INTRODUCTION

The online gaming industry has boomed during the Covid-19 pandemic-induced lockdown. A number of big entities hold online fantasy sports and rummy, which as per them are games that require skills and there are many large businesses that may have associated with or may have invested in some of the other big or small gaming platforms or such start-ups and in today’s era, such gaming platforms form a small but substantial part of the economy.

MATTER

On or around 5th October 2021 the ban on online gaming came into effect in Karnataka with the State Government notifying the Karnataka Police (Amendment) Act, 2021, banning all formats of online games involving wagering, betting and gambling of all nature and forms in the State.

Under the Karnataka Police (Amendment) Act, 2021, online gaming became a non-bailable offence with fines up to Rs 1 lakh and imprisonment of up to 3 years. Apart from banning games of skill, online games that use “electronic means and virtual currency, electronic transfer of funds in connection with any game of chance were also banned. Banning online games was a massive blow to the fastest growing sector in Indian entertainment also affecting investments, jobs, revenues and consequently taxes.

The amendments were challenged by the All India Gaming Federation, Federation of Indian Fantasy Sports, Mobile Premier League, Games24x7, A23, Junglee Games, Gameskraft and Pacific Games. The petitioners before the Karnataka High Court focused on the fact that banning online skill-based games violates the companies’ fundamental rights and law to curtail any harm must be proportionate and a complete ban should be only used as a last resort if other less intrusive options are not viable.

The Karnataka High Courton or around 13^th February 2022 struck down the amendments to the Karnataka Police Act, 1963 which banned online games including online rummy and online poker with stakes and prohibited and criminalised any kind of online gambling and betting.

The Karnataka High Court struck down certain provisions of the amendment on the following grounds:

1. There is a difference between games of skill and chance.
2. No research work done to understand the ill-effects of online gaming before enacting the amendment.
3. Online games don’t fall under the ambit of gambling merely because they are played on the internet.

OTHER ASPECTS OF THE CASE:

There may be many gaming companies registered in the Information Technology capital city of Bengaluru, Karnataka which employ thousands of people and may have, in the last few years attracted investments worth crores of rupees. The ban of online games that happened in October 2021 did come at a time when the Indian Premier League (IPL) was in progress. A number of online gaming companies are dependent on the IPL as it brings a substantial amount of revenue to the gaming industry. The gaming industry subsequent to the ban of online games in October 2021 was seeking clarity on several aspects pertaining to online games and precedents which establish the legitimacy of “games of skills”. Thus, the decision of banning any kind of online games was a big blow to the budding gaming industry.

The Judgment that was passed around 13^th February 2022 by the Karnataka High Court which struck down the necessary part of the notification dated 5^th October 2021 comes in at a time as the Supreme Court is scheduled to hear an appeal by the Tamil Nadu government challenging a similar decision passed by the Madras High Court. The Madras High Court had struck down the suspension order in August 2021 in the State of Tamil Nadu while the Kerala High Court recently overturned a similar order by the State Government of Kerela. The State of Tamil Nadu has recently approached the Supreme Court to restore the ban. The Supreme Court of India had upheld fantasy sports as a game of skill in July 2021. States like Andhra Pradesh, Telangana, Tamil Nadu and Kerala have banned or tried to ban real-money based online games over the past year or two. However, the Judgement by the Karnataka High Court will likely pave the way for fantasy sports and gaming platforms such as Dream11, Mobile Premier League, Games24x7 (RummyCircle, My11Circle), and many more that were suspended from the State as a result of the notification passed on or around 5^th October 2021.

The Court further clarified that “nothing in this judgment shall be construed to prevent an appropriate legislation from being brought about, concerning the subject of ‘Betting and Gambling in accordance with the provisions of the Constitution.” In light of this, it’ll be interesting to see if the Karnataka Government brings about specific legislation for regulating the online gaming industry.

WHY WERE THE STATES PREVIOUSLY TRYING TO BAN ONLINE GAMING?

1. Many social activists, government officials and those in law enforcement believed that online games like rummy and poker are addictive in nature, and when played with monetary stakes leads to depression, mounting debts and suicides.

1. `Reportedly, there have been a few instances where youngsters, faced with mounting debts due to losses in online games have committed other crimes like theft and murder.
2. Earlier, the World Health Organisation (WHO) had announced a plan to include “gaming disorder” as a mental health condition.
3. Online games are susceptible to manipulation by the websites operating such games and that there is a possibility that users are not playing such games against other players, but against automatic machines or ‘bots’, wherein there is no fair opportunity for an ordinary user to win the game.

What are the Negative Consequences of Banning Online Gaming?

1. An outright ban may not entirely curtail the playing of such online games, with or without stakes.

1. Telangana, which was the first State to ban online games for stakes in 2017 has seen a spurt of illegal or underground online gambling apps, most of which originate from China or other foreign countries, and accept payments from players through dummy companies or hawala channels.
2. Both the Enforcement Directorate (ED) and local cyber crime authorities have tried to crack down on such apps but with limited success.
3. Shifting of users to grey or illegal offshore online gaming apps not only results in loss of tax revenue for the State and job opportunities for locals, but results in users being unable to avail remedies for any unfair behaviour or refusal to pay out winnings.

WAY FORWARD

1. Instead of a complete ban, one could look at licensing and regulating the industry with various checks and balances such as:

1. Diligent KYC and anti-money laundering processes.
2. Barring minors from accessing real money games.
3. Placing weekly or monthly limits on the money that can be staked or time that can be spent.
4. Counselling for addictive players and allowing self-exclusion of such players etc.

2. A Gaming Authority at the central level should be created. It could be made responsible for the online gaming industry, monitoring its operations, preventing societal issues, suitably classifying games of skill or chance, overseeing consumer protection, and combatting illegality and crime.
3. More and more youngsters are getting hooked to online games. In light of this, the Online gaming industry needs to be regulated in India. Moreover, regulation of online gaming will not only open up economic opportunities but also address its social costs.