Just because a game of chance exists online, it doesn’t constitute gambling or betting, said a Bombay High Court order passed on January 18th, reported Gateway to Gaming. For that, there needs to be a promise of a monetary reward involved.
Justices Gautam S. Patel and S.G. Dige were hearing a case filed by gaming company Play Games 24×7, whose compliance obligations with the Reserve Bank of India (RBI) were pending due to its hosting of “betting and gambling” games. The Court begged to differ, noting that the online games Play Games 24×7 offered did not constitute gambling or betting.
Why it matters: There are broadly two regulatory categories of games in India—games of skill (which require some skill to be won) and games of chance (where rewards are based on luck). Games of chance—basically gambling games—are regulated by states in India, and generally outlawed. But different states define these games based on their own legislative wisdom, which means what’s legal (and illegal) changes from state to state. This ambiguity has only been complicated by online gaming—where you can play games of chance without actually winning a monetary prize. The Bombay High Court’s order sheds some light on how to view these games. Or, as Gateway to Gaming puts it, “free-to-play or freemium games of chance which do not involve staking of money or any prize would not fall within the ambit of gambling or betting”.
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About the petition: The RBI was allegedly not processing Play Games 24×7’s “compounding application” said the complaint. The reason: Play Games 24×7’s ‘procedural’ and ‘technical’ violations of the Foreign Exchange Management Act, 2000 (FEMA).
Wait, what’s a compounding application?: Way back when Play Games 24×7 issued equity shares to foreign investors from June 23rd 2006 to February 1st 2012. But, it failed to file some procedural reports within 30 days, which FEMA mandates. Play Games 24×7 then filed a “compounding application” with the RBI to “settle and compound” its legal lapses in this case.
And what did the RBI do?: It told the gaming company to check if its activities were legal—directing it to reach out to Department for Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Commerce and Industry. Play Games 24×7 allegedly didn’t receive a reply from the DPIIT despite multiple attempts to clarify its operations with them.
DPIIT wasn’t silent in court: Once the case was filed in the Bombay court, DPIIT broke its silence. Play Games 24×7’s subsidiaries host games of chance like ‘teen patti‘ and ‘Call it Right’, which fall under the gambling and betting category—a sector prohibited under FEMA. They then informed the Enforcement Directorate—India’s economic intelligence law enforcement agency—of this “FEMA violation”. Play Games 24×7 was clear that these games don’t “involve any prize that can be won by the player that has monetary or tangible value”. So, if that’s the case, can they really be called gambling games?
The Court sided with Play Games 24×7: The Court highlighted the two conditions that should be satisfied for a game to be considered a gambling game—it has to predominantly be a game of chance (where the outcome is determined by luck) and it must be played for a reword. If there’s no chance of getting a monetary benefit here, then the games do not amount to gambling. The mere existence of an online game of chance doesn’t indicate gambling unless a reward is on the cards too, said the Court.
What’s more, Play Games 24×7 wasn’t even offering the games during the period when it lapsed on its FEMA compliances, the Court added. Play Games 24×7 had offered teen patti since 2015, while the “Call it Right” games were only offered in “Western markets”.
What next?: Play Games 24×7 has to file a fresh compounding application within two weeks of the order—which the RBI should consider within four weeks.
Note: The headline was updated on January 24, 2023 at 11:27 AM for brevity
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