Gambling which is Skill based, even if played with money, is allowed almost in all of Indian states. Even if the skill component is small, it is allowed. However, for Games played online with money, it is upto the discretion of Courts whether each Game has skill component in it, and is hence Legal or not. There is no law specifically disallowing Sports betting in India, but its a grey area and SC is considering the Lodha Panel report to allow Cricket betting – however, it is work-in-progress
Gambling is a state subject. It has 2 classifications: Game of Skill & Game of Chance. Game of Skill is mostly allowed nationwide, but some states have banned it, like Assam. But Game of Chance is allowed only in some states which have created specific laws for it: like Goa, West Bengal, Sikkim etc.
Now any Game has 3 components: Consideration, Skill and Reward.
Consideration means if one is putting money upfront. If a Card game sells chips, there is no consideration involved, since they are not accepting money but only chips to play the game. If it accepts cash, then consideration is involved.
Reward is if the game pays back on wins: since card games like Teen Patti only sell chips, but don’t allow winners to take cash back on leftover or winning chips, there is no reward component. Games which give winning cash involve the reward component.
The last point is proving that a game is of Skill & not Chance. This is important because most Indian states allow Games of Skill but only few allow Games of Chance. That is a grey area with many legal cases going on in states, verdicts will define interpretation of each state law.
Recent Nagaland Bill was drafted by a CA firm – Gaggar & Associates. It’s partner Vaibhav’s Gaggar’s brother Gaurav, was with me in Deloitte. This article gives the Court judgments to ascertain the legal position in India, on matters of Gambling or Betting.
Only legal point on which Card game companies getting players to play with chips are in Court is to prove theirs is a Game of Skill & not Chance, hence allowed in most states, barring Assam etc, which debar even Game of Skill. But this last point, proving a Card Game with chips is a Game of Skill & not Chance, is a grey area in Courts.
Gambling or gaming has been defined by the Supreme Court in 1996 as betting and wagering on games of chance only. The Supreme Court in this judgment specifically excludes games of skill, irrespective of whether they are played for money or not, from the definition of gambling. The exact quote from the 1996 judgment is as follows:
“The expression ‘gaming’ in the two Acts has to be interpreted in the light of the law laid-down by this Court in the two1957 cases, wherein it has been authoritatively held that a competition which substantially depends on skill is not gambling. Gaming is the act or practice of gambling on a game of chance. It is staking on chance where chance is the controlling factor. ‘Gaming’ in the two Acts would, therefore, mean wagering or betting on games of chance. It would not include games of skill like horse racing”
Further, the Public Gambling Act, which is the central law on gambling and most subsequent state laws on the subject substantially state that “nothing in this Act shall apply to games of mere skill wherever played”. This is also mentioned in the 1996 Supreme Court judgment with regards Tamil Nadu and Madras laws.
“In any case…Section 11 of the Gaming Act specifically saves the games of mere skill from the penal provisions of the two Acts.”
What is a game of skill under Indian laws?
Supreme Court of India in 1996 defined a game of mere skill as follows:
The competitions where success depends on substantial degree of skill are not “gambling” and
Despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of “mere skill”.
We, therefore, hold that the expression “mere skill” would mean substantial degree or preponderance of skill.
The 1968 Supreme Court ruling that declared:
“A game of skill, on the other hand – although the element of chance necessarily cannot be entirely eliminated –is one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player. Golf, chess and even Poker are considered to be games of skill. The Courts have reasoned that there are few games, if any, which consist purely of chance or skill, and as such a game of chance is one in which the element of chance predominates over the element of skill, and a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element –“skill” or “chance” — which determines the character of the game.”
The Supreme Court of India in the case of R.M.D Chamarbaugwala v. Union of India has declared that competitions or games where the success depends upon a substantial degree of skills cannot be considered as gambling. If it is preponderantly a game of skill with some element of chance, it would nevertheless be a game of ‘mere skill’.
With all such inferences, you could conclude that it is legal to play online poker games.
Various states such as Maharashtra, Delhi, Tamil Nadu, Karnataka, West Bengal, Assam have exempted horse racing activity from the ambit of gambling activity.
In the case of State of Andhra Pradesh vs. K. Satyanarayana (AIR 1968 SC 825), the Hon’ble Supreme Court held that, “The “three card” game which goes under different names such as “flush”, “brag” etc., is a game of pure chance. Rummy, on the other hand requires a 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. We, cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill.”
West Bengal is the only State in India that has exempted poker, rummy and other card games from the ambit of gambling. Although Poker, another widely played card game, is not specifically classified as a “game of skill” by any Court ruling, the interpretation regarding the legality of poker will be based on the aforementioned judgments.
GAME OF SKILL V. GAME OF CHANCE
Similarly, as in the State of Delhi, the State of Goa has made special enactments for the purpose of allowing gambling. The only State to allow on-line Gaming is the State of Sikkim. However, there are certain restrictions. In India, the enactments essentially allow such Games to be played on line, which are games of skill.
