Online Gaming: Effect on mental health of players, need for regulatory legislation and more

A deep dive into the legal aspects associated with the Online Gaming industry in India, which has come under the scanner of the courts of late.
Online Gaming
Online Gaming

Online gaming in India has experienced an immense boom in the recent past. Fantasy sports and e-sports, among other forms of online gaming, have gained significant traction, especially among the youth. One of the aspects that makes these games so attractive is the monetary rewards one can reap on winning these games.

Of late, a number of questions have been raised before the courts, including those pertaining to the effects of online gaming on the mental health of players, celebrities endorsing these games, the validity of a blanket ban, and more.

A spate of litigation has arisen in the last two years on all these aspects of online games. With mass internet penetration fuelled by telecom companies offering data services at cheap rates, the number of online gamers is expected to rise exponentially in the years to come.

Is online gaming the equivalent of online gambling?

A plethora of cases have cropped up across High Courts on whether certain online games amount to online gambling. The courts, while distinguishing online gaming from gambling, have dissected whether the game in question is a game of chance or one of skill.

In 2019, a PIL was filed initiating criminal action against cricket and football fantasy game Dream11 for allegations of tax evasion. The Bombay High Court ruled in favour of the gaming company by observing that the process of choosing a team did not involve any service, and therefore, the provisions under the Goods and Service Act were not attracted. It was also ruled that the game was not one of chance but of skill, and therefore playing the game does not amount to gambling.

In another case filed before the Madras High Court regarding the game Online Rummy, the Court noted that it could not be considered as a game of skill since the game is based on algorithms. It was brought to the notice of the Court that those who play these games continuously fall prey to their data getting manipulated by the database algorithms, and that once an individual is “marked as a victim, you cannot make any money.”

It was also emphasised that Online Rummy could not be compared to the physical game of Rummy, which requires skill. It was further contended by the petitioner that when skill-based games are played for money online, it would be illegal as in the virtual space there is a high possibility of manipulation as well as randomness, cheating and collusion.

In a recent case before the Bombay High Court, the Maharashtra government’s response was sought on a plea to declare that Ludo is a game of chance rather than a game of skill. The petitioner emphasised that the possibility of a 3-year-old winning the game could not be discounted, and therefore, Ludo was to be considered as a game of chance. To this effect, the Maharashtra Prevention of Gambling (MPG) Act will apply as it is a game being played for stake, it was argued. It was noted that the format of the game was similar to that of the original board game, the difference being that there is an entry fee and the winner is rewarded with money in real-time currency of value. It was noted that the rolling of the dice and value rolled is entirely controlled by the application and its algorithm. The plea emphasised that the occurrences in the entire game are absolutely based on luck, therefore making it a game of chance.

Effect on mental health and liability of celebrities for endorsements

In M Vinoth v. UOI & Ors before the Madras High Court, the petitioner argued that individuals who are lured in to play Online Rummy lose money and die by committing suicide.

There were several petitions before the Madras High Court for criminal action to be taken against proprietors of online games and celebrities Virat Kohli and Tammanah who endorse and promote such online games. It was contended by the petitioner that with celebrity endorsements, youngsters are brainwashed to fall into the trap of gambling, where they not only spend their own money but also their family members’ money, causing a financial burden. It was therefore prayed before the High Court that all online gambling sites should shut and all celebrities engaged in endorsing these gaming websites be arrested for abetting suicide and gambling.

In yet another petition before the Madras High Court regarding the same concerns, notice was issued to Telecom Regulatory Authority of India (TRAI) and actors Prakash Raj, Tamannah Bhatia, Rana Daggubati and Sudeep for endorsing online gambling in the name of online games. Last month, however, the Court dismissed the petition on ground that the plea is "a waste of time and fuelled by an ambition to gain publicity."

The case of Muthukumar v. UOI & Ors was filed in the wake of the State of Tamil Nadu seeing multiple youngsters committing suicide due to online gambling through games like Online Rummy. On the issue of celebrity endorsements, the Court added that in a country where hero-worshipping is predominant, even if one actor endorses such games, tens of thousands will follow.

In a similar case, the Karnataka High Court mentioned that the Centre need not be made party to the matter on regulating online gambling and directed the State government to come out with a decision on banning the games.

Bar & Bench spoke to Roland Landers, who is CEO of All India Gaming Federation (AIGF), the apex body for online skill-based gaming in the country. Addressing the concerns surrounding the impact of these games on the mental health of players, he said.

