the games of skill are beyond the purview of legislation by the state, hence the state has exercised excessive and arbitrary power which is against constitutional sense and propriety.

Further, the Court found that the working of the entire amendment is based on an expanded meaning of gaming, so if the expanded meaning of gaming is declared void, the whole amendment would be void as there will be no meaningful part which can be reasonably allowed Hence the doctrine of severability is not applicable.

Analysis of Court’s Reasoning

The author is of the opinion that the High Court has rightly decided the matter in the favour of petitioners. The present judgment is an important step in respect to regulating the online gaming apps. By defining the legislative power of the state governments on regulating games in cyberspace, a standard path is set out by the Court.

The author opines that clarifying the status of online gaming platforms will encourage new online gaming start-ups to operate in Tamil Nadu. It will also help in developing a strong gaming industry in the country and will provide more career opportunities to gamers. Legally recognising online skill-based games will be a win-win situation for the government and for the online gaming industry. On one hand, by effectively regulating and legalising the online gaming industry, the government can increase its revenue and on other hand, online gaming platforms can operate in states legally and can make profit by providing their services.

Additionally, prohibiting online games would force consumers to use illicit means to play games which may increase cyber crimes and make players more vulnerable. Hence, instead of prohibition, the legislature should focus on regulation. Moreover, online gaming platforms are required to build a self-regulatory body to ensure that members are offering games of skill and not games of chance.

Further, it is viewed that basic rights should not be restricted only on the basis of having some negative impacts. A bird’s-eye view of the situation should be taken into consideration and a cost benefit analysis should be done. Moreover, the actions taken by the governments should be in proportion with the cause of action for affirmative regulation.

Lastly, an authoritative pronouncement by the Supreme Court is required to put a complete end to the debate on constitutional validity of skill-based games in cyberspace. The authoritative pronouncement will remove all the ambiguities and will help in accelerating the growth of the online gaming industry.

Conclusion

To conclude the whole discussion, it can be said that the Madras High Court’s judgment has allowed the state governments to legislate betting and gambling in only games of chance and not in skill-based games. The judgment has not completely barred the state from enacting legislation on betting and gambling as provided under Entry 34 of List II of the Seventh Schedule to the Constitution. The emphasis was also laid upon the differences between skill-based games and games of chance and observed that legislation regulating online gaming should be reasonable, proportionate, non-arbitrary and must conform with the Constitution. The decision is a welcome step with respect to the regulation of online gaming in India. It has sought to clear the ambiguities regarding online gaming and will help in accelerating the growth of the online gaming industry particularly in Tamil Nadu. Hence, the current position of law is that competition which substantially depends on skill is not gambling and will not be subject to penal provisions.

[*] Mayank Gandhi is a second year student at Maharashtra National Law University, Nagpur.