Precincts of Electronic Sports, Betting and Gambling

   

Introduction

The recent data published by Statista.com suggests that in 2022, the global eSports market was valued at just over 1.38 billion US dollars3. Additionally, the growth of the global market revenue of the eSports industry was forecasted to be as much as 1.87 billion US dollars in 2025.4 A report titled “Ready. Set. Game On! eSports in India” by Ernst and Young and Federation of Indian Chambers of Commerce & Industry (FICCI) estimated that “the esports industry is expected to grow fourfold to INR 11 billion by FY 2025 from FY 2021″.5

Electronic sports, popularly known as eSports, in simple words, are video games that are played in a highly organised competitive environment. eSports are generally multiplayer video game competitions held between professional players, individually or as a team. It transforms online gaming into a spectator sport. The main factor or component required in an eSports tournament/competition/league is the use of skill. Several genres are associated with eSports, such as real-time strategy (e.g. age of empires), first-person shooter (FPS) games (e.g. call of duty), multiplayer online battle arena (MOBA) games (e.g. league of legends), etc.

In 2021, the International Olympic Committee (IOC) in the run-up to the Tokyo Summer Olympics, announced that it “will partner with five International Sports Federations (IFs) and game publishers to produce the olympic virtual series (OVS), the first-ever, Olympic-licensed event for physical and non-physical virtual sports”.6 This was the first stride the IOC had made towards accepting eSports as a legitimate sport. Esports is going to make its debut at the Asian Games 2022 with medals being awarded in eight games — International Federation of Football Association (FIFA) (made by EA Sports), an Asian Games version of PUBG Mobile and Arena of Valor, Dota 2, League of Legends, Dream Three Kingdoms 2, Hearthstone and Street Fighter V.7 In 2018, eSports was included in the Asian Games as a demonstration title.

However, despite the increase in the popularity and growth of eSports in India, it cannot be denied that the eSports industry is highly fragmented and undocumented, which leads to several uncertainties and confusion. The term “eSports” continues to be open to many interpretations, often being misunderstood for online gaming. In India, eSports is often confused with fantasy poker, rummy, teen patti, RMG, etc. This confusion blurs the lines between eSports, competitive gaming and fantasy sports. Additionally, the lack of a regulatory framework ensures that the area between what requires skill and where it borders on public gambling becomes obfuscated.

Game of skill v. Game of chance

Every game can either be a game of chance or a game of skill or game of skill and chance combined. The Supreme Court has itself pondered upon the difference between the game of skills and game of chance. In K.R. Lakshmanan v. State of T.N.8, the Supreme Court held as follows:

3. … Games may be of chance or of skill or of skill and chance combined. A game of chance is determined entirely or in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling of the cards, are all modes of chance. In these games the result is wholly uncertain and doubtful. No human mind knows or can know what it will be until the dice is thrown, the wheel stops its revolution or the dealer has dealt with the cards. A game of skill, on the other hand — although the element of chance necessarily cannot be entirely eliminated — is one in which success depends principally on upon the superior knowledge, training, attention, experience and adroitness of adroitness of the player. Golf, chess and even rummy are considered to be games of skill.

The Supreme Court, in the two Chamarbaugwala cases9 and in the Satyanarayana case10 clearly lay down that, (i) the competitions where success depends on a substantial degree of skill are not “gambling”; and (ii) despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of “mere skill”.

The Indian courts, while deciding the question of “skill v. chance”, have adopted the test followed by the US Courts, known as the dominant factor test. As per the test, the primary question is whether skill or chance is the dominating factor in the determination of the outcome of the game. The Supreme Court applied this test in the case of rummy (Satyanarayana case11) and horse-racing (Lakshmanan case12).

In the Satyanarayana13 case, the Supreme Court held that it cannot be said that rummy is a game of chance, and there is no skill involved in it. However, it was observed that if there is evidence of gambling in some other way or that the owners of the house are making a profit or gain from the game of rummy or any other game played for stakes, the offence may be brought home. It was held as follows:

12. … Rummy, on the other hand, requires certain amount of skill because the fall of the cards has to be memorised and the building up of rummy requires considerable skill in holding and discarding cards. We cannot, therefore, say that the game of rummy is a game of entire chance. It is mainly and preponderantly a game of skill. The chance in rummy is of the same character as the chance in a deal at a game of bridge. In fact in all games in which cards are shuffled and dealt out, there is an element of chance, because the distribution of the cards is not according to any set pattern but is dependent upon how the cards find their place in the shuffled pack. From this alone it cannot be said that rummy is a game of chance and there is no skill involved in it….