“All the potentially perceived determinants of online gaming like compromised mental health, etc cannot be attributed solely and as a direct result of online gaming, especially during the times of the pandemic, when the overall screen time has multiplied significantly with even classes happening online. On top of that, for want of entertainment and recreation, the youth end up having more screen time with online gaming. In fact, in a study conducted few years back with a mental health expert, there were several benefits of online gaming which came to light such as better adroitness, better eye-hand coordination, etc.

We need to have clear, standardized responsible gaming guidelines, and the AIGF Charter is a significant step in that direction. The Charter mandates global best practices of responsible gaming like KYC, time-spent warning, lock-out, post-break, self-exclusion, spending-guidelines, digital payment through reputed payment gateways, connecting at the operator level with mental health experts, etc. With every new industry, one needs to look at what are the best practices followed globally and accordingly try and deploy those,” Landers added.

Constitutional validity of a blanket ban on online gaming

The Madras High Court most recently rendered Part II of the Tamil Nadu Gaming & Police Laws (Amendment) Act, 2021, which imposed a blanket ban on online games like Online Rummy and Online Poker, unconstitutional. The said part of the Amendment specifically banned betting or wagering in cyberspaces and also games of skill if played for a wager, bet, money or other stakes. The Bench ruled that imposing a complete ban would be violative of the ‘least intrusive test’ and thereby in conflict with Article 19 (1) (g) of the Constitution (right to practice any profession or to carry on any occupation, trade or business).

Explaining how the Amendment is unreasonable and excessive, the Court said that the amended Act brings within its ambit all sporting activities if played for a prize - whether between two class teams in a school or between two schools in an inter-school competition. It would effectively also render Indian Premier League (IPL) and cricket test matches illegal if the amending Act was to come into effect. It was also noted that portions of the amending Act which did not serve the object of the amendments could not be severed, since the amended definition of gaming runs throughout the entire legislation.

The Court further cited an American case (United States of America v. Lawrence DiCristina) where online poker was accepted as a game of skill. This verdict had even prompted the Law Commission of India to accept poker as a game of skill in its 276th Report. The Bench urged for a more intelligible legislation and mentioned that rendering the particular amended Act as unconstitutional will not stop the State government from enacting a legislation on betting and gambling that is aligned with Constitutional tenets.

Speaking about this judgment, Landers said,

“I think the Madras High Court verdict was an extremely progressive one, given the way that the amendments were brought about. Even online games that were heavily dependent on the player’s skill were being equated with betting and gambling, so that obviously did not hold ground and was rightly struck down by the Hon’ble Bench. Supposing an online game of chess was being played between Viswanthan Anand with Magnus Carlsen, nobody in their right mind would say that they were participating in betting or gambling. The legislation also did not satisfy the test of reasonableness and proportionality. Just because there is a participation fee in online games, they cannot be said to be falling within the purview of betting or gambling."

The Kerala High Court recently heard a batch of petitions challenging the State government's ban on online rummy. It ruled that the notification banning a game when played for stakes is arbitrary, violative of Articles 14 and 19(1)(g) and therefore unconstitutional, since the element of skill is predominant for winning such games. It was also held by the Court that a notification in relation to a game which is explicitly exempted from the provisions of the Kerala Gaming Act under Section 14, cannot be curtailed. In addition to this, it was noted that Online Rummy does not come within the purview of 'gambling' or 'gaming' and providing a platform for playing the game cannot be restricted.

The Court, while rendering the State government notification banning Online Rummy unenforceable, observed that Rummy is a game of skill for the purpose of State gambling and gaming regulations.

In a similar vein, the Karnataka Police (Amendment) Bill, 2021 was recently tabled in the Karnataka Assembly. The Bill seeks to criminalize all activities of the online gaming industry and effectively renders players participating in such online betting and gambling as criminals. As per the Bill, a punishment extending up to 3 years of imprisonment and fine up to ₹1 lakh will follow in case of individuals or organizations seen to engage in online gaming as per the amended definition. The Bill sparked an uproar among the online gaming industry since it seems to include within the ambit of wagering even games of skill.

Need for laws regulating online gaming

While hearing a case registered over real-word gambling, the Madras High Court last year called for the setting up of a regulatory body for online games. The Court also held that games like Online Rummy could not be considered as a games of skill, since there was betting involved.

