Why A Central Legislation Needs To Prevail To Govern Online Games Of Skill

Misinterpretation of certain laws has been a hindrance for the operation of online skill gaming platforms.

3 min read

There has been constant debate on the distinction between online skill gaming and other games of chance such as betting and gambling. Judicial intervention has been needed to delineate the two activities as completely different activities. As early as 1957, the Supreme Court of India has held the view that competitions that require substantial skill are not gambling activities. Recently, the Supreme Court has reiterated this view in favour of online skill gaming, categorically stating that it is a legitimate business exercise, protected as a fundamental right under Article 19 (1) (g) of the Constitution of India. Various High Courts in the States have held the same view.

In the light of this delineation between both the activities provided by the judiciary at multiple points, it should be amply clear that the difference between both the activities is of chalk and cheese. However, the erroneous interpretation of certain laws has been a hindrance for the operation of platforms catering to online skill gaming. Entry 34 of List II of the Seventh Schedule of the Constitution of India contains the empowering provisions for State Governments to legislate on matters exclusively covering the ambit of betting and gambling. Attempts by various State Governments have been made in the form of ordinances promulgated against the online skill gaming sector or bans on operation of activities, under this provision. Consequently, High Courts in various states have quashed these legislations forthwith.

Constitutional provisions and further amendments in present legislation also clarify the Parliament to be the legislating authority for this sector. Article 246, read with Entry 31 of List I of the Seventh Schedule of the Constitution exclusively grants jurisdiction to the Parliament to enact laws for forms of communication such as wireless, telecom and broadcasting. Platforms for online gaming are intermediaries under the Information Technology Act, 2000, specifically under central purview. Services provided by these platforms to users are specifically for and on behalf of users, whether in the processes, such as calculation of points, or declaration of winners, or services such as intra-platform interaction between users.

Similar provisions enabling the Centre to legislate in this sector are present in the taxation regime. Under Section 2 (17) of the Integrated Goods and Services Tax Act, 2017 (IGST), it has been further clarified that services where the delivery is through the internet, or an electronic network, specifically for online gaming, the levy and collection of taxes would be by the Centre, in consonance with Entry 31 of List I.

Concerning the point of Inter-State trade and commerce, the territorial jurisdiction of the Centre and the states is also clearly demarcated in the Constitution of India. Article 245 of the Constitution empowers the Parliament to enact laws for the whole or any part of the territory of India, whereas the States are restricted to making laws governing only the state. The apex Court, along with the High Courts of various States have also iterated that the states cannot exercise extra territorial jurisdiction on any subject, highlighting the erroneous exercise of jurisdiction in the field of sports and entertainment in the instant case.

Apart from the jurisdictional and taxation policies in favour of the Centre in making laws for the online skill gaming sector, there are constitutional doctrines that must be adhered to. The doctrine of ‘Occupied Field’ is very clear in demarcating that if a central law has defined jurisdiction concerning a regulation, Article 254 will render any other law made by the State void, as the doctrine of ‘Repugnancy’ shall apply, if there is a conflict in the concurrent powers of the State and the Centre. Judicial prudence and timely action by the Centre has already taken the course needed for the online gaming industry to blossom, poised to provide the boost the industry requires as a part of the booming sunrise sector.

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Topics:  Online Gaming   FIFS