In the Lakshmanan14 case, the Supreme Court attended to a similar concern; however, in the context of horse-racing, when Tamil Nadu brought horse-racing within the definition of “gaming” by enacting the Tamil Nadu Horse Races (Abolition and Wagering or Betting) Act, 1974, even though the Public Gambling Act, 1867 provided punishment for public gambling, however, the Act did not bring within its cope the betting on horse races. The Supreme Court held as follows:

30. We have no hesitation in reaching the conclusion that horse-racing is a sport which primarily depends on the special ability acquired by training. It is the speed and stamina of the horse acquired by training, which matters. Jockeys are experts in the art of rising. Between two equally fast houses, a better trained jockey can touch the winning-post.

***

51. … Horse-racing is neither “gaming” nor “gambling” as defined and envisaged under the two Acts read with the 1974 Act and the penal provisions of these Acts are not applicable to the horse-racing which is a game of skill….

The Indian judiciary and the games of skills

The New Encyclopedia Britannica defines gambling as “the betting or staking of something of value, with the consciousness of risk and hope of gain on the outcome of a game, a contest or an uncertain event the result of which may be determined by chance or accident or have an unexpected result by reason of the better's miscalculations”. According to Black's Law Dictionary (6th Edn.), “Gambling involves not only chance, but hope of gaining something beyond the amount played. Gambling consists of consideration, an element of chance and a reward.”

The long title of Public Gambling Act, 1867 (hereinafter referred to as “Public Gambling Act”) and the Preamble of the said Act clearly show that the Public Gambling Act was passed with a view to punishing public gambling and the keeping of common gaming houses. The long title and Preamble read as follows:

Long title:

An Act to provide for the punishment of public gambling and the keeping of common gaming houses in the [United Provinces, East Punjab, Delhi] [and the Central Provinces].

Preamble:

Whereas it is expedient to make provision for the punishment of public gambling and the keeping of common gaining-houses [in the United Provinces, East Punjab, Delhi and the Central Provinces].

Section 1 of the Public Gambling Act defines “common gaming house” as follows:

Common gaming house”.—“Common gaming house” means any house, walled enclosure, room or place in which cards, dice, tables or other instruments of gaming are kept or used for the profit or gain of the person owning, occupying, using or keeping such house, enclosure, room or place, whether by way of charge for the use of the instruments of gaming, or of the house, enclosure, room or place, or otherwise howsoever.

It is worth noting that the Public Gambling Act has been drafted keeping physical enclosures in mind, and it has not been amended to include mobile phones and the internet under the definition of “common gaming house”.

Further, Section 12 of the Public Gambling Act states that the said Act would not apply to any game of mere skill. It reads as follows:

12. Act not to apply to certain games.—Nothing in the foregoing provisions of this Act contained shall be held to apply to any game of mere skill wherever played.

Thus, this makes it clear that games of chance which involve mutual consideration or are played for profit or gain would be considered gambling, whereas any game wherein luck has little to no role to play and the winner of the game is determined purely on the basis of the skill possessed by the player/team, such game would not be considered as gambling.

Furthermore, the exception of the “game of mere skill” is extremely vague and one of the reasons for discrepancies in the laws enacted by the States. No explanation of what constitutes “mere skill” has left the doors open for interpretation. The Supreme Court, as discussed in the earlier paragraphs, have determined several games, such as rummy15, horse riding16, bridge17, video games,18 etc., on the basis of the degree of skill involved.

The Public Gambling Act is a pre-independence Act and is derived from the British Gaming Act, 1845 and the Betting Act, 1853. Since betting and gambling is listed as Entry 34 of List II of the Seventh Schedule, and therefore, only the State Legislatures have the competence to make laws pertaining to betting and gambling. In the current regime, the States/Union Territories have passed enactments by adopting the Public Gaming Act, 1867.

The exemption under Section 12 of the Public Gambling Act has been adopted by States such as Delhi 19 and Maharashtra20. However, States such as Andhra Pradesh21, Assam22, Odisha23 and Telangana24 have repealed the exclusion for the game of skill.

