India: All In Or Fold – The Legal Conundrum Of Real Money Online Poker

Last Updated: 15 July 2019
Article by Anand Jayachandran and Aditya Prasad

Indian mythology suggests that playing and losing at a game of dice led to the Pandava brothers, their wife and mother being sent to exile. Regardless of this cautionary tale, the online gaming market in India has taken off in India with revenues reaching Rs. 43.8 billion in FY 18 and expected to grow to Rs. 118.8 billion by 2023.1

The question of whether the state should permit businesses relating to betting and gambling was hotly debated in the Constituent Assembly Debates, with several members opposing constitutional sanction to betting and gambling activities. Members drew support for their argument from sources as varied as the apocryphal sufferings of the Pandavas to the ideals of Mahatma Gandhi.

Notwithstanding their opposition, List II of the Seventh Schedule to the Indian Constitution places matters relating to betting and gambling within the legislative purview of state governments. This compromise allowed state governments to choose to either prohibit or regulate (and tax) activities relating to betting and gambling.

States in India enthusiastically exercised their legislative rights to regulate gaming/ gambling activities within their territory, passing a variety of betting and gambling laws (State Gambling Legislations). Approaches vary, with some states prohibiting betting and gambling altogether, others permitting a narrow range of betting and gambling activities, and yet another contingent of states adopting the easy way out and modelling their enactments on the antediluvian central legislation on the subject, The Public Gambling Act, 1867 (together with the State Gambling Legislations, the Gambling Legislations).

Gaming Houses

Most Gambling Legislations predate the internet and envisage gambling activities taking place in premises termed as "common gaming houses". With the exceptions of Nagaland, Sikkim and Telangana, Gambling Legislations do not directly address gaming or gambling conducted on a virtual platform. The term "common gaming house" is typically defined broadly in Gambling Legislations, and it is safe to assume that web-servers which house online gaming websites are likely to fall within their ambit. Persons who own, occupy or manage common gaming houses are liable for violations under most Gambling Legislations, with penalties being either a fine, imprisonment or a combination of both.

Game of Skill v. Game of Chance

Gambling Legislations typically distinguish games of chance from games of skill – while the former is equated to gambling and prohibited, the latter is typically distinguished from gambling and is not prohibited. Some exceptions to this general rule can be seen in the Gambling Legislations of Assam, Odisha and Telangana, which do not carve out games of skill from restrictions on gambling.

While most poker players would argue vociferously that poker is a game of skill2, courts have typically had a harder time coming to this conclusion. Some states, without going into the question of whether poker is a game of chance or skill, have permitted and regulated poker under local Gambling Legislations. Examples of this approach can be seen in West Bengal and Sikkim. Sikkim and Nagaland allow certain games (including poker) to be operated and played online under a licence obtained from the State Government. Interestingly, with the exception of Nagaland, the term game of skill has not been statutorily defined in the Gambling Legislations3.

Given the absence of a statutory definition, courts have stepped in and sought to draw a line separating games of skill from games of chance. The Supreme Court's decisions in Dr. K.R. Lakshmanan v. State of Tamil Nadu4, State of Bombay v. RMD Chamarbaugwala5and State of Andhra Pradesh v. K. Satyanarayana and ors.6 have prescribed the following general rules:

  1. The determination of whether a game constitutes a 'game of skill' depends on the extent of skill involved in the relevant activity.
  2. If a game involves substantial skill but has an element of chance, it would be considered as a game of skill irrespective of the element of chance.
  3. While there is an element of chance in the distribution of cards in games such as rummy, rummy is predominantly a game of skill, on the basis that the fall of cards in a game of rummy is required to be memorised and the game itself involves considerable skill in holding and discarding cards. Similar arguments could apply to other card games.

Poker as a Game of Skill

  Indian states/ courts have taken inconsistent views on whether poker is a game of skill or chance. The High Court of Gujarat in Dominance Games Pvt. Ltd. v. State of Gujarat7 distinguished between rummy and Texas hold'em poker and held that while rummy was a game of skill, poker is a game of gambling and involves betting as an inseparable part of the game play. Courts in Karnataka and West Bengal have been less equivocal and have issued favourable rulings in the context of petitions filed to restrain police interference in clubs and associations where poker is played by members. However, these decisions do not analyse whether poker is a game of skill or chance.

