Recently, a district court in Delhi ruled that playing online games, including games of skill such as chess, billiard, rummy, for a monetary stake amounts to gambling and is illegal in India. This is in contrast to a landmark judgment of the Supreme Court where the Supreme Court held that playing games of skill, such as chess, rummy and bridge, with monetary stakes is not illegal.
The district court has pronounced the judgment in a matter filed before the court by a start-up company (“Company“) proposing to launch a website for providing a platform for playing games of skill. The Company was seeking to venture into a business model where the participants would be able to have a monetary stake in the games being played by them (“Online Gaming Business“). The Company itself would not have stakes on the games being played, but would charge a commission of 5% on the winning hand. The case was filed by the Company for seeking an opinion from the court on several issues, including whether the Online Gaming Business amounts to gambling.
The additional district judge, after analysing several aspects of games of skill, came to the conclusion that “all these games, even those involving a high degree of skill, conducted by gaming sites offering prize money and partaking a slice of the winning hand are illegal in states prohibiting gambling“. The court observed that while the Supreme Court in the case of Dr. K.R Lakshmanan v. State of Tamil Nadu (1996) has held that playing games of skill for a stake does not amount to gambling, the judgement of the Supreme Court is confined to these games being played in person and not over the internet. Consequently, the district court has drawn a distinction between games of skill being played “in person” and “over the internet” and opined that games of skill being played over the internet will not be protected by the law laid down by the Supreme Court in the case of Dr. K.R. Lakshmanan.
Analysis of the judgment
The district court has arrived at the conclusion that games of skill being played online for a monetary stake are illegal, even though the same games being played in person by players are legal and permitted. While the court, at first, sought to draw a distinction between online gaming and physical gaming on the basis of the degree of skill involved, it later concluded that the real distinction is due to the involvement of a service providing website. The court opined that the crucial distinction between games being played in person and those being played over the internet is that the latter involves a service provider taking a slice of the winning component. Therefore, it appears from the judgment that the profit motive of the service provider alone renders online gaming as illegal.
The distinction drawn by the court seems artificial. The court has failed to appreciate that the commission proposed to be taken by the Company is nothing more than a service fee. The Company specifically clarified that it will not by itself bet on any of the games being played. Only participants playing the games themselves will be permitted to have a stake in the game. Therefore, the analogy drawn by the court between Online Gaming Business and earnings made by bookies is clearly misplaced.
It is unclear from the judgment whether Online Gaming Business will be illegal even in cases where the fee being charged by the entity hosting the gaming website is a fixed fee and not a component of the winning hand.
Impact of the judgment
The judgment has been passed as a decree of the court on the facts placed before it by the parties. As such, this judgment is only binding on the parties involved in the matter. Further, a review has been filed against the judgment before the High Court. Accordingly, the judgment of the district court by itself does not reflect a settled position of law on the point of online gaming. However, it does indicate the apprehension of lower courts in India in dealing with nuances of technical field such as e-commerce.
Pertinently, in May this year the Supreme Court has stayed an order of the Madras High Court prohibiting a company from making profit from the game of rummy. In this matter, the Supreme Court is likely to conclusively determine whether playing games of skill over the internet for stakes is legal or not. However, until the Supreme Court gives its verdict in the matter, the legality of online skill based gaming will remain a grey area.