"E-gaming serves as a platform that facilitates electronic versions of real-world games" - Aruna Sharma, Practitioner Development Economist
The e-gaming market in India is on an impressive trajectory, poised to expand significantly from its 2023 valuation of USD 3.02 billion to a projected USD 6.26 billion by 2028. This anticipated growth translates to a robust compound annual growth rate (CAGR) of 15.68% throughout the forecast period from 2023 to 2028.
In the fiscal year 2022, the fantasy sports industry in India surged to remarkable heights, reaching a staggering valuation of more than INR 22 billion, as reported by Statista. Projections for the future are nothing short of astonishing, with expectations that this segment's market size will skyrocket to surpass the INR 50 billion mark by the fiscal year 2025.
Given these staggering numbers and the rapid growth of this industry, it becomes increasingly imperative to establish robust regulatory measures. The sheer scale of participation in fantasy sports demands a framework that ensures fair play, transparency, and responsible gambling practices.
Proper regulations can safeguard the interests of users, prevent fraudulent activities, and ensure the long-term sustainability and integrity of this burgeoning market, ultimately benefiting both participants and the industry as a whole.
In this exclusive article for Sportskeeda Business of Sports, Aruna Sharma, a Practitioner Development Economist and retired Secretary of the Government of India, discusses the need to distinguish between games of skill and games of chance in India's burgeoning e-gaming industry. She highlights the historical context of gambling regulations and recent developments, emphasizing the importance of clear criteria for classifying these games.
''India has emerged as a hotspot for e-gaming due to its thriving startup ecosystem'' - Ms Aruna Sharma
In India, the governance approach with respect to gambling considers the risks of addiction and financial strain on families. The Public Gambling Act of 1857 gives federal and state governments the authority to license gambling activities in specific areas. This control aims to balance the potential financial benefits of gambling with the need to protect citizens from addiction and monetary losses, ensuring responsible management of gambling.
However, with gaming graduating to the e-gaming platforms, it has become more challenging to regulate the same. India has emerged as a hotspot for e-gaming due to its thriving startup ecosystem. This makes it important to establish regulations for these games. These regulations will help players recognize the "games of skill." Further, the games will also contribute to the government's revenue stream.
Understanding "game of skill" and "game of chance"
It is the outcome that will be the guiding factor for separating the two. A "game of skill" is a game where the outcome is based on the knowledge and expertise of the player rather than just chance. Various court judgments have clarified this:
"(ref: Manoranjithan Manamyil Mandram v. State of Tamil Nadu (2005); the Hon’ble High Court of Karnataka, in the case of Indian Poker Association (IPA) v. State of Karnataka (2013), observed that Poker is a game of skill; Hon’ble Punjab and Haryana High Court in Varun Gumber v. Union Territory of Chandigarh (2017), has held that games such as horse, boat and foot racing, football, baseball, chess, golf are games of skill and significant judgment and not a game of chance; Bombay High Court in the case of Gurdeep Singh Sachar Vs. Union of India and Ors. (2019)10 wherein the Court observed that it was evident that the success in Dream 11 fantasy sports depends upon the user’s ability to exercise his skill based on superior knowledge, judgment and attention, the latest being that of Karnataka High Court has ruled on taxation based on classification of game of skill for High Court of Karnataka has ruled that online/electronic/digital game of rummy and other online/electronic/digital game of skills are not taxable as 'betting' and 'gambling' under the Central Goods and Services (GST) Act. )"
Need for regulations
India is rapidly becoming a significant market for e-gaming, particularly in fantasy sports. Therefore, it's crucial to establish clear criteria that differentiate between games of skill and pure games of chance based on their influencing factors. While the aforementioned legal judgments provide some clarity, there's a strong requirement for a regulatory framework that certifies games of skill involving prediction.
Currently, there's a concern because the Ministry of Electronics and Information Technology (MeitY) introduced the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023 (IT Rules 2023), which only allow games without wagering on outcomes to operate.
This contradicts court observations that permit skill-based games with monetary involvement. The design of skill-based games lacks this distinction. Establishing a clear legal boundary between games that offer rewards for predicting sports outcomes and fantasy sports is necessary based on the game's result.
Another issue is there should be no artificial distinction between online and offline games. So, were the Supreme Court to categorize rummy or horse racing under games of skill offline, the same needs to apply to their online versions. The judgment seeks to distinguish skill and chance and calls for this difference to form the basis for the jurisdiction issue of the Government at the Center with that of States.
E-gaming has been distinctly classified as "games of skill," falling within the protected scope of Article 19(1)(g) of the Indian Constitution, as they do not fall under the category of "gambling." These games, which hinge on the involvement of players' knowledge, expertise, and capabilities, are skill-based rather than games of chance.
This distinction implies that regulation should fall under the IT Act rather than the Indian Penal Code (IPC), which typically pertains to games of chance or gambling. Consequently, it becomes imperative to introduce comprehensive legislation at the central level to establish clear guidelines. Once these parameters are agreed upon, e-games failing to meet these criteria and carrying gambling elements will be subject to the provisions of the IPC.
Conclusion
The initiative of MeitY (Ministry of Electronics and Information Technology) is welcome because they have come up with rules and settled that the "game of skill" will be governed by the Center under the Information Technology Act 2000 and the "game of chance" will continue to be dealt with under the Public Gambling Act, 1857 and Indian Penal Code provisions by the state. However, there is a need for a more detailed regulatory framework that distinguishes games of skill and games of chance.
E-gaming serves as a platform that facilitates electronic versions of real-world games, as well as exclusive games designed to help players refine their knowledge and skills. The results in these games are determined by the player's acquired knowledge and abilities, making them skill-based rather than reliant on chance.
Acting as an intermediary platform, e-gaming allows users to assess, enhance, and acquire skills, knowledge, and rules through interactive experiences, providing an alternative approach to gaming.