Tamil Nadu to ban online rummy and poker games

Tamil Nadu governor RN Ravi has approved an ordinance to ban online gambling, including online rummy and poker with stakes in the state, dealing a big blow to the nascent but fast-growing skill gaming sector.

This move comes a week after the Tamil Nadu cabinet, led by Chief Minister MK Stalin, had passed an ordinance to prohibit these games in the state, terming them as "online games of chance". The ordinance doesn't specifically mention other game formats, but mentions that it plans to "regulate online games in the state".

Any person offering these services will face an imprisonment of up to three years or a fine of up to Rs 10 lakh, or both. Meanwhile, people playing these games with money shall face imprisonment of up to three months or a fine of up to Rs 5,000 or both.

Supreme Court case

The move comes as the Supreme Court has started hearing a petition by the Tamil Nadu government challenging a Madras High Court decision that overturned the previous AIADMK-led government's November 2020 ban on online games involving the transfer of money. In an order issued on August 3, 2021, the state high court declared it unconstitutional.

On September 9, the Supreme Court issued notice to all of the petition's respondents, including skill-based gaming companies Junglee Games, Play Games24x7, Head Digital Works, and industry body The All India Gaming Federation, giving them four weeks to file their responses, with the case expected to be listed after 10 weeks. Since then, the Supreme Court has added a similar petition by the Karnataka government to the matter.

Skill-based real money gaming, which accounts for a significant portion of the Indian gaming industry's revenue, has been banned or attempted to be banned by several state governments, including Tamil Nadu, Andhra Pradesh, Telangana, Kerala, and Karnataka because gambling is a state subject.

South India is a particularly important market for skill-based games such as Rummy, which has a significant penetration in these states, industry executives tell Moneycontrol.

Sameer Barde, CEO of industry body E-Gaming Federation said that including Rummy as a game of chance is "directly in violation of the Supreme Court judgments and also the recent judgment of the High Court of Madras"

"Rummy being a game of skill has been settled by the Supreme Court and has been held to be a protected trade under Article 19(1)(g) of the Constitution...In its detailed judgement, the Honorable High Court of Madras reaffirmed the preponderance test for distinguishing between games of skill and games of chance especially in the context of rummy, reinforcing that both rummy and poker are games of skill" he said.

Meanwhile, another skill gaming industry body The All India Gaming Federation has urged the Tamil Nadu government to reconsider the ordinance, saying it will impact the overall business in the sector.

"What this ordinance in effect does is treat and conflicts games of skill as gambling and games of chance. This is disappointing as it disregards the six decades of established legal jurisprudence and also the recent judgment of the Madras HC which struck down a similar law" said Roland Landers, CEO of The All India Gaming Federation.

Landers said they have been engaging with the government to understand their concerns and have also made them aware of the "proliferation of offshore gambling websites and apps which flourish when constitutionally protected India apps are banned. We had provided various consumer protection and other measures which stop short of an outright ban. In such a scenario this is unfortunate"

"Instead of waiting for the SC judgment and in the meantime respecting the categorical decision by their own HC, they seem to have taken another unconstitutional decision which will eventually only benefit online gambling operators" he said.

Landers also mentioned the ban will push "more and more people towards illegal offshore websites".

Jay Sayta, a technology and gaming lawyer said the ordinance is likely to be challenged in courts since "it is contrary to judgments and well-established jurisprudence on games of skill"

"The definition of online gambling and online games of chance as well as artificially deeming poker and rummy as online games of chance in the new Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Ordinance, 2022 goes against past judicial precedents and court rulings" he said.

New online gambling law

MK Stalin, who took office as Tamil Nadu chief minister in May 2021, set up a five-member committee led by retired Justice K Chandru to analyse the negative effects of these games and make recommendations for a new law prohibiting "online gambling games" on June 10, 2022.

In its report submitted on June 27, the committee had classified online gaming into two types: one with “minimal or negligible randomness factor” and “another having random event or count generators which are pseudo random and are addictively designed”. It had recommended to regulate the former and ban the latter.

The government stated that it also solicited feedback from seventeen stakeholders including representatives from the online gaming industry, think tanks, political parties, players association and social activists as well as the general public via email in order to draft the ordinance with advice from the state law ministry. On September 26, a draft ordinance was presented to the state cabinet for approval.

The ordinance, called Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Ordinance, 2022, classifies gaming operators as local and non-local gaming operators. Local gaming operators are companies whose services are hosted in Tamil Nadu as well as central management and control of service is in the state. These operators can apply for a three-year license to offer certain online games.

Meanwhile, non-local gaming operators will have the onus to conduct due diligence that its customers are not physically present in Tamil Nadu by collecting their personal details, apart from ensuring the service is geo-blocked in the state.

The ordinance also mentions that the state will establish an authority called Tamil Nadu Online Gaming Authority. The authority will have powers to regulate online games, issue registrations and oversee the functioning of local online gaming providers, identify games of chance for suspension, and resolve any grievances or complaints received against any gaming provider.

The authority will have a chairperson who is an officer, retired from a post not below the rank of Chief Secretary, and four members, including an officer, who has retired from a post not below the rank of Inspector General of Police, an expert in the field of Information Technology, an eminent psychologist and an expert in the field of online gaming.

Central regulation

Meanwhile, the Indian government is also considering regulating the burgeoning online gaming industry.

In May 2022, the government set up a seven-member inter-ministerial task force chaired by Rajeev Chandrasekhar, minister of state for information technology, to work on regulations for the online gaming industry and to identify a nodal ministry for the sector.

The minister has held multiple rounds of discussions with skill-gaming platforms, industry associations, lawyers and gamers who have sought a light-touch self-regulatory policy framework.