Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Ordinance, 2022
The State of Tamil Nadu promulgated the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Ordinance, 2022 (‘Ordinance 2022’) on 3 October 2022 for the regulation of online gaming in the State. It has already been assented to by the Governor. This is the second attempt on part of the State government for regulating online games. In November 2020, Tamil Nadu government had introduced an Ordinance to amend the Tamil Nadu Gaming Act, 1930 (‘TN Gaming Act’) which was later called as Tamil Nadu Gaming and Police laws (Amendment) Act, 2021 (‘Amendment Act’). Said Ordinance put a complete ban on the online games of skill on the pretext that the youngsters were being cheated by the online gaming providers and were committing suicides due to online gaming.
The Amendment Act was challenged in the High Court of Madras (‘HC’), wherein the petitioners stated that said Act prohibited all forms of games in cyberspace and removed the exemption of games of skill, and therefore the same is arbitrary and unreasonable. In the matter of Junglee Games India Pvt. Ltd. & Anr v. The State of Tamil Nadu & Ors[1]., the HC struck down the Amendment Act. It ruled that the law was unconstitutional in its entirety. According to the Court, it failed the test of proportionality, said law was unreasonable, arbitrary and was in violation of the principles established by the Supreme Court of India.
In the cases of RMD Chamarbaugwala v. Union of India[2] and KR Lakshmanan v. State of Tamil Nadu[3], the Supreme Court had opined that, under Entry 34 List II of the Constitution of India, the State has the legislative competence to make laws with respect to gambling or betting on games of chance, and that Entry 34 does not cover games of skill under its ambit. Relying on KR Lakshmanan case, HC also observed in Junglee Games that the games of skill were protected under Article 19(1)(g) of the Constitution of India as it was considered a business activity and not gambling under the law. According to the HC, the restrictions imposed on games of skill were excessive and were disproportionate to the object sought to be achieved through the legislation. Therefore, the HC struck down the Amendment Act. However, the High Court observed that the State may derive the legislative competence from other Entries of the Constitution of India in relation to regulation of games of skill.
The State Government, thereafter, took cue from the observation of the HC, and constituted a five-member committee under the chairmanship of retired Justice Thiru. K. Chandru for advising on the enactment of new legislation, in order to regulate online games. Following the suggestions of the committee, vide the reports and surveys formulated, the State government introduced the Ordinance 2022 seeking to regulate and prohibits online gaming at the same time.
Overview of the key provision of the Ordinance 2022:
The Ordinance 2022, under Section 7, prohibits online gambling, and playing of online games of chance with money or other stakes. As per the definition of ‘online game of chance’, it involves elements of both chance and skill, where the element of chance dominates element of skill or involves an element of chance that can be eliminated only by superlative skill. The State government, through a Schedule under the Ordinance 2022, has identified ‘rummy’ and ‘poker’ as games of chance, thereby prohibiting the individuals or companies from offering or playing said games. At present, playing or offering of games listed in the Schedule will constitute an offence under the Ordinance 2022. Further, the advertisement in relation to online gaming and games of chance (viz., Poker and Rummy) is prohibited and there are restrictions on the transfer of funds for the purpose of the online gambling or for listed games of chance in the schedule. The local online games providers are required to obtain a certificate of registration from the authority before conducting online games in the State.
The State Government has once again enacted a law which may go against the principles established by the Supreme Court and other High Courts, wherein the courts have differentiated between games of chance and games of skill. The Ordinance 2022 equates games of chance and games of skill and identifies rummy and poker as game of chance. It may be noted that various judicial forums have earlier held rummy and poker as a game of skill. In the case A.P. v. K. Satyanarayana[4], it was determined that rummy involves substantial amount of skill and is not merely a game of chance. It was observed that rummy involves memorizing the fall of cards and it requires a great degree of skill. Similarly, in the cases of Indian Poker Association v. State of Karnataka and Indian Poker Association v. State of West Bengal, it was concluded that poker is a game of skill. The Government, by way of the Ordinance 2022, has neglected the judicial decisions and has tried to circumvent the same in the guise of protection of youngsters from addictions and cheating.
The Government has considered factors like randomness involved in the online games and manipulation through artificial intelligence. However, they failed to consider that there is no vested interest of the organizers involved in the game as all the winnings go to the players and not to the organizer. As rummy and poker are considered games of skill as per the judicial dicta, the Government may be in violation of a settled law that states preponderance of skills is protected under Article 19(1)(g) of the Constitution of India. However, the Ordinance 2022 provides for setting up of Tamil Nadu Online Gaming Authority which will be a regulatory body who will be responsible to regulate online games. Therefore, there might be a case that the committee may take a case to case approach for the regulation of different online games.
The stakeholders and gaming companies may challenge the Ordinance 2022 on the issue of reasonability, arbitrariness, and violation of established principles of the Supreme Court and other courts. Therefore, it will be on the courts to decide the future of the Ordinance 2022.
[The author is an Associate in the Corporate and M&A advisory practice at Lakshmikumaran & Sridharan Attorneys, Mumbai]
