A Game of Skill or Chance? Navigating the Indian Online Gaming Landscape

The ancient Indian epic, the Mahabharata, tells the story of a great war between two factions of a royal family; a war that started with a game of dice, and which ultimately has devastating consequences. In the Mahabharata, the game of dice is a metaphor for the allure and dangers of gambling. It serves as a cautionary tale, highlighting the negative consequences of addiction to games of chance while also imparting profound philosophical teachings regarding duty and righteousness, and the importance of self-control, ethical conduct and fair play.

Drawing on the philosophical teachings of the Mahabharata, the Indian legal system adopts a role as the steward of the people, ensuring fair play and structure in an otherwise unregulated sector. The focus of this article is on the nuances of the Indian legal landscape and specifically on how games of skill differ from games of chance.

The online gaming industry in India has witnessed an unprecedented rise, attracting huge capital investments from both domestic and international investors. The widespread availability of smartphones and advances in technology have fuelled this boom, leading to an influx of industry players, especially those involved in real-money gaming including online poker and online rummy, where the stakes and financial risks are very real.

Despite the fact that the majority of games, such as poker and rummy, are globally recognised as games of skill, the Indian online gaming sector is ensnared in a complex web of regulations. Multiple state acts and regulations have been enacted to prohibit or regulate betting and gambling, while generally exemptions exist for games of skill.

In the Indian legal framework, a game is classified as a game of skill if it is predominantly determined by skill, whereas a game reliant largely on luck is considered a game of chance.

The Supreme Court of India (SC) has clarified the term “mere skill”, specifying that games in which success relies more on skill than on chance will not be classified as gambling, but will be recognised as games of skill.

In the case of State of Andhra Pradesh v K. Satyanarayana & Ors. and State of Bombay v R.M.D. Chamarbaugwala, the SC specifically tested the game of rummy based on the principle of skill versus chance and held that rummy is a game of skill, unlike three-card games such as “Teen Patti Flush”, which is a game of chance. While the SC has stated that any game involving the shuffling and dealing of cards contains an inherent element of chance due to the unpredictable distribution of the cards in the shuffled deck, it ruled that rummy is a game of skill as it requires a certain amount of skill particularly in memorising the sequence of falling cards and strategically holding or discarding cards to build a strong hand. Such competitions are akin to business activities, protected by Article 19(1)(g) of the Constitution of India, 1950 (the “Constitution”) pertaining to the right to practice any profession or carry out any occupation.

In 2005, the Madras High Court, in the case of Manakadu Elainger Nala Sports, Narpani Mandram v State of Tamil Nadu, ruled that games such as chess and carom, even when involving payment of club fees, ie, payment of consideration, did not amount to gambling as the games were predominantly games of skill rather than chance. As such, they were classified as games of skill and exempted under the Public Gambling Act, 1867.

In India, the States have the exclusive power to regulate betting and gambling, under Entry 34, List II of the Constitution. As such, there is no set or fixed law regulating the gaming sector, and this applies to online gaming too. However, recently the central government has also imposed certain responsibilities on gaming entities via amendments to the Information Technology Act, 2000 and the Information Technology (Guidelines for Intermediaries and Digital Media Ethics Code) Rules, 2021.

Due to the varying legal positions adopted by different states, largely influenced by political considerations, the legal landscape for gaming in India is constantly evolving. Some states have gone as far as to classify certain online gaming platforms as “common gambling houses”, even if they are providing games of skills, an interpretation at odds with the position taken by other states. As a result, the distinction between games of skill and games of chance is usually assessed on a case-by-case basis by the respective state.

The Assam Game and Betting Act, 1970 (“Assam Act”) prohibits “bets” or “invitations to bet” in the state. As such, any game or sport (irrespective of its reliance on skill or chance, since no differentiation is made) that involves playing for money or any form of valuable security is prohibited under the Assam Act.

Similarly, the Orissa Prevention of Gambling Act, 1955 (“Orissa Act”) prohibits the playing of a game for money or other stakes, akin to the Assam Act, with the exception that the State Government has the power to exempt, by a general or special order, any social club or party playing games for bona fide recreational purposes from the restrictions imposed by the Orissa Act.

In contrast, the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016 (“Nagaland Act”), explicitly recognises poker and rummy as games of skill, along with a host of similar games, thereby exempting them from the definitions of gaming or gambling. The Nagaland Act states that once a license is obtained under the Act, making profits from a game of skill will not be construed as gambling, provided that the game is being played by players from anywhere within India where games of skill are permitted. This is believed to be the case in the majority of Indian states, except for those that have certain restrictions.

The Nagaland Act, a recent legislation and the only state act that currently provides for the extra-territorial application of its provisions, has prompted numerous companies to secure licenses under it.

In view of the above-mentioned decisions of the SC and various high courts of India, ruling that games involving substantial skill are not considered gambling activities and that such games are in fact business activities, along with the specific exclusion of games of skill from the scope of gambling in almost all state acts relating to gambling (with the exception of states like Assam, Telangana and Orissa, etc), it can reasonably be inferred that all games where skill outweighs chance can be classified as games of skill. As a result, they fall under the exception of Section 12 of the Public Gambling Act  and similar state acts, making it permissible and legal for clubs, institutes and even websites to offer games of skill for money (cash games) like rummy , poker or any other game which are either judicially (by courts) or legislatively (by an enactment) declared to be “legal/games of skill/non-gambling activities”.

Unless a specific prohibition exists in any state against betting even on games of skill on the internet or specifically barring games of skill, there should be no legal basis to prohibit online betting or wagering in India on games like rummy and poker, which are classified as games of skill.