Friday, June 21, 2024

Who is framing laws for gaming companies in India?

There is a strange lull in the ongoing slugfest between a host of gaming companies that operate in India and the Tamil Nadu government which seeks to put the companies out of business.

The gaming companies, justifiably worried, have sought legal recourse and filed a number of writ petitions in the Madras High Court. But judges hearing the case told the gaming companies it would be premature to discuss the subject since the state government had not notified the much-feared ordinance because the governor had not yet put his seal on the same.

If that had happened, the ordinance would have seriously impacted the operations of the gaming companies. So as of now, the issue looks like a momentary relief. The war has, momentarily, halted and silence set in the trenches. 

At the heart of the slugfest is the prohibition of Online Gambling and Regulation of Online Games Act passed by the State of Tamil Nadu. The gaming companies are worried because it seriously impacts their business and wanted protection from the court against the ordinance.

India’s political cognoscenti say it is important to dig deep, and understand the basis of what appears like a needless controversy. It all started when the Tamil Nadu government constituted a committee chaired by Justice K Chandru (Retd.) to recommend the desirability of a legislation to ban online card games including rummy. The five-member committee worked at breakneck speed. It was formed on June 10, 2022 and had two sessions on June 13th and 16th before finalising a report that gaming experts claimed was filled with several loopholes.

But since it was a government committee, no one dared to raise a banner of protest, the only recourse was to seek legal redressal.

Now here comes the real twist. 

The report takes cognisance of the Supreme Court’s landmark judgements, and the recent high court judgements in the states of Tamil Nadu, Kerala, and Karnataka. All of these recognised games of skill – including the much-debated and much-maligned rummy and poker as business activities – protected under Article 19 (1) (g) of the Constitution of India. There’s more to it. As per the law of the land, such activities cannot be regulated by states selectively under Entry 34 of List II of Schedule VII as that only applies to betting and gambling.  

The Chandru Committee report, however, selectively looks at the judgement. 

For the records, the Karnataka High Court in its judgement dated February 14th, 2022 explicitly mentioned that “games of skill do not metamorphosize into games of chance simply because they are played online”. And then, on September 27, 2022, the Kerala High Court noted “online rummy is no different from physical form of rummy”. The court also held that the Supreme Court’s judgement which held Rummy to be a game of Skill ( K Satyanarayana judgement, 1968, Supreme Court) will also be applicable to online version and therefore online rummy, whether played for stakes or without it, will also be a game of skill.

And then, the Madras High Court judgement on August 3, 2021, had stated that there is “no distinction in physical and virtual form of card and board games”. The court said when it comes to card games such as rummy and poker, or board games such as chess or scrabble, there is no distinction between skill involved in physical form or in virtual/online form. The court, reaffirming the preponderance test for distinguishing between games of skill and games of chance – especially in the context of rummy – said wherever the better skilled would prevail more than not, is a game of skill. So, in short, the court reinforced the fact that both rummy and poker are games of skill.

But then, the judgements have had no impact on the five member Chandru Committee. The report, and hence the ordinance, simply ignored the above jurisprudence and current law, which specifically grants constitutional protection to online rummy and poker, and labels them as games of chance and places them within the ambit of betting and gambling.

Unfortunately, instead of recommending ways of weeding out nefarious platforms through prudent policymaking, it suggests the approach of banning all online rummy and poker platforms, thereby clearing the turf for black-market operators to occupy the vacuum left behind by legitimate online skill gaming operators.

Many claim that the report has been largely influenced by suicidal deaths in South India. 

The report goes on to attribute and list details of 17 cases of death by suicide since 2020 that the committee has attributed to online games (rummy). Death by suicide is a very serious and complex matter, and it is unfair to arrive at a causative conclusion without thorough investigation of all parameters. 

Consider this one. Regional news outlets have published over 20 reports of deaths by suicide that they have attributed to online games over the period when online gaming was banned in the state. Isn’t that shocking. India is already reeling under the impact of fake news, many are being probed for posting incorrect content. 

In this particular case, credible agencies that work on-ground with loved ones of victims of deaths by suicide, such as a Chennai-based non-profit organization called the Rotary Club of Chennai Info city, said families of two victims revealed debt accumulation due to other reasons was to blame and not addiction to the game itself. 

Of course when games are played for real cash, public health is a concern, but clearly the government has neither seriously investigated the suicide reports nor given any serious thought to public health issue. 

Like no job is permanent, banning legitimate games of skill does not protect public health. A thorough investigation is required to ascertain the actual cause of these tragedies instead of  finding a convenient scapegoat in online gaming (in this case the game of Rummy). 

There is more to the case. A report by an Indian psychiatrist, Dr. Sandip H. Shah,  which was also peer reviewed, advised the Tamil Nadu government against harsh legislation based on misinformation. The report stated that there is no direct relation between suicide and online gaming. 

So, the Chandru Committee report is genuinely not a good move, it is like throwing the gaming companies to the wolves. Will it stand the test in the courts? Legal experts are unanimous, it will not.

