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Separating the wheat from the chaff in India’s real-money gaming sector

Online Gambling Poker Rummy Playing Cards

By Sarthak Doshi, Kruthi Venkatesh, and Nehaa Chaudhari

In a recent article on MediaNama, Mr. Vishal Gondal opined that real-money games (RMGs) in India are warped with ethical issues. He covered all forms of RMGs: from casino and lottery to card games and fantasy sports. Mr. Gondal argued that platforms are unfair, rigged, and maximise addictive behavior to siphon money from users; celebrity endorsements are without oversight, and minors get unfettered access. He said that RMGs operate in a regulatory grey, and India needs a clearer framework to regulate gaming.

We disagree with Mr. Gondal’s portrayal of India’s RMG sector: as a single block. Gaming is a USD 1.1 billion market. It has countless game varieties and business models. Each category operates differently and is consequently governed by distinct laws. Yes, laws are ambiguous and we need a robust framework (preferably, a central law) for gaming. But the absence of such a regulatory framework doesn’t render the entire industry rogue or without oversight.

In this piece, we discuss why it is risky to characterize the gaming industry as a homogenous block, the laws and practices that make skill-gaming platforms ethical, and how India could frame clear laws for the RMG sector.

Not all real-money games are ‘gambling’

Using gaming, gambling, betting, casino, lottery interchangeably is incorrect. It confuses users, companies, regulators, and other stakeholders.

Imagine if you and your friends pool in Rs. 100 each to play cricket and decide that the winner will take it all. Or, a quiz competition where every participating team pays a fee and the first ranked team gets a cash prize. Neither of these scenarios would be considered gambling. Most RMGs follow a similar format. Not all games played with real-money are gambling, and it’s misleading to use these terms interchangeably.

‘Gambling’ is a game (played with money) where the outcome is based on chance/luck, for eg: roulette, blackjack, bingo, and teen patti. On the other hand, RMGs is a broader term. It also includes games where the outcome is based on the user’s skill: hand-eye coordination, ingenuity, pattern recognition, and logical reasoning i.e. ‘games of skill’.

Skill games and chance games are different. In the latter, you stake money on luck whereas in skill games you’re relying on your skills to win. Outcomes in a chance game are erratic, people may get addicted, and suffer financial losses. But outcomes in a skill game are linked to your skill and consistency of play. Users are rewarded for enhanced skills. People may play chance games to try their luck, whereas skill games are typically played for their competitiveness and recreation. This is why most Indian states treat skill games and chance games differently; the former are typically permitted, the latter are banned. The Supreme Court has echoed the same view in multiple judgments like K. Satyanarayana (1967) and KR Lakshmanan (1996).

Equating RMGs with gambling runs the risk of illegitimating skill games which are protected under the Indian Constitution as a fundamental right to trade and profession. To color skill games as gambling is a roadblock for new businesses who want to enter the market, users who want to enhance certain skills, and law/policy-makers who want to tap into the industry’s potential through proactive measures.

Skill games have regulatory oversight and industry-led safeguards

Most state laws are clear that they do not want to ban skill games. Yes, these laws are archaic and may not be abreast with current realities. But self regulation aims to plug gaps in the law.  Industry bodies like the All India Gaming Federation (AIGF), Federation of Indian Fantasy Sports (FIFS), and The Online Rummy Federation (TORF) (collectively “SROs”) have adopted good governance, ethical measures, and consumer centric initiatives in the skill-gaming industry. SROs also require their members to uniformly follow the law for related business activities like advertising, age-gating and platform governance.

Platforms practice fair play and are user centric

It’s a generalization to suggest that all gaming companies manipulate platforms to disadvantage users. User preferences and overall popularity are key factors that platforms consider when deciding what games to showcase. Similarly, incentive schemes (such as cashbacks, referrals and discounts) are also structured after analyzing user appeal and interests, leveraging data and algorithms – a practice quite common across social media, food delivery, and content platforms. This is a fair practice under current law if platforms take user consent through their terms of use and privacy policies to collect and use data in this way.

Skill-gaming platforms also implement additional safeguards. Games have elaborate rules and a ‘how to play’ section. Platforms also offer free versions of games so that users are familiarized before they play for money. SROs also prescribe additional safeguards for user safety, which platforms implement. For instance, the governing charter of AIGF requires members to display responsible gaming practices on their platforms. Members are also required to provide users access to a self-administered test for gaming addiction and provide information on treatment centres. Many platforms have deposit and time limits in place to track and warn users of their time and money spent. Some platforms even offer users an ‘opt-out’ from participating in RMGs and provide free professional help if needed. Health precautions during gaming are also advocated. Both AIGF and TORF require members to allow users to set daily, weekly and monthly deposit limits.

