Tamil Nadu Governor RN Ravi on October 1 promulgated an ordinance banning online gambling and regulating online gaming in the state. This is the second law regulating this industry passed by Tamil Nadu, after the first one, which was passed in 2020, was struck down by the Madras High Court in August 2021. Like the earlier law, this new one also bans poker and rummy, which could result in another legal battle because the 2020 law was deemed unconstitutional for covering these “games of skill.”
The new law, called the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Ordinance, 2022, has been framed based on the recommendations made by a committee led by a former judge of the Madras High Court K. Chandru. The date the law will go into effect is yet to be notified.
Why does this matter? The Tamil Nadu government has been trying to regulate this industry because of the multiple suicides linked to online gambling in recent months and the public outcry resulting from these incidents. But since the industry lives in a legal grey zone due to the lack of uniform and central regulation, the piecemeal approach taken by various states, including Tamil Nadu, has faced legal challenges from gaming companies. It’s very likely that this new law will also face similar challenges and the outcome of the same will indicate what states can and cannot do when regulating online gaming and gambling.
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Key features of the new law
Prohibition of online gambling and of online games of chance: The law prohibits online gambling and online games of chance that are specified in the Schedule. Currently, the Schedule specifies rummy and poker, but the government has the power to include more games in the future.
- Online gambling is defined as “online wagering or betting and includes playing of any online game of chance for money or other stakes, in any manner.”
- Online games of chance include any online game that:
- involves both an element of chance and an element of skill and the element of chance dominates over the element of skill
- involves an element of chance that can be eliminated only by superlative skill
- is a game that is presented as involving an element of chance
- involves cards, dice, wheel or such other device, which works on random or event generator
Any person who is in contravention of this prohibition can be punished with imprisonment for a term which may extend to three months or with a fine which may extend to five thousand rupees or both.
Tamil Nadu Online Gaming Authority: The ordinance allows the government to establish a Tamil Nadu Online Gaming Authority, that consists of:
- An officer, who has retired from a post not below the rank of Chief Secretary to the Government (Chairperson)
- An officer, who has retired from a post not below the rank of Inspector General of Police (Member)
- An expert in the field of information technology (Member)
- An eminent psychologist (Member)
- An expert in the field of online gaming (Member)
The Authority will be tasked with performing the following functions:
- regulate online games (time limit, monetary limit, age restriction or such other restrictions)
- issue certificate of registration to local online games providers
- identify online games of chance
- oversee the functioning of the online games providers in the State
- collect and maintain information and data with regard to the activities of the online games providers
- request the Government to take appropriate action as per the Information Technology Act, 2000, whenever deemed necessary, for the purposes of this Ordinance
- resolve grievances or complaints received against any online games provider;
- send periodical reports to the Government in such manner as may be prescribed
- advise the Government on any matter regarding online gaming
Prohibition of advertisement: “No person shall make or cause to make any advertisement in any media including electronic means of communication, in this State, which directly or indirectly promotes or induces any person to indulge in online gambling or play any online game of chance specified in the Schedule, with money or other stakes,” the ordinance reads. Violation of this prohibition can lead to imprisonment for a term which may extend to one year or with a fine which may extend to five lakh rupees or both.
Prohibition of transfer of funds: “No bank, financial institution or payment gateway provider shall engage in any transaction or authorization of funds towards payment for any online gambling or any online game of chance specified in the Schedule.”
Registration of local online game providers: The law requires local online game providers to obtain a certificate of registration from the Tamil Nadu Online Gaming Authority. Local online games provider refers to an online games provider:
- whose central management and control of the service is in this State; or
- whose service that is available for access by the customers, is hosted in this State
Violation of this requirement can result in imprisonment for a term which may extend to three years or a fine which may extend to ten lakh rupees or both.
Due diligence for non-local online game providers: All game providers that do not fall under the definition of local game providers are required to ensure that gambling and games of chance are not available to users in Tamil Nadu. To ensure this geo-blocking, non-local online games provider should exercise due diligence by:
- informing prospective customers that the State prohibits online gambling and playing certain online games
- requiring the customers to enter into contracts with an express condition that the customers shall not use the service if they are physically present in this State
- requiring the customers to provide personal details sufficient to establish that they are not physically present in this State
- obtaining data that indicated that the customers were not physically present in this State
- taken all other reasonably practicable measures to ensure that no person physically present in this State could have access to online gambling services or to online games of chance that are prohibited
If a non-local games provider fails to comply with any of the restrictions specified in this law, the Tamil Nadu government may make a recommendation to the Central Government to exercise its power under section 69-A of the Information Technology Act, 2000 to block access to the concerned platform.
