(Vikram Jeet Singh & Prashant Daga)
We bring you the latest chapter in the ongoing struggle around regulating online gaming and ‘Real Money Gaming’ in India. In 2021, you will remember, the state of Tamil Nadu (“TN”) had passed a law prohibiting all forms of online gaming, including games of skill. This ban was struck down by the Tamil Nadu state high court (“HC”). While the HC ruled the law to be ‘ultra vires’ in its entirety, it noted the state’s right to formulate an ‘appropriate legislation’ to regulate online gaming.
In-line with the HC’s suggestions, on October 03, 2022, the cabinet of the state government approved the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Ordinance, 2022” (“Ordinance”) and referred it to the state’s governor for their assent. Now, on October 07, 2022, the Tamil Nadu State Governor gave his assent to the Ordinance, thereby materializing it into enforceable law.
To be clear, the Ordinance applies only in the state of Tamil Nadu and does not extend to other states. It has a maximum validity period of 6 months (i.e., the maximum gap between state assembly sessions) and must be approved within 6 weeks of the subsequent state assembly session commencement.
A copy of the Ordinance can be accessed here.
The key provisions of the Ordinance are:
Ban on ‘Online Gambling’: The Ordinance reiterates the existing ban on online gambling i.e., online ‘wagering’ or ‘betting’ or playing any games of chance for money/other stakes.
Games of chance: These have been defined as games where element of chance dominates over skill or where the element of chance can be eliminated only by superlative skill. In particular, the definition states that games which ‘involve ‘cards’, ‘dice’, ‘wheel’ or such other device which works on random or event generator’ as games of chance, with no exemption carved out.
Ban on Rummy and Poker: The Ordinance prohibits playing any games of chance listed in the ‘Schedule’ for money or other stakes. At present, only ‘Rummy and Poker’ are listed in this Schedule. Consequently, offering (and playing) Rummy and Poker (for money / stakes) would constitute to be an offence under the Ordinance.
Prohibition of advertisements: Advertisement which (directly or indirectly) promote or induce any person to indulge in online gambling or play identified games of chance (viz., Rummy and Poker) with money or other stakes are prohibited. Any lapse is punishable with imprisonment up to 1 year and/or fine up to INR 500,000.
Transfer of funds: Banks, financial institutions, and payment gateway providers are restricted from facilitating transfer of funds for participating in online gambling or identified games of chance (viz., Rummy and Poker).
Regulatory Framework: On a progressive note, the Ordinance provides for setting up a regulatory body called “Tamil Nadu Online Gaming Authority” to (inter alia) oversee the operation of online gaming service providers, identifying games of chance for inclusion in the Schedule, etc. Online games operators have been classified into “Local Online Games Providers” (i.e., Tamil Nadu based entities) and “Non-Local Online Games Providers”, with each subject to certain compliances for offering online gaming platforms in the state.
What this means for you:
Multiple southern states have taken cue from Tamil Nadu’s approach over the past two years when it comes to regulating online gaming. For instance, Kerala and Karnataka had also attempted to ban online gaming in 2021. However, these bans were also ruled to be ultra vires and struck down by the respective state high courts. Subsequently, the high court rulings were challenged before the Indian Supreme Court and are pending. Tamil Nadu’s Ordinance may yet again inspire other states to follow suit and adopt a regulatory approach towards online gaming services, as opposed to blanket bans.
BTG will keep you updated on the status of the Ordinance, and if it is challenged before the state high court.