Let me explain why. There are instances of erroneous interpretation of facts in the report, I wish to highlight some of these. 

The 276th Law Commission Report on Legal Framework: Gambling and Sports Betting including in Cricket in India cited within the section regarding statutory history on gaming and betting (2.12) was specifically on the matter of ‘gambling and sports betting’, activities which are entirely distinct from online games of skill. But the two have been incorrectly equated. 

Section 2.14 lauds the Ministry of Information and Broadcasting’s step in expressing intent to bring guidelines to regulate advertising by online gaming companies on mainstream TV channels. The Ministry has since issued advisories on June 13, 2022, and then on October 03, 2022 to private television channels, digital news publishers, and OTT platforms, asking them not to broadcast or show online betting advertisements in any form where the exhibit in the document highlighted the various betting and gambling operators. 

So, what happens in reality? The report confuses online skill games with gambling and betting.

Section 3.18 of the report asserts that when a person plays online rummy for stakes, two events happen, i.e. Playing + betting. This is contrary to settled jurisprudence which provides that playing online games of skill cannot be construed as ‘betting and gambling’, and the act of playing a game of skill for real cash prizes does not make it ‘betting’. The court emphasises that skill in playing a game is in no manner dependent on stakes. As such playing for stakes or not can never be a criterion to find out whether a game is a game of skill.

Section 3.30: provides for the differences between online and physical games. Non-personal connect has been equated to a means of no check on addictive behaviour despite the fact that a number of legitimate online skill gaming operators are proactively running responsible game play (RPG) initiatives to dissuade players from engaging in unhealthy gaming patterns and addiction. Personalisation has been equated to a means of creating addiction by wherein the truth is that a number of legitimate online skill gaming operators are proactively running responsible gameplay (RGP) initiatives to dissuade players from engaging in unhealthy gaming patterns.

The issue of unlimited amounts of money: Wherein online RMG with its barriers such as KYC verification ensures the source of money is legitimate and the amounts spent are easily traceable. Over and above, the players are offered tools for self-exclusion and setting both financial and time limits which the operator then enforces. Here data science helps in detecting and addressing unhealthy playing patterns. 

And then, there are other issues.

Online gaming is an Rs 80 billion industry as compared to a minuscule physical betting industry as a hobby-social pastime.  The 276th Law Commission Report on Legal Framework: Gambling and Sports Betting Including in Cricket in India cited by the Chandru Committee itself pegs the underground betting industry in in India at Rs 3,00,000 crores (2013), highlighting that as far back as 2015, Rs 1300 crores was being bet on a single ODI. All of these activities are being carried out offline, illegally, and will proliferate further in case legitimate skill gaming businesses are prohibited from operations. But the Indian government has not reacted for reasons known best to them.

There is an impression in the corridors of power in the Indian Capital that most of the cash goes to the gaming companies. Now this is far from the truth, like labelling everything not holy under the draconian Sin Tax. So what is the reality? Rummy and poker companies charge a platform fee in the range of 5 percent to 20 percent of the total amount as platform fee, depending on the nature and scale of the game. This platform fee is termed as Gross Gaming Revenue (GGR), and is inclusive of payable GST, and helps the platforms pay for their operational costs. Majority of the money, 80 percent to 95 percent, is shared by the skilled winners as prizes. Also, the gaming companies do not indulge in gameplay on its own (through BOTS) 

Section 3.31 mentions that online platforms have ‘Pseudo random generators’ alleging that the outcome is known to the developer. Section 4.9 raises the concern of potential BOTS pretending to be players in online games.

While these are legitimate concerns, the right response would be to pass regulations that require operators to follow high standards when it comes to these issues.

When it comes to Random Number Generator, reputed and responsible online skill gaming operators seek certification on their RNG from reputed and credible international firms such as iTech Labs, the leading RNG testing company in the world. They certify that the software of these companies complies with relevant global standards and have passed various tests of statistical randomness and tests that ensure that the RNG is not prone to any changes or adjustments by anyone. This ensures and reinforces that the platform has no motive to influence the deal or outcome in any manner. 

So why doesn’t the government react?

Responsible online skill gaming platforms don’t merely understand that risk but actively work to prevent such instances through multiple checks.

These initiatives uphold the sanctity of games of skill and prevent all attempts at manipulation or gaming of the system through use of bots. The above-mentioned measures ensure that all games offered for real money on these platforms are entirely skill-based, and enjoyed by actual players competing against each other.

The Chandru Committee should have seriously looked into it.

The bottom-line: The report neither provides the industry’s stand point on the matter nor does it do a thorough analysis of the methodology of working of the OSG sector. 

A ban only impacts those that operate legitimately and only shifts the demand patterns to the underground market who continue to operate without fear.

Is the Indian government listening?

(Shantanu Guha Ray is a Wharton-trained journalist and award-winning author. He lives in Delhi with his wife and two pets.  He won the 2018 Crossword award for his book, Target, which probed the NSEL payment crisis.)

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