Liability for officers of companies: If an offence in contravention of this law is committed by a company, “every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly” unless the person liable proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of the offence.
Why does the Tamil Nadu government consider rummy and poker games of chance?
Despite multiple High Court and Supreme Court rulings classifying rummy and poker as games of skills that cannot be banned by states, the Tamil Nadu government has classified these two games as games of chance and has banned them arguing that online versions of rummy and poker involve a high degree of randomness.
“The Tamil Nadu government has passed an ordinance that will result in banning of most online games of skill including rummy and poker. What this ordinance in effect does is treat and conflicts games of skill as gambling and games of chance. This is disappointing as it disregards the 6 decades of established legal jurisprudence and also the recent judgment of the Madras HC which struck down a similar law,” Roland Landers, CEO of All India Gaming Federation, said in response to the ordinance.
The Tamil Nadu government, however, makes the argument that rummy and poker in the offline world may be games of skills but that does not necessarily apply to online versions of these games, for the following reasons:
- Online and offline versions of the same game cannot be compared with each other: The TN government explained that report submitted by the Chandru Committee took “into account the parameters of physical space of operation, time of playing, players’ relationship with other players, addiction level, amount of money involved, level of economic activity, scale of organisers’ profit and role of credit” to conclude “that online version of any game cannot be compared with the offline version of the game, except in cases of word games or board games not involving any random outcome generator.”
- Random generators used in these games are not really random: The report further states that “in the case of the online version of games including online rummy, the algorithm for the random generators are known to the developers and hence are pseudo-random generators; such games can be played with bots (an autonomous program or character designed to interact with systems or users); no mechanism is available for auditing the centralised server architecture of the gaming systems; and artificial intelligence can be used to manipulate the games and lure the players into continued indulgence.”
- No way to audit algorithms: “It is an established scientific fact that true random outcome is not feasible in a software and any randomness will depend upon the specific algorithm written by the developer and that audit of the algorithm makes it difficult to detect any hidden algorithm designed to favour the game provider and that overlay of artificial intelligence in the online gaming can make the gaming scenario completely unfair to the game player/customer, with the game service provider/ facilitator literally being able to hold all the cards; and that no scientifically validated algorithm for testing of even pseudo-randomness is available at present,” the Tamil Nadu government explained.
- Cannot use old binaries of thinking: “It is considered that the issues of online gaming and gambling cannot be dealt with by the old binary of game of chance versus game of skill and a new conceptual framework is needed which incorporates an understanding of how information technology operates at the basic level, the critical difference between physical and online in general and also between physical and online versions of games,” the TN government remarked.
- Addictive design: The government pointed out that due to the “inherent addictiveness by design of the online games and the money being put in by the game players, the complete gaming scenario amounts to an exploitative, addictive service, causing not only health hazards but also social and economic harm of epidemic proportions.” Additionally, “gambling by means of electronic communication is available at all hours, from any place, and to any person who is able to access a device capable of remote communication.”
Other observations made by the Tamil Nadu government
- Ill-effects on students: “In a recent survey conducted by the Government among more than two lakh teachers of the School Education department to study the effects of online games on school students, more than seventy-four per cent of the teachers responded that concentration of students is impacted, sixty-seven per cent of the respondents said that they noticed eye defects, more than seventy-four per cent of them said they noticed a decrease in the intelligent quotient, writing skills and creativity of students, more than seventy-six per cent said they have noticed a significant decrease in the self-esteem of students, more than seventy-seven per cent said they have noticed an increase of anger in students, and more than seventy-two per cent said they have noticed indiscipline among students.”
- Response from the general public: “On seeking the view of the general public on the proposed legislation, more than ninety-nine per cent, that is, 10,708 out of the total 10,735 mails received, have requested for imposing a total ban on online games.”
- Response from relevant stakeholders: “Seventeen stakeholders comprising of representatives from the online gaming industry, think tanks, political parties, players association and social activists, who were provided with an opportunity to express their views in person, have put forth various suggestions and requests to the Government, such as, to allow self-regulation by the industry themselves, regulation by the Government, to differentiate real money games and other forms of games, to provide age and money restrictions, to ban advertisements, to prevent money laundering, to provide grievance redressal mechanism and to provide a total ban on online games.”
- Research pointing towards adverse effects: “Many research studies on the effects of online gambling and online gaming addiction on youth, have highlighted negative effects such as the development of aggressive behaviour, poor eyesight, reduced concentration, diminished analytical thinking, decreased productivity and hence should be viewed as a potent vice that would affect the long term prospects of the State and its population.”
- Public health and order: “The ruining of families and suicide deaths due to online gaming addiction affects public health, disturbs social order and prejudices the maintenance of public order.”
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