Mr. Gondal’s wide assertion that platforms use bots or random number generators is also worth a re-look. Skill-gaming companies adopt various measures to keep their platforms fair, competitive, and secure. Algorithms match equally skilled players for competition. This ensures that a first-day user is not competing with a user who has spent months on the platform. Companies are also increasingly using AI and machine learning tools to identify fraudsters and detect instances of cheating, and ensure that only genuine players participate.

Gaming advertisements are regulated

All advertisements and endorsements in India are subject to the same law. There is no unique carve out for gaming businesses. The Consumer Protection Act, 2019 penalizes false or misleading advertisements made by celebrities, placing such endorsements within the oversight of the Consumer Protection Authority. Penalties of upto Rs. 50 lakh could be imposed and the endorser may be barred from making endorsements for 3 years. The Advertising Standards Council of India (ASCI) has its own set of guidelines to catch hold off any untoward claims made by endorsers. ASCI (through its Consumer Complaints Council) regularly directs TV broadcasters to withdraw misleading and false advertisements. In January 2020, more than 100 advertisements (including gaming advertisements) were found objectionable by ASCI and were withdrawn from circulation. Additionally, an advisory from the Ministry of Information and Broadcasting (MIB) requires gaming advertisements to carry adequate disclaimers, not advertise to minors, and not pose gaming as an income opportunity. Most gaming advertisements follow this advisory today.

On top of these regulatory safeguards, SROs follow additional ethical standards. The governing charters of both FIFS and AIGF prohibit members from targeting minors, using misleading terminologies, publicising cash winnings through mass media, and advertising skill and chance games alongside each other. All member companies of the SROs are required to adhere to their respective charters, and ensure that their advertisements follow all required guidelines.

Access to minors is restricted

Skill-gaming companies follow various measures to keep minors away from RMGs. Almost all platforms mention that their services are not available to persons below 18 years. Many ask users to specifically confirm if they are above 18 years by clicking the ‘I Agree’ button. Moreover, players are required to submit a government-issued ID-card that platforms use for age verification. Several companies also publish guidance for parents and guardians, advising them on distancing their wards from RMGs. Further, withdrawal of winnings from the platform is only allowed if the user is over 18 and has a valid bank account. In addition, the industry, through the self-regulatory guidelines of AIGF and FIFS, ensures that companies do not send targeted advertisements to minors. These efforts, although not exhaustive, go a long way to keep minors away from RMGs.

Need for a central law on gaming

While SROs have undertaken various efforts towards implementing checks and balances for the skill-gaming sector, these measures, no matter how robust, are voluntary and may not be followed by the entire industry. Some skill-gaming platforms are not members of any SRO and may not follow these best practices. Companies who flout industry standards jeopardize the entire sector, which could benefit from a clear regulatory framework, applied uniformly.

In addition, courtesy the Indian Constitution, currently each state has its own law on gaming. While most states do not restrict skill games, some like Telangana, Assam, Andhra Pradesh, and Odisha prohibit all forms of RMGs — regardless of whether they are based on skill or chance — under their gambling law. This prohibition is absolute. In addition, states do not selectively debar a particular game or platform. Even in states where skill games are not restricted, there is little consensus among courts to identify and segregate skill games from chance games. Decisions are subjective and lack quantitative assessment. This creates curious situations since a game could be legal in one state and illegal in another. This further compounds the need for a consistent and predictable regulatory framework.

New businesses find it challenging to enter the market with such constantly changing and uncertain laws. It impedes innovation and compromises efficiency. India should hence depart from regulating gaming state-by-state and move to a central framework. The 276th report of the Law Commission had recommended this in 2018. And a private member’s bill floated by Member of Parliament Shashi Tharoor in 2018 proposed something on similar lines. NITI Aayog’s draft guidelines for fantasy sports, which can be considered as covering all skill games, also sees merit in having a central framework. A central law will give regulatory certainty and subject all games to a fair and uniform standard.

With a projected CAGR of 47% by 2022, the gaming industry holds a promising future. It is a sunrise sector and could contribute significantly to India’s job sector, revenue, and GDP. But like any new sector, it needs the right laws and policies to boom. A central law on gaming could be that first step to ensure that India does not lose out on the opportunities this sector presents.

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Sarthak Doshi is an associate, Kruthi Venkatesh a consultant, and Nehaa Chaudhari a partner with Ikigai Law, a technology and innovation focused law firm. The firm advises digital gaming companies and investors. The views are the authors’ own.

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