Online gaming industry to challenge Tamil Nadu ordinance as Centre mulls new law

The online gaming industry is set to challenge an ordinance by the Tamil Nadu government that seeks to ban online gambling and regulate online gaming. Stakeholders and lawyers with knowledge of the development said the ordinance, passed on 3 October, “goes against many years of established court orders”. This will be the second time the industry will challenge a Tamil Nadu government decision after the Madras High Court struck down a move to ban online rummy, poker and other similar games in August last year, deeming it against legal norms.

The ordinance brings under its ambit “online games of chance”, which it defines as any online game that includes both chance and skill, with chance outweighing the skills required to play the game. It also includes games that have both the elements, and requires players to have “superlative” skills to outweigh chance, among other factors.

According to Jay Sayta, a prominent technology and gaming lawyer, the ordinance clubs online rummy and poker under games of chance, without clearly defining whether online fantasy games would also be included under this. “Such a regulation goes against years of established court regulations, which have segregated games of chance and skill. The law is trying to establish a new regulation of sorts where the two are not mutually exclusive,” he said.

While gambling is a state subject, the Union government’s Public Gambling Act, 1867 prohibits betting money on games of chance. However, rulings by various courts in the past have categorized games like rummy, poker and daily fantasy sports (like Dream 11), as games of skill.

Meanwhile, two industry executives said union home secretary Ajay Kumar Bhalla held a meeting with representatives of government agencies on Monday to discuss framing a central law for online gaming and betting. Officials from the Enforcement Directorate, departments of Information Technology, Goods and Service Tax (GST) among others were present in the meeting, the people said, adding gaming industry officials were not invited.

The landmark K.R. Lakshmanan vs State of Tamil Nadu verdict by the Supreme Court in 1996 is typically cited as the main precedent. The court ruled that a game of skill is one that is “not dependent on mere chance or accident but determined by many factors.”

Sayta said the ordinance will be challenged in courts as early as next week by gaming operators and other industry stakeholders. However, unlike the earlier attempted ban on online gaming, lawyers said with this ordinance, the Tamil Nadu government is looking to take a case-wise approach.

“It is the same attempt from the government in a different guise, but the setting up of a regulatory committee will likely see them take a case-wise approach to regulating different games. For instance, slight variations to rules of various rummy games could push them towards being defined either as a game of skill, or chance, under the definition of this ordinance,” said Shoubhik Dasgupta, partner at law firm Pioneer Legal.

Industry bodies, too, expressed “surprise” and “disappointment” at the ordinance. Sameer Barde, chief executive of E-Gaming Federation, said rummy’s position as a game of skill “has been ruled by the Supreme Court as a protected trade under Article 19(1)(g) of the Constitution”.

He added that classifying it as a game of chance is “directly in violation of Supreme Court and High Court judgments.”

Roland Landers, chief executive of All India Gaming Federation, noted that a Supreme Court hearing on this matter is slated for next month, and passing the ordinance in the interim supersedes the same. Sayta, however, said that while the hearing could have a lasting say on whether the ordinance would stand, reaching a verdict on it could take “months, or even years”.

Stakeholders also noted that advisories by the ministry of information and broadcasting issued on 3 October directed OTT players and digital news publishers to cease from airing advertisements of betting platforms. They said that the advisory warned against international platforms like Betway etc, which they claim are different from rummy, poker or DFS platforms in India.

While fantasy games may not be directly banned as a result of the ordinance, a top official from an Indian gaming firm, who requested anonymity, said they will likely fall under a “gray area” that could see their veracity being challenged. Pioneer’s Dasgupta said gaming operators will likely use such advisories and the fact that it does not club games under gambling to challenge the ordinance in court.