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Centre's online games rules very clear; some states trying to distinguish online games based on chance is mistake: ASG

Amid attempts by certain industry players to masquerade wagering as a game of skills in the wake of the new rules issued under the IT Act, he said that some states are making a mistake in trying to distinguish between a game of skill and a game of chance in the context of wagering.

Centre's online games rules very clear; some states trying to distinguish online games based on chance is mistake: ASG

Tuesday April 25, 2023 , 6 min Read

Putting money on uncertain events amounts to wagering and the government's new rules bar online real money games that declare winners based on prediction of the unknown outcome, according to Additional Solicitor General N Venkataraman.

Amid attempts by certain industry players to masquerade wagering as a game of skills in the wake of the new rules issued under the Information Technology (IT) Act, the government's senior law officer said that some states are making a mistake in trying to distinguish between a game of skill and a game of chance in the context of wagering.

He also emphasised that the rules should be tested on the basis of the country's Constitution, statutory provisions and Supreme Court judgements.

"The new rules notified by the Centre is very clear. There is no ambiguity. Our courts have held that wagering is illegal, and any business predicated on wagering is res extra commercium that is a thing outside commerce. Such businesses cannot be carried on in India," Venkataraman told PTI on Tuesday.

In an interview, he pointed out that putting money on uncertain and unknown events amounts to wagering and the new rules bar online real money games that declare winners based on prediction or speculation of the unknown outcome.

The new rules mandate that all online games which involve an element of prize should be registered with Self Regulatory Organisations (SROs) that will have a mix of experts from various fields.

If any online game involves any element of wagering, then they would not be registered by the SROs and such games cannot be hosted on the internet. Any kind of advertisement relating to such online games are also prohibited under the new rules.

According to Venkataraman, states are making a mistake in trying to distinguish between a game of skill and a game of chance in the context of wagering rather than testing their rules on the basis of the Constitution, statutory provisions and various judgements of the Supreme Court.

While asserting that playing a game is different from predicting the outcome of a game, he wondered, "how do you know this ball is going to be six or four? Whether a player will be in the playing squad or not? Whether the chosen player would perform or not? How do you know you will win the game before the game is even played?".

"Stakes are today placed on these uncertainties, hoping in anxiety that the predictions turn true to reap higher rewards than the amount at stake," Venkataraman said.

The Additional Solicitor General also said the Minister of State for Electronics and IT Rajeev Chandrasekhar during various consultations has clearly explained the new rules, but some industry players have been trying to confuse and defend their games by bringing in the concept of games of skill in the context of wagering.

"Let us take the example of Teen Patti and Cricket. The former is a game of chance and the latter is a game of skill. In both kinds, the outcome of the game for the player as well the spectator, remains unknown and uncertain.

"When money is thrown on that uncertainty, it amounts to wagering. Skill or chance simply has no relevance when money is thrown on the outcome of a game," Venkataraman said.

He also quoted decisions of the Supreme Court from 1957 till 1995 which have defined wagering and held it to be illegal under the relevant state legislations, and rejected the argument that experts are capable of making prediction based on data sets.

Explaining further, Venkataraman said the Supreme Court has held horse race is a game of skill but predicting which horse will win and staking money on that uncertain outcome will only amount to betting and therefore illegal under the relevant law.

When asked about legality of matches that charge fee for the game and may give prize money in cash to the winner, he said paying fee for participating in a tournament or a match is legal but throwing money to predict who will win the game and get higher returns is barred.

About his views on the rules introduced by some states that have given exemption to a set of real money games that claim to be game of skills, Venkataraman said states have to frame laws as per the law laid down by the Supreme Court.

"They are making a mistake in trying to distinguish between a game of skill and a game of chance in the context of wagering. Such a differentiation is directly against the law of the land as pronounced by the apex court.

"When it comes to placing stakes on the unknown and uncertain outcome of a game, it becomes wagering irrespective of the nature of the game. Skill or chance pales into insignificance," he said, adding that the Centre's new rules will be applicable to all states.

Venkataraman also expressed concerns about the impact of online real money games involved in wagering on the society and the country as a whole.

According to him, many sites are controlled from outside India and money of Indians get peddled out of the country through fictitious accounts and to anonymous jurisdictions.

These businesses are clearly outside the Indian regulatory and tax systems and hence dangerous to the fiscal structure of the country, he added.

"In one of the platforms being run from outside India, their bank account showed a turnover of Rs 14,000 crore. (And) no taxes were paid in India," Venkataraman said as he highlighted the legal actions being taken by the tax authorities with respect to such platforms.

The senior law officer also said the controversy over online games is not only about legality or otherwise in the context of wagering but there are deep rooted social issues involved as well, which the government is concerned about.

"There is an element of addiction amongst youth and loss of hard-earned money of citizens as well. Apart from these, possible money laundering and other aspects of crime and abuse cannot also be ruled out," he said.


Edited by Akanksha Sarma