Regulating Online Gaming

Humans by nature are competitive beings. But they also tend to be greedy, often giving in to the lure of making a quick buck without any mental or physical efforts.

Since ancient times, the culture of gaming has evolved, channelizing the above two human traits. A lot of games are played across the globe. These different games can be classified into two categories – games of skill or games of chance.

A game of skill is one where success primarily relies on the player’s expertise, knowledge, and strategic decisions. Our popular physical sports such as cricket, volleyball and mental sports such as chess would be good examples of games of skill. One can argue these games provide Intellectual stimulation, challenge, and opportunity for self-improvement.

A game of chance, on the other hand, relies on luck and randomness to determine the outcome. Popular examples include roulette, slot machines, lottery, and bingo. It can be said that these games tend to foster an element of escapism and allure of instant fortune.

But, often the classification of games, as skill-based or chance-based, becomes contested. The classic example is Poker, which is viewed alternately across various jurisdictions. This has major regulatory implications as often games of chance (which include betting or gambling) are strictly regulated with winnings taxed at much higher rates than those applied to the game of skills.

The key question to ascertain a game’s classification is whether skill dominates chance in it? The differentiating factor for a game of skills is that performance is predictable. In a game of chance there would be no correlation in the winnings of players across successive periods, whereas there would be in a game of skill. More skilled players are more likely to win and a less-skilled player, through practice and patience, can better his chances of winning with time.

The problem of classification is compounded when the online variants or spin-offs of popular offline games emerge. There has been a proliferation of many illegal betting/gambling apps/websites with questionable sources of funding or country of origin, which aim to lure users.

In India, betting and gambling is a state subject, with states legislating their specific laws, modeled on the old public gambling act 1867, prohibiting all forms of gambling and betting in their respective states. Only Goa, Sikkim and Meghalaya permit it under specific regulations. Since most of the gambling legislations which have been enacted were done prior to the advent of online or virtual gambling or betting, thus, the gambling legislations primarily refer to gambling activities in physical form.

This regulatory ambiguity often leads to penalizing legitimate online gaming businesses as argued by Mr. Gullapalli (CEO, Head Digital Works, which operates popular gaming apps such as rummy, carrom and pool) here.

As the gaming sector continues to see rapid growth, one can hope that the government would focus on promoting legitimate gaming firms and advocate for increased compliance measures, including the establishment of self-regulatory bodies, will create opportunities and avenues for more online businesses in gaming to flourish.

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