The State police filed an affidavit in that case stating that there is a surge in online gaming and gambling among the youth and that online gaming companies are not complying with the requisite techno-legal requirements. It was also added that there is no rule in place to regulate or license online games like rummy, bridge, nap, poker, fantasy sport, etc. The Court observed that neither of the legislations - the Public Gaming Act, 1967 nor the Tamil Nadu Gaming Act, 1930 - have provisions to regulate the virtual space, since the emergence of online games is very recent. It thus emphasized that a legal framework for “emerging online games is the need of the hour”.

The Court urged the State government to frame regulations in this regard in consultation with the stakeholders to aid investment in the sector, which could ultimately lead to technological advancements and generation of revenue and employment.

Another issue pointed out in another case before the Madras High Court was that many foreign companies invested in the game Online Rummy, holding more than 70% stake. This meant that most of the money earned was going into foreign pockets, thereby having an adverse impact on the Indian economy and the internal security of the country, it was noted.

While there may be a need to regulate online gaming owing to the potential ill-effects these games pose as pointed out before the courts, state governments have acted with hot haste in framing such regulatory legislation. As the courts have held, such laws need to conform with Constitutional principles and should apply only to games of chance and not games of skill. While most online games are a combination of skill and chance, online gaming companies must reduce the element of chance in their games as much as possible. Online gaming being a subject of the State List, each state will have to come up with their own legislation.

Self-regulation through algorithms

Such legislation will also have to address nuances associated with these games. Even in games of skill, by virtue of there being an algorithm in place, the element of chance may play a vital role in the outcome of a game. Speaking on this aspect, Landers said,

“All algorithms are certified by leading laboratories and all operators have to comply with the stipulated charters. There are companies like GLI (Google Laboratories International) that are global certifying bodies who certify the software and the gaming process, including the algorithms, BOTs operating in the game, etc. So all gaming companies need to comply with these global certifications. These certifications authorise that there are no manipulations happening in the game and they are world-wide standards, not something that any organization in India has formulated. So, the operators of online gaming companies themselves formulate their algorithms and for the certification they have to submit the necessary details to these certification bodies who then examine all of it and see if it matches the standards expected."

Legal Counsel at AIGF Vishakh Ranjit added,

"This is an arguable issue. There is a lot of evidence which shows that players who play these games, their success rate improves with the amount of time that they spend on the game. So it shows that experience in the game increases their chances of winning. But of course, everything has an element of chance.

The crux of the issue is not whether there is an element of chance, but whether there is a preponderance of skill. The element of chance can never be eliminated even in the highest level of sports. So what needs to be looked at is what is the majority element in the game and whether skill is a dominant element in the game. When we undertake an approval process for a game, we ask the companies to submit statistics of players' time spent on a game and their progressive improvement in the skill measured by the outcomes This shows a direct correlation with skill. So the percentage of impact on the outcome is not at hand even in a game of skill."

Senior Vice-President of Mobile Premier League (MPL) Dibyojyoti Mainak spoke on the operative side of online gaming software to iron out the creases on the aspect of algorithms. He said,

"All software and gaming systems have to go through technical certifications. So there are randomized tests conducted during the audit before the certifications are granted which ensure that fair play systems are in place."

Speaking about the preventive measures taken by the company to ensure no user faces adverse consequences of playing the game, Mainak explained,

"There are 3 stages at which we regulate players. First is the awareness stage - which is you lay down precautions in the terms and conditions and pop ups are enabled for players to verify that they will have to self-certify that they have read and understood that they should not play beyond a certain period of time, if they start feeling a sense of discomfort, etc. At layer 2, we set mandatory and automated limits on the amount a player deposits, spends and the amount of time a player spends on the game. Most companies have a warning system to warn players if they have exceeded the time, but at MPL, we have enabled a mandatory and automated lock-out - which means after 3 hours, a player is forcefully removed from the app and the app will not open for the next 15 minutes."

Mainak added,

"At level 3, assuming there is someone who still falls through the cracks, if we see any kind of risky behaviour, we surface a questionnaire prepared by mental health experts as a self-certification step. The player has to answer questions like how long they have been playing, if they have lost more money than they expected, etc. This is a subjective layer and there is a possibility some players may not fill it in truthfully. So we also have an automated layer, which is where the algorithm helps a lot. If a player is losing a lot of money in a short time or has been hitting their spending limit consecutively, they get flagged by the system. Or if the player themselves approaches us via customer care or is chatting with another player, the algorithm detects the trigger points. At MPL, we are working with Kaha Mind, a mental health organization focused on internet-related issues. We provide free counselling services after first blocking the player from using the app. Only after the counsellor certifies that the player is fit to play again, do we allow them entry."

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