The question of whether eSports would constitute a game of skill or a game of chance has not knocked on the doors of the Indian judiciary yet; however, the lack of regulations governing esports as a sport would pose an issue in the determination of the status of eSports. The matter became more complicated after the interpretation of the game of skill by the Supreme Court in M.J. Sivani v. State of Karnataka25. The questions before the court were whether a video game is a game and whether it is a game of skill or chance in the backdrop of the Mysore Police Act, 1963 and Madras City Police Act, 1888. The Court held that “no game can be a game of skill alone”. It went on to further state that:

11. … In any game in which even great skill is required, chance must play a certain part. Even a skilled player in a game of mere skill may be lucky or unlucky, so that even in a game of mere skill chance must play its part. But it is not necessary to decide in terms of mathematical precision the relative proportion of chance or skill when deciding whether a game is a game of mere skill. When in a game the element of chance strongly preponderates, it cannot be a game of mere skill. Therefore, it is not practicable to decide whether a particular video game is a game of skill or of mixed skill and chance. It depends upon the facts, in each case.26

The interpretation of the Court in M.J. Sivani27 case proved to be radical as it deviated from the judgments passed in Lakshmanan28 case, where the Supreme Court had divided the games into three categories, namely, the game of skill, a mixed game of skills and chance and games of mere chance. M.J. Sivani29 definitely muddied the waters for future interpretations by the courts with respect to what is a game of skill and what is a game of chance.

Recently, the Rajasthan Government issued a draft “Rajasthan Virtual Online Sports (Regulation) Bill, 2022”30 to regulate pay to participate formats of virtual online sports within the State and to provide for matters connected therewith or incidental thereto. There are several issues with the Bill such as clubbing eSports with fantasy sports. E-Sports has been defined to mean “a simulated real life domestic or internationally recognised sports and games in the form of online competitions, played over the internet, including through an internet website or a mobile application and approved from time to time by the Government or accredited sporting federations or appropriate authority as may be notified.”31 The definition itself assumes that online gaming is synonymous with eSports, which in itself is a highly wrong and problematic interpretation of the term “eSports”. Moreover, the way the Bill attempts to regulate/restrict/limit eSports will only prove to be detrimental to the growth of the sport.

Recognition of eSports as sports

The question whether eSports can be considered as sports has been a matter of debate in the past. Many are of the opinion that eSports is not a sport, however, on the other hand, the opinion seems to be that eSports qualifies as a sport in the same way video games qualify as real entertainment. Several countries have recognised esports as a sport — China's General Administration of Sports has included esports as an official sport in the country32, Russian Ministry in 2016 recognised esports as a sport discipline33. South Korea was one of first nations to recognise eSports as a legitimate sport and as a job category.34 In 2020, the Danish Tax Assessment Council ruled that “eSports is a grassroots sport on equal terms with handball, gymnastics and other association-based activities”. 35 In the same year, Commission for the Recognition of Sports of the Ukrainian Ministry for Youth and Sports, recognised eSports as a sport.36 Interestingly, South Africa has classified esports as a mind game, placing it in the same category as chess. 37 There are several eSports leagues in league of legends and other which mirror the traditional sports, in terms of competition, spectators, skill required, etc. In fact, the professional eSports athletes require a lot of training to hone their skills and abilities. It would not be out of place to state that the eSports players go through the same stress and physical exertion as the “regular sports” players. There is a specialised skill set that an eSports player has, which cannot be expected from an amateur player. Interestingly, sports leagues are also venturing into eSports. The NBA 2K League, for example, is a joint venture between the National Basketball Association (NBA) and Take-Two Interactive and is a professional eSports league featuring the best NBA 2K players in the world and is the first official eSports league operated by a US professional sports league.38 The traditional sports leagues are no longer taking esports lightly and are seeing it as a developing domain. Another reason for recognising esports as a sports is the ease in the travel and visa issuance for eSports athletes. There a lot of similarities between esports and sports and believes that eSports is a sport.

Conclusion

In a vast country like India, where there is no central legislation governing and regulating the eSports industry, the responsibility is on the shoulders of the judiciary to determine in which category esports will fall in game of skill, game of skill mixed with chance or game of chance. However, before the stage of interpretation is reached, it is paramount that the meaning of esports is made crystal clear. E-sports is neither online gaming nor fantasy sports. E-sports are video games played in the format of competitions which require a lot of skills on the part of the players. E-sports is picking up its pace and is being recognised by several international organisations such as International Olympic Committee; however, given the lack of a unified global outlook it is important that India continues to not only adopt a conventional global outlook, but also builds the legal contours of esports that protects all involved stakeholders, and not be contrived with other forms of gaming. It is pivotal that the end consumer, the gamer or esports player, is protected at all costs.

Federation of Electronic Sports Associations of India (FEAI) has been meeting with various stakeholders to ensure growth of esports in the country. FEAI recognises esports to be an important part of the gaming industry and is focused on bringing esports to the forefront.

E-sports, first and foremost, needs to be recognised as a sport, and to achieve that, a central legislation governing esports has become a need of the hour.