There is no conclusive judicial order on whether poker is a game of skill or chance. That said, in instances where courts have scrutinised this question, they have typically concluded that online poker is a game of chance. The Supreme Court, in M. J. Sivani v. State of Karnataka8 stated that the elements of gaming are the presence of prizes or consideration, and gaming involved playing of any game, whether of skill or chance, for money or money's worth. In the context of games like poker double up, blackjack and pacman, the court noted that there was no scope for using one's skill to arrive at a desired result, as the electronic machines on which these games were played could be tampered with resulting in the chances of winning becoming completely unrelated to the skill of the player. Accordingly, games played electronically were placed under the scope of 'games of chance'. While the decision in M.J. Sivani was issued in the context of games played on a machine/video games, rather than internet poker, similar considerations could apply to real money online poker.

The Additional District Judge, New Delhi in M/s Gaussian Networks Pvt. Ltd. v. Monica Lakhanpal and State of NCT [9] drew a difference between games played in a physical space and those played virtually, and stated in this regard that playing 'games of skill' for money is legal only to the extent of the games being played in physical form. The court observed that while playing games on an online forum, various factors increase the degree of chance and the predominance of skill over chance becomes questionable, as factors like randomness, cheating and collusion become prevalent. The original petition was subsequently withdrawn and hence the aforesaid decision was set aside.

Real Money Online Poker

The legality of poker played for real money is not consistent across the various states of India. The Supreme Court in M. J. Sivani, has taken a clear stand that any game, whether of skill or chance, when played for "money or money's worth" will fall within the ambit of gaming or gambling. Except for the limited states that have adopted laws to regulate online gaming/ gambling, in the absence of a Supreme Court decision on this issue, it is difficult to ascertain the parameters that can determine the legality of real money online poker in other states.

Accordingly, while the legal position on whether the business of real money online poker is compliant with Indian laws is uncertain, courts have typically held that poker is a game of chance, particularly when played online or through video games. While arguments can be framed to support the contention that poker is predominantly a game of skill, irrespective of the element of chance– these are judicially untested.

* The authors were assisted by Anuj Dattathreya, Associate and Sonakshi Verma, Associate

Footnotes

1 "The evolving landscape of sports gaming in India" by KPMG and IFSG, March 2019

2 "Towards the Legalization of Poker: The Skill v. Chance Debate" by Robert C. Hannum and Anthony N. Cabot, the UNLV Gaming Research and Review Journal, Volume 13 Issue 1 (A) Hope, Mizelle, & McCulloch (2009) examined 103 million hands of Texas Hold'Em played at an online poker site and estimate that 76 percent of the hands in Texas Hold'Em do not go to showdown. Of the remaining 24 percent, only about half, or 12 percent of all hands, are won by the player at the table who would have had the best hand. This is because the player with the luckiest cards that would otherwise have been the best 5-card hand folded prior to showdown. Thus, only about 12 percent of the time does the player with the best or luckiest cards show his hand and win. (B) When a skilled player employing a raise-when-possible strategy is up against a player making haphazard (random) decisions in a limit Texas Hold'Em game, the skilled player wins full pots 96.8 percent of the time and split pots 0.21 percent of the time, with a win rate average of 1.6 big blinds per hand (for comparison, three big blinds per hour, or 0.10 big blinds per hand assuming 30 hands per hour, is considered reasonably good among top poker players). That a player can implement a strategy to defeat another player such a high percentage of the hands, with such a large win rate is strong evidence that skill predominates over chance in determining the outcome in poker.

3 Section 2(3) of the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015 "where there is preponderance of skill over chance, including where the skill relates to strategising the manner of placing wagers or placing bets or where the skill lies in team selection or selection of virtual stocks based on analysis or where the skill relates to the manner in which the moves are made, whether through deployment of physical or mental skill and acumen"

4 (1996) 2 SCC 226

5 AIR 1957 SC 699

6 AIR 1968 SC 825

7 (2018) 1 GLR 801

8 (1995) 6 SCC 289

9 Suit No. 32/2012

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