ONLINE GAMING OR ONLINE GAMBLING

ONLINE GAMING OR ONLINE GAMBLING

Online gaming in simple terms can be defined as “ gaming that requires the use of Personal Computer and internet connectivity, either played online or downloaded or played online later, capable of supporting either single player or multiple players. It does not include games downloaded or stored on the PC’s hard drive and played offline. It also does not include mobile and console gaming[1].

2.         The Prize Competition Act, 1955 and the Public Gambling Act, 1867 are the principal laws that govern the gaming and the gambling market in India.

3.      Section 2 (d ) of the Prize Competition Act, 1955 defines ‘prize competition’ to include any competition, a missing word prize competition, a picture prize competition or by any other name in which prizes is offered for solution of a puzzle based upon building up arrangement, combination or permutation, of letters words or figures. Section 4 of the Act prohibits prize competitions where prize offered exceeds one thousand a month. In case the amount is more than one thousand per month an licence needs to be obtained from the state government under section 6 of the Act. Hence, conducting any prize competition in the above form or in combination of above form will attract the provisions of the Prize competition Act, 1955. Though this law does not directly regulate online gaming, section 11 of the Act is broad enough to bring online prize competitions under purview of this Act.

4.      The Hon’ble Supreme Court observed that a competition in order to avoid the stigma of gambling must be dependant to a substantial degree upon the exercise of skill. Therefore, a competition wherein success does not depend to a substantial degree upon the exercise of skill is now recognised to be of a gambling nature.[2]But in case the game is skill based then it falls outside the ambit of the Prize Competition Act, 1955 Act and does not constitute gambling.

5.      Under the Public Gambling Act, 1867, Section 3 provides punitive provisions for maintaining premises known as “Common-Gaming House” for the purpose of carrying out gambling activity or games where the element of chance is present. In other words, the Act strictly prohibits gambling in any form which would cover even online activity . The Act however, makes a clear distinction between gambling or games based on purely element of chance and games involving skills. Under section 12 of the Public Gambling Act, 1867, it is clearly provided that nothing in this Act shall be held to apply to any game of mere skill wherever played.

6.      It is important to understand the difference between “gaming” and “gambling”. The New Encyclopedia Britannica defines gambling as the betting or staking of something of value with consciousness of risk and hope for gain on the outcome of a game, a contest or an uncertain event the result of which may be determined by chance or accident or have an unexpected result by the reason of the bettor’s miscalculations. According to the Black’s law dictionary “gambling involves not only chance but a hope of gaining something beyond the amount played.” Gambling consist of consideration, an element of chance or a reward. Hence, gambling in a nutshell is payment of a price for a chance to win a prize.  In gambling a winner is determined by a lot or chance and a participant has no opportunity to exercise his reason, judgement, sagacity or discretion.[3]

7.      Games may be of chance or of skill or of skill and chance in combination. 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 results are 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,  is one in which success depends principally upon the superior knowledge, training and attention, experience and adroitness of the player.  Although the element of chance necessarily cannot be entirely eliminated.Golf, Chess and even Rummy are considered even games of skill. The courts have reasoned that there are few skills, if any, which consists purely of chance and 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 elements of chance. Hence, it is the dominating element i.e. skill or chance that determines the character of the game[4]. In oye lucky oye , the proposed website games such as lazy bagpacker require substantial skill in finding the lowest and most unique number or solution to a problem and thus constitute a game of skill rather than chance.

8.      Further under Indian Contract Act, 1872 any agreement where generation of value depends upon the result of some future uncertain event is void. These kinds of agreement are  called “wagering agreements” and are void under Section 30 of the Contract Act, 1872. Hence, any suit brought for the recovery of any amount agreed upon wagering agreement is not maintainable in any court of law. The direct implication of this is where there is an element of chance of winning or losing it will come under the provisions of section 30, and hence void.   In lazy bag packer, the person with lowest and unique solution will definitely win a prize and the result depends on the skill of a person and not on happening of  an uncertain event and thus the game does not constitute a wagering contract.

9.      The online gaming segment is not expressly regulated by the Indian Information Technology Act, 2000 .There are no specific provisions in the IT Act,2000 that provides legal position as regards  online gaming activity.  From the legal matrix of rules in India , we are of the view that any gaming portal or website that provides access to users who play games on the website in which substantial use of skill is required then that is protected under section 12 of the Public Gambling Act, 1867.

[2] State of Bombay V. R.M.D. Chamarbaugwala AIR 1957 SC 699.  See also satyanarayana’s case (1968) 2 SCR 387

[3] Dr. K.R. Lakshmanan V. State of Tamil Nadu 1996 2 SCC 226.

[4] Dr. K.R. Lakshmanan V. State of Tamil Nadu 1996 2 SCC 226.