Centre must regulate skill games to enhance FDI, protect players

Games of skill hold massive potential for the Indian economy, and regulatory clarity from the central government will boost taxes, enhance foreign direct investments, and protect vulnerable players, said a panel represented by members of the government and technology industry. 

"Indian courts have held that conducting games of skill as a commercial activity does not amount to gambling and therefore entitled to constitutional protection and online games of skill hold a vast potential for the Indian economy and regulatory clarity will be key to attract foreign investment into the digital economy," said Yaduvendra Mathur, Ex-Special Secretary, Niti Aayog.

Mathur was speaking at a webinar organized by the Bombay Stock Exchange (BSE) in partnership with law firm Ark Legal to discuss the need to regulate games of skill to drive economic growth in India. 

Brijesh Singh, Inspector General of Police at Government of Maharashtra, Neeraj Roy, Founder & CEO of Hungama Digital Media, and Bhavin Pandya, Co-founder and CEO of Games24x7 were also a part of the panel moderated by Khushbu Jain, Advocate, Supreme Court of India, and founding partner ARK Legal.

The Supreme Court has consistently held that skill games are legitimate and constitutionally protected commercial activities that can be played or organized for gain and profit. In 1957, the Supreme court held that "competitions which involve substantial skill" are protected under the fundamental right to do business and profession, which is guaranteed under Article 19 (1)(g) of the Constitution of India. In 1996, the Supreme court held that 'gaming' includes only 'games of chance' and not games of skill. It said, "A game of skill, on the other hand - although the element of chance necessarily cannot be entirely eliminated - is one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player. Golf, chess and even Rummy are considered to be games of skill."

The courts have already adopted the dominant factor test or the pre-dominance tests to determine whether chance or skill is the dominating factor in determining the result of the game, the panelists agreed, adding that the government needs to understand that this is a dynamic area and a complex regulatory regime will only increase compliance burden. 

"State governments should be advised to use their laws to stop gambling, which are online games of chance and not enter into the area of the online games of skill. Such regulatory clarity will allow the industry to grow," Mathur added.

The size of India's overall online skill gaming industry is estimated to be around INR 5,250 crores, according to KPMG. A state-level ban on game of skill forces the legal operators out of the market, thereby exposing players to illegitimate operators that continue to operate in these states even after the ban.

Emphasizing that several countries worldwide regulate real money games, Singh said, "People in India are already playing these games and regulation of the sector will help the government use this money for the public good. Once regulated, you will also be able to accord protection to players. A business has to innovate, the business has to attract money, and if you want to derive taxes out of that and prevent vulnerable sections, there have to be regulations."