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Delhi Court: Online Games Involving Real Money Are Illegal; Online vs Physical Gaming

A Delhi court has ruled that online games that involve physical money are illegal and websites hosting these games cannot be offered protection under the constitution, reports PTI (via Asian Age). In addition, the court also added that banks have the option to deny normal services to such websites, and payment gateways for gambling are blocked by RBI as per IT (Information Technology) Rules of 2011.

This judgement was announced following a petition filed by Anuj Gupta, Director of Gaussian Network, a Delhi-based Internet startup company, on Feb 17, 2012. According to the petition filing, Gaussian Network was planning to launch a social gaming website which includes betting or gambling and had inked an agreement with Monica Lakhanpal, who had agreed to invest Rs 5 lakhs into the company. However, before launching the website, the company wanted to make sure that it was not violating any law and had therefore sought the Court’s opinion.

Betting on Skill-based games Illegal? What’s worth noting though is that the website was planning to offer betting on skill based games like Chess, Billiards, Bridge and Snooker besides the traditional gambling games like Rummy and Texas Holdem Poker. The company noted that it was planning to charge a commission of under 5% on the winning hand but it didn’t plan to bet on any of the players. It also claimed to have developed a completely transparent user friendly website after conducting a thorough due diligence of various financial, IT (Information Technology) and legal issues.

Online Games v/s Real Games: Citing previous judgements, the company’s counsel pointed out that skill based games, when played for stakes, are termed as business activities and do not amount to gambling. Hence, he noted that the website is protected under the Article 19(1)(g) of the Constitution of India.

The court however dismissed this argument stating that online games cannot be compared to physical games, since the skill needed for both these games are not equal and only physical skill based games are legal when played for stakes. The court stated that such online gaming portals are essentially a substitute for traditional casinos, since websites operate a common gaming room where members interact and place bets. It also noted that the degree of chance increases in case of online games and the degree of skill used in these games is questionable.

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Further, the court also noted that there are several service providers who are offering such online skill-based games for free, but when service providers take commission on the prize winnings, it becomes similar to virtual casinos or game houses which are illegal in the states where gambling is prohibited. Therefore, the court ruled that such online business activities would not be protected under Article 19(1)(g) of the Constitution of India.

Advertising: The court also ruled that the advertisements and promotion of such websites should be restricted and advertisers who are advertising or promoting their own product on such sites can possibly attract criminal consequences.

No Regulations On Online Gaming: The court also observed that there were no regulations in place for online gaming, despite it being a multi ­billion dollar industry and is growing at an exponential pace in the country, thereby paving the way for several companies to offer such business without any punishment. It noted that gambling acts have not been amended by various states to include online games, and there is currently no specific law which bans betting activities on online skill games.

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