Supreme Court directs Andhra Pradesh High Court to Review if Online Rummy is a “Game of Skill or Chance” after Considering Committee Report and IT Rules 2023.

It is undeniable that there are no clear regulations for the entire online rummy industry. There needs to be a firm legal framework in place regarding its legality, regulations, or taxes. Since online rummy has become so popular, there has been an increase in people’s curiosity about whether the game is legal, specifically whether it falls under the legal definition of “game of skill” or the category of betting or gambling. Online rummy raises legal concerns since these games typically involve real money transactions and are frequently compared to betting and gambling.

The Supreme Court has ordered the Andhra Pradesh High Court to re-examine matters about online rummy in light of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023, which the Central Government recently implemented.

The State Government was ordered by the Andhra Pradesh High Court to form a committee to look into the nature of online rummy gameplay in an order that was issued on March 31, 2023. This study sought to ascertain whether online rummy should be categorized as a skill-based game or a game of chance. In response, despite the order’s temporary nature, the State of Andhra Pradesh petitioned the Supreme Court with reservations regarding the High Court’s conclusions on Issue No. 1. The State argued that the Andhra Pradesh Gaming Act, 1974, which governs games of chance, conflicts with the High Court’s position on the game’s skill-based nature.

The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023, are rules notified by the Ministry of Electronics and Information Technology (MeitY) on April 6, 2023. The rules amend the Information Technology (Intermediary Guidelines) Rules, 2011, and the Information Technology (Code of Ethics for Intermediaries) Rules, 2021. The main changes introduced by the amendment rules are:

• The definition of “intermediary” has been expanded to include online gaming platforms. This means that online gaming platforms will now be subject to the same regulatory requirements as other intermediaries, such as social media platforms and search engines.
• A new provision has been added that allows for the exemption of games of skill from the definition of gambling. This means that online rummy, poker, and other games considered to be games of skill could potentially be exempted from state laws prohibiting gambling.
• A new provision has been added that requires intermediaries to take “reasonable steps” to prevent disseminating fake or misleading information about the government. This provision aims to curb the spread of misinformation on social media and other online platforms.
• Intermediaries have informed users of their rules, regulations, privacy policies, and user agreements. This is intended to make it easier for users to understand their rights and responsibilities when using online platforms.

The amendment rules have been met with mixed reactions. Some stakeholders have welcomed the changes, arguing that they will help to regulate the online gaming industry and protect users from harm. Others have expressed concerns that the rules are too broad and could be used to censor content or restrict freedom of expression.

The amendment rules are still relatively new, and it still needs to be clarified how they will be interpreted and implemented by the government and the courts. It remains to be seen how the rules will impact the online gaming industry and the freedom of expression on social media.

1. The Andhra Pradesh High Court ruled in November 2015 that playing rummy was legal and within the parameters of the Constitution because it is a game of skill. However, Andhra Pradesh outlawed all real money online gaming in September 2020 by amending the Andhra Pradesh Gaming Act, 1974, and enacting a subsequent ordinance.
2. State Chief Minister YS Jagan Mohan Reddy wrote to Ravi Shankar Prasad, Union Minister for Electronics and Information Technology and Law & Justice, in October 2020, requesting his assistance in getting all internet service providers (ISPs) to order the blocking of 132 gambling websites that are currently accessible from Andhra Pradesh.
3. Several online gaming companies submitted petitions to the High Court in November 2020 contesting the ban.
4. In December, the state assembly approved the Andhra Pradesh Gaming (Amendment) Bill 2020.
5. On January 31, 2023, the Andhra High Court acknowledged the potential for an excessive and arbitrary ban on online rummy during a hearing of the petitioners versus the state. It brought up worries about fraud and manipulation in the digital version. The court noted the lack of evidence designating online rummy as a “game of skill” or “game of chance,” even though traditional rummy has been established as a “game of skill” through prior judgments.
6. The court urged the government to set up a committee and establish a clear distinction between games of skill and games of chance while comparing the skill components of online and offline rummy to protect the constitutional right to freedom of trade and commerce, which is outlined in Article 19 (1) (g).
7. In light of this, the Supreme Court’s ruling on Monday gave the Andhra Pradesh government sole authority to consider and determine how to classify online rummy.

The case concerns online game developers who argued that online rummy is a skill-based game similar to physical rummy and challenged the amendments to several sections of the Andhra Pradesh Gaming Act, 1974. They took issue with the revised Section 15, which applies the Act’s harsh penalties to skill-based games with stakes.

If rummy is a game of skill or chance, whether skill-based games are protected by Article 19(1)(g) of the Indian Constitution, and whether the regulation of such games falls within the legislative purview of the state are among the questions that the Andhra Pradesh High Court first formulated for consideration. Ultimately, the High Court acknowledged that there wasn’t enough data to classify online rummy as a game of skill or chance. Because of the importance of this finding for the relevant legal considerations, the High Court established a committee to determine the nature of the game.

Senior Advocate Sajan Poovayya argued on behalf of the respondents that the High Court’s decision was still up for debate because it had only called for a report to be considered. He also emphasized that the Central Government had established regulations permitting particular games.

Senior Attorney Kapil Sibal, who argued on behalf of the State of Andhra Pradesh, refuted this claim by claiming that the legal issue had already been resolved. He pointed out that the High Court’s position implies that online rummy cannot be outlawed if it is not considered a game of chance. He also voiced concerns about the game’s open accessibility, potential harm to children, and financial ramifications.

Justices J.K. Maheshwari and K.V. Viswanathan were on a division bench that gave the Andhra Pradesh High Court instructions. The bench advised the High Court to revisit the situation based on the committee’s report and the most recent Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023. The bench emphasized the significance of an objective assessment disassociated from earlier conclusions.

The Supreme Court urged the government to set up a committee and establish a clear distinction between games of skill and games of chance while comparing the skill components of online and offline rummy to protect the constitutional right to freedom of trade and commerce, which is outlined in Article 19 (1) (g).

In light of this, the Supreme Court’s ruling on Monday gave the Andhra Pradesh government sole authority to consider and determine how to classify online rummy. This action might set a precedent for the larger industry and significantly impact the state’s online gaming regulation. If the online rummy companies win their writ petitions in the High Court, the court’s order won’t take effect for three weeks. This will give the state government time to file a new appeal with the Supreme Court on the legal issue.

The bench voiced concerns about addiction and children using online gaming websites. The court noted that in light of the provisions of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023, which the central government notified, the state government needs to reevaluate online rummy. Following challenges to similar online gaming restrictions imposed by the states of Tamil Nadu, Karnataka, and Telangana, all of which are currently pending a joint hearing with the Apex Court, this is the fourth appeal regarding real-money online gaming to be listed in the Supreme Court.

The degree to which a game involves a “game of chance” or a significant “degree of skill” determines whether it falls under the purview of betting or wagering. A ban shouldn’t be placed on an online game if it requires significant skill. The Supreme Court’s most recent guidance, which considers the committee’s upcoming conclusions and the updated IT rules, aims to resolve the skill-chance controversy surrounding Online Rummy. This could serve as a model for the broader industry and greatly impact how the state regulates online gambling.