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EXPLAINED: Why Kerala HC Struck Down Online Rummy Ban And How High Stakes Are In Indian Gaming Sector

The Kerala HC ruled that online rummy is a game of skill and not one of chance

The Kerala HC ruled that online rummy is a game of skill and not one of chance

The Kerala High Court has struck down a ban that the state government had slapped against online rummy, ruling it to be a game of skill and not of chance

The Kerala High Court has struck down an order passed by the state government banning online rummy. The verdict follows a similar decision by the Madras High Court last month. State governments have sought to crack down against online gaming, especially where it involves money, amid concern that participants can end up suffering monetary losses even as such games can prove to be addictive and difficult to quit. But gaming platforms argue that games like rummy involve the use of skill and, in any case, are commonly played in their physical form in Indian households.

Why Did The Kerala Govt Ban Online Rummy?

In late February this year, the Kerala government said in a notification that online rummy played for stakes is not exempted from the general prohibitions related to gaming and gambling that are extended under Section 14A of the Kerala Gaming Act, 1960.

After online gaming companies appealed against the order in the high court, the Kerala government said the decision was based on its reading that online rummy is not a game of skill. It was also argued that such games were leading to problems in society as people were squandering money on these platforms and the consequent monetary losses had led some to take the extreme step of committing suicide.

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What Were The Arguments Against The Ban?

Holding the Kerala government ban to be unconstitutional, a single-judge bench of the high court said that it violated the fundamental rights to trade and commerce under Article 19(1)(g) and the right to equality under Article 14 of the Constitution of India.

Citing a Supreme Court decision in this regard, the high court said it has already been ruled that rummy is “a game of mere skill" and the fact of playing for stakes or not cannot be a test of “whether a game is a game of skill". To that extent, since rummy “does not come within the meaning of ‘gambling’ or ‘gaming’, providing a platform for playing the game, which is in the nature of business, cannot be curtailed" the high court said.

The counsel for the online gaming companies also pointed out that even if a game was deemed to be addictive, that had nothing to do with whether it’s a game of chance or not. It was argued that by the same token, even lotteries can be addictive, but are nonetheless allowed in the country. They also said that banning online rummy while physical rummy was permitted was an arbitrary decision.

Drawing attention to Supreme Court judgments in this connection, the petitioners said that since rummy has been ruled to be a game of skill, any profit derived by gaming platforms by offering a game of skill played with stakes, is a ‘business’ that stands protected by the Constitution of India.

What Is The Difference Between A Game Of Skill And A Game Of Chance?

Gambling is a state subject in India, which means that it is up to the individual states to make laws regulating or banning activities involving “betting and gambling". The colonial-era Public Gaming Act, 1867, experts say, lays down that where a game involves an element of skill, it will not be treated as gambling as against those where the outcome is totally dependent on chance. While it penalises “playing or gaming with cards, dice, counters, money or other instruments of gaming", it says that the Act does not “apply to any game of mere skill wherever played".

While it’s argued that the “luck factor" is an integral part of any game, there is a demarcation between a ‘game of skill’ and ‘game of chance’ that revolves on the question of whether the players can apply skills to succeed at it. Thus, success in games like poker, teen patti, horse racing, even if they involve gambling, is seen as being dependent on the skill of the player than the likes of blackjack and roulette.

Legal experts say that one important marker in this respect is the question of whom the game is being played against. Normally, games where one contends against other individuals are considered to be based on skill as opposed to games where the individual has to play the ‘house’, which is the casino or gaming establishment. These latter games are said to belong to the category of game of chance.

Why Is Online Gaming Facing Pressure In India?

The online gaming industry has witnessed a huge surge in its user base amid the pandemic, attracting youngsters and adults alike as people were forced to remain homebound due to lockdowns and restrictions. But this rise in the number of users has been accompanied by warnings and complaints as regards online gaming’s socio-economic and mental health impacts.

In September 2018, the World Health Organisation (WHO) included “gaming disorder" in its International Classification of Diseases list, saying that it involves a behaviour pattern — which would “normally have been evident for at least 12 months" — marked by “impaired control over gaming, increasing priority given to gaming over other activities… and continuation or escalation of gaming despite the occurrence of negative consequences".

Noting that studies suggest gaming disorder affects only a small proportion of people who engage in digital- or video-gaming activities, it nonetheless warns that “people who partake in gaming should be alert to the amount of time they spend on gaming activities, particularly when it is to the exclusion of other daily activities" and involves “significant impairment in personal, family, social, educational, occupational or other important areas of functioning".

Days before the Kerala High Court order, the Karnataka legislature passed the Karnataka Police (Amendment) Act, 2021, which is aimed at slapping a complete ban on gambling in the state, including online gaming. Although the legislation does not include lottery or wagering and betting on horse races, it bans all forms of gambling in the state, including online gambling.

A similar law passed by neighbouring Tamil Nadu — the Tamil Nadu Gambling and Police Laws (Amendment) Act, 2021 — was struck down last month by the Madras High Court, which ruled that rummy and poker were games of skill and that no distinction could be made between their physical and online formats.

The Karnataka Bill has been met with sharp objection from the online gaming industry with trade body Confederation of All India Traders (CAIT) saying the ban on online gaming will be a setback to Indian startups. In a letter addressed to the Karnataka CM Basavaraj Bommai, CAIT Secretary-General Praveen Khandelwal says that the Bill “will hurt the Indian startups sector, the Indian gaming and animation industry and millions of Indian gamers and esports players across the country" and result in “massive job losses in Bengaluru". It also made the claim that the Bill “does not distinguish between a game of skill and a game of chance".

How Big Is The Online Gaming Industry In India?

A June 2021 report by consultancy firm KPMG says that Covid-19 was the “tipping point for the consumption of gaming in India" and everything from game downloads and average time spent on gaming to the conversion of daily active user to paid user “are operating at a higher new normal as compared to the pre-Covid-19 lockdown time".

It said that the number of users of online gaming platforms is set to swell from 433 million in 2021 to 657 million by 2025 with revenues set to surge from Rs 136 billion to Rs 290 billion within the same period.

Another report said that when it comes to online rummy specifically, revenues are set to jump from USD 335 million in 2019 to USD 1.4 billion by 2024, thanks to “increasing penetration of smartphone usage in rural areas of the country".

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first published:September 28, 2021, 14:55 IST