† Advocate-on-Record, Supreme Court of India. Author can be reached at siddharth.batra@satramdass.com

†† Senior Associate, Satram Dass B & Co. Author can be reached at archna.yadav@satramdass.com

3. Statista, Revenue of the Global eSports Market 2019-2025 (5-7-2022), <https://www.statista.com/statistics/490522/global-esports-market-revenue/>.

4. Statista, Revenue of the Global eSports Market 2019-2025 (5-7-2022) <https://www.statista.com/statistics/490522/global-esports-market-revenue/>.

5. FICCI & EY, Ready. Set. Game On! Esports in India (June 2021).

6. International Olympic Committee, IOC makes Landmark Move into Virtual Sports by Announcing First-Ever Olympic Virtual Series (22-4-2021) <https://olympics.com/ioc/news/international-olympic-committee-makes-landmark-move-into-virtual-sports-by-announcing-first-ever-olympic-virtual-series>.

7. International Olympic Committee, Asian Games 2022: Esports to make Debut; FIFA, PUBG, Dota 2 among eight medal events (9-9-2021) <https://olympics.com/en/news/fifa-pubg-dota-2-esports-medal-events-asian-games-2022>.

8. (1996) 2 SCC 226, 233.

9. See State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699 and R.M.D. Chamarbaugwalla v. Union of India, AIR 1957 SC 628.

10. State of A.P. v. K. Satyanarayana, AIR 1968 SC 825.

11. AIR 1968 SC 825.

12. (1996) 2 SCC 226.

13. AIR 1968 SC 825.

14. (1996) 2 SCC 226, 249.

15. Satyanarayana, AIR 1968 SC 825.

16. (1996) 2 SCC 226.

17. Satyanarayana, AIR 1968 SC 825.

18. M.J. Sivani v. State of Karnataka, (1995) 6 SCC 289, para 11.

19. Delhi Public Gambling Act, 1955, S. 13.

20. Bombay Prevention of Gambling Act, 1887, S. 13.

21. Andhra Pradesh Gaming (Amendment) Act, 2020.

22. Assam Game and Betting Act, 1970.

23. Orissa Prevention of Gambling Act, 1955.

24. Telangana Gaming (Amendment) Act, 2017.

25. (1995) 6 SCC 289, 299.

26. M.J. Sivani, (1995) 6 SCC 289, para 11.

27. (1995) 6 SCC 289.

28. (1996) 2 SCC 226.

29. (1995) 6 SCC 289.

30. Rajasthan Virtual Online Sports (Regulation) Bill, 2022, available at <https://finance.rajasthan.gov.in/PDFDOCS/REVENUE/10746.pdf>.

31. Rajasthan Virtual Online Sports (Regulation) Bill, 2022, S. 2(h),.

32. Esports Insider, “Esports Around the World: China”, 17-5-2022, can be accessed from <https://esportsinsider.com/2022/05/esports-around-the-world-china/>

33. Samuel Lingle, “Esports Insider, Esports is now a Sport in Russia”, 9-6-2016, can be accessed from: <https://dotesports.com/general/news/esports-is-a-sport-russia-3412>; Also see: <http://publication.pravo.gov.ru/Document/View/0001201606070022>

34. Esports Insider, “Esports Around the World: South Korea”, 3-5-2022, can be accessed from <https://esportsinsider.com/2022/05/esports-around-the-world-south-korea/>

35. ISCA, “Landmark Decision: Esport is an Association-Based Grassroots Sport — And Should be Exempt from VAT”, 2-7-2020, can be accessed from <https://www.isca.org/news-detail/815/landmark-decision-esport-is-an-association-based-grassroots-sport-and-should-be-exempt-from-vat#:~:text=Esport%20is%20a%20grassroots%20sport,a%20landmark%20and%20important%20decision>; Also see: Esports Insider, “Esports Around the World: Denmark”, 17-4-2022, can be accessed from <https://esportsinsider.com/2022/04/esports-around-the-world-denmark/>.

36. Niji Narayan, “European Gaming Industry New: Ukraine Approves Esports as an Official Sport”, 15-9-2002, can be accessed from <https://europeangaming.eu/portal/latest-news/2020/09/15/77707/ukraine-approves-esports-as-an-official-sport/>; Also see: Thomas Lace, “Esports Insider, Esports Gains Official Government Recognition in Ukraine”, 10-9-2020, can be accessed from <https://esportsinsider.com/2020/09/esports-gains-offical-government-recognition-in-ukraine/>.

37. Esports Insider, “Esports Around the World: South Africa”, 24-5-2022, can be accessed from: <https://esportsinsider.com/2022/05/esports-around-the-world-south-africa/>.

38. NBA 2K League, accessed from <https://2kleague.nba.com/league-info/>.

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