Explore the status of online gaming in India, its economic impact, and the distinction between games of skill and games of chance in the legal landscape.
Recently the Indian Government has also begun to recognise the gaming industry as one of the pillars of the Indian economy. According to the report released by KPMG in 2022, India’s online gaming market had revenue of INR 136 billion ($1.80 billion) and is predicted to expand at a CAGR of 21% over the next five years leading up to INR 290 billion ($3.84 billion). The industry estimates that it has the potential to attract FDI of more than INR 10,000 crore over the next few years.
India gaming companies have achieved unicorn status, but there has been also a greater scrutiny of the industry w.r.t online offering of games will fall under gambling and potential violations of various laws including GST, foreign exchange laws etc. Gambling and betting are a prohibited activity under foreign exchange laws.
Indian courts have recognised that the offerings of game of skill is protected business activity. The same view is reiterated by Karnataka High Court in recent order in matter of Gameskraft Technologies Private Limited where the question before court for consideration was “whether offline/online games such as Rummy which are mainly/preponderantly/substantially based on skill and not on chance, whether played with/without stakes tantamount to ‘gambling or betting? “The question was posed to ascertain GST related matter.
The court held that “There is a distinct difference between games of skill and games of chance; games such as rummy whether played online or physical, with or without stakes would be games of skill.
“A game of chance whether played with stakes is gambling.
A game of skill whether played with stakes or without stakes is not gambling.
A game of mixed chance and skill is gambling, if it is substantially and preponderantly a game of chance and not of skill.”
To summarise, the games which consist purely of chance or skill, and as such a game of chance is one in which the element of chance predominates over the element of skill, and a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element — “skill” or “chance” — which determines the character of the game.”
Therefore, whether foreign investment is allowed or prohibited will depends upon the factor whether such offering of game involves game of chance or game of skill.
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