Online Gaming for Skill-Based Learning: Clearing its Legal Identity

The online skill gaming sector has seen phenomenal growth in recent years and led to significant employment boost.

Skill-based online gaming cannot be associated with elements of chance as there is a fundamental cognitive science that determines measured outcomes.

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The information era carries with it the onus of unintended outcomes. Hence, it becomes essential to classify the good and bad sides across cyberspace. While legality identifies what is within the law and complies to the legal framework, legitimacy is about being fair, moral and ethical. Legality is driven by published laws, whereas legitimacy gets driven mostly by public opinion. Therefore, things that are legal may not be considered as legitimate. and vice versa.

This brings us to the hot topic of the online skill gaming industry. Answers to questions around the online skill gaming industry’s perceived credibility are not easy to arrive at, as they involve conceptual fragments that need to be woven into holistic perception.

The pace of technological advancement far surpasses the changes in legislative systems. Thus, the IT Act 2000 must be amended to keep up with the advancements in the online skill gaming space. Digitalization has led to an exponential upsurge in digital gaming, of which online skill games are an integral part. The AVGC (Animation, Visual Effects, Gaming, and Comics) sector has witnessed phenomenal growth and generated employment based on specialized skill sets. A dedicated taskforce for this sector has been set up on the recommendation of the Finance Minister in Budget 2022.

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While it is true that the legality of a game played within a defined physical space is simpler to establish vis-a-vis the same game being played on an online platform, there is a user base outside the larger spectrum of viewership in online skill gaming. Participants are required to have a knowledge base and overall understanding of the game. Positive outcomes cannot be based on trial and error. For example, virtual reality business games form an effective tool to train budding entrepreneurs to understand various aspects of operating a start-up while having limited resources. After playing multiple rounds of such simulation games, they learn to conduct what-if analysis, gauge competition and market better, and evaluate the feasibility of their short and long term strategies. Fantasy Sports users swear by their research and knowledge of sports being key to their win in a contest.

To prevent user harm and minimize unintended outcomes in online skill gaming, countries such as the US, UK, and Singapore have adopted modelled tests to distinguish online skill gaming. These tests helped establish a regulatory framework in these countries to assert effective checks and balances in order to eliminate concerns of addiction and financial loss. This ensured undisrupted growth of the industry operating within systematized monitoring protocols.

To analyze whether a game is based on skill or chance, the dominant factor test, also known as the predominance test, is used. This test requires one to imagine a scale backed by sheer chance on one side and skill on the other. The analysis is relatively simple when comparing dice games to chess, for instance, but it is the underlying gray area that is difficult to draw a conclusion on. For example, fantasy sports have obvious elements of skill as the ability to strategically select teams in real time demonstrates a considerable level of skill. In fantasy sport, the format is centred around the role of a manager of the team with a budget and power to buy and sell players before each game. Despite the provision of monetary incentives on winning, there is no scope of victory by chance as players need to evaluate possibilities and select teams on the basis of a sport being played live. The calculation of probability based on analysis and assumptions plays a critical role during participation. The “any chance” test, also undertaken globally, dictates that if chance influences the outcome of a game in any way, it will be deemed illegal gambling. As we’ve already seen, skill-based online gaming cannot be associated with elements of chance as there is a fundamental cognitive science that determines core competence yielding measured outcomes.

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India has also resorted to the same tests in examining the legality of games of skill. Last year, Madras High Court set aside the amendment to Tamil Nadu Gaming Act by applying the test of predominance while hearing the petitions filed by All India Gaming Federation (a body that represents diverse forms of online gaming) and online rummy operators, and concluded that rummy and poker were skill-based games . Similarly, several online gaming platforms offering games like rummy, poker, and fantasy sports along with online gaming federations representing these operators challenged the amendment to the Karnataka Police Act, following which the Karnataka High Court also set aside the amendment and held these online games to be games of skill. Interestingly, even the Supreme Court of India, while hearing a case pertaining to the status of fantasy sports clarified that fantasy sport is a game of skill and does not amount to gambling, betting or wagering.

With the consensus on an inter-ministerial regulatory authority in place and judicial recognition from various courts consistently emphasizing on why games of skill should be treated differently from games of chance, this sunrise sector promises legal credibility. It could boost economic growth in the coming years and be a significant contributor to the Prime Minister’s forward-looking vision of accomplishing a ‘Digital India’.