Various courts in India have examined the difference between the game of skill and game of chance and in order to determine what constitutes gaming as defined in various state enactments (i.e. gambling); it is imperative to understand the difference between a “game of skill” and a “game of chance“. For this purpose, it will be interesting to examine the following Indian judicial pronouncements:
In State of Andhra Pradesh v. K. Satyanarayana & Ors4, the Apex Court while holding that the card game – “Rummy” is not a gambling activity stated that “Rummy 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. We cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill.”
In M.J. Sivani & Ors. v. State of Karnataka5, the Apex Court observed, “Even a skilled player in a game of mere skill may be lucky or unlucky, so that even in a game of mere skill chance must play its part. But it is not necessary to decide in terms of mathematical precision the relative proportion of chance or skill when deciding whether a game is a game of mere skill. When in a game the element of chance strongly preponderates, it cannot be game of mere skill. Therefore, it is not practicable to decide whether particular video game is a game of skill or of mixed skill and chance. It depends upon the facts, in each case.”
The Apex Court again delved into the aspect pertaining to what constitutes a game of skill in Dr. K.R. Lakshmanan v. State of Tamil Nadu6, where it stated “Games may be of chance, or of skill or of skill and chance combined. A game of chance is determined entirely or in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling of the cards, are all modes of chance. In these games the result is wholly uncertain and doubtful. No human mind knows or can know what it will be until the dice is thrown, the wheel stops its revolution or the dealer has dealt with the cards. A game of skill, on the other hand – although the element of chance necessarily cannot be entirely eliminated – is one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player. Golf, chess and even Rummy are considered to be games of skill. The courts have reasoned that there are few games, if any, which consist purely of chance or skill, and as such a game of chance is one in which the element of chance predominates over the element of skill, and a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element – “skill” or “chance” – which determines the character of the game.”
From the aforesaid, judgments, it can be concluded, that what is allowed in India is only a game of skill and for a game to be considered as a game of skill, the mechanics (nature of the game, mode of playing, rules etc.) of the game should clearly reflect that the requirement of skill preponderates the element of chance and wherein success depends principally upon superior knowledge, training, attention, experience and adroitness of the player. In addition to which, it can be concluded that “games of skill” do not come within the purview of a majority of state gambling enactments, thereby meaning, that playing games of skill for stakes in the physical form, would not be treated as an act of gaming (as defined in such enactments).
Nagaland and Sikkim are so far the only states in India which has enacted a statute pertaining to online gaming i.e. Sikkim Online Gaming (Regulation) Act, 2008 (“Sikkim Gaming Act“). In terms of the Sikkim Gaming Act, an interested person can obtain a “license” for the purpose of conducting online games such as Roulette, Black-jack, Pontoon, Puntobanco, Bingo, Casino Brag, Poker, Poker dice, Baccarat, Chemin-de-for, Backgammon, Keno and Super Pan 9.
- As concluded above, games of skill played for stakes in the physical form, do not come within the ambit of gaming (as defined in various state enactments); however to ascertain whether the same status is accorded to games of skill played online, it has to be seen whether there is a distinction between a game of skill and a game of chance. The expression ‘skill’ has been defined by the Courts as an exercise upon known rules and fixed probabilities of sagacity, which involves five parameters:
- learned or a developed ability,
- physical co-ordination,
- technical expertise, and
Games like Rummy, Chess, Bridge, Billiards and Golf have been recognised by the courts in India as games of skill.
- The courts have held that Poker cannot be accepted as a game of skill; however it was stated that it would be legal to play poker within the states which do not hold it as illegal.
- The Courts have also opined that that the degree of skill required in games played in a physical form cannot be equated with those played online, as the degree of chance increases in case of online games and the degree of skill used in playing these games online is questionable. Hence, online games, even those requiring a high degree of skill, conducted by gaming sites offering prize money and partaking a slice of the winning hand are illegal in states which prohibit gambling.
- Courts in India have also stated that such online gaming portals are essentially a substitute for traditional casinos since websites operate as common gaming houses7 where members interact and place bets. Thus the company and its directors, agents, players are liable to penal consequences.
- It has been also held that conducting online games for profit cannot be included in the scope of trade, business or commerce as envisaged under Article 19 (1) (g)8 of the Constitution. Further, sports’ betting is an offence in India and individuals earning money from bets laid on games of skill do not have the constitutional protection of Article 19(1) (g).
In view of the aforesaid, it is clear that only Games of skill and that too played in physical form have been held by the courts to be valid and falling within the ambit of various enactments, dealing with Gaming, in India. However, as far as, on-line Gaming is concerned, the courts are of the view that on-line Gaming could not be compared to real game being played and would, therefore, not be allowed until ‘skill’ test is passed by it.
Hence, if you want to open a business of online Betting/ Gambling, make sure you would be able to justify it, if need be, in front of Courts, that yours is a Game of Skill and not Chance.
Most Indian states allow Game of Skill and to operate a company into online betting Games, you should set up the company in Sikkim or Nagaland or some other states, which have a specific law allowing online Gaming companies.
Regarding Sports betting, the SC recently accepted the Lodha Panel report on BCCI and asked the Government to legalise cricket betting. But no specific case has been taken up by the Court and hence a specific precedent is missing. Also, the Government would have to come out with a new Law.