End of play – Andhra Pradesh Outlaws Real Money Gaming

Following the footsteps of its neighbouring state Telangana, effective 25 September 2020, the Andhra Pradesh Government has banned all forms of real money games in the State. This comes as a serious blow to one of the fastest growing industries in India. On 23 September 2020, the Honourable Governor of Andhra Pradesh promulgated the Andhra Pradesh Gaming (Amendment) Ordinance 2020 [Andhra Pradesh Ordinance #13 of 2020] (Ordinance) amending the Andhra Pradesh Gaming Act 1974 (AP Gaming Act). The Ordinance has made significant amendments to the AP Gaming Act and has extended its application to online gaming activities. The Ordinance prohibits all forms of real money gaming from being conducted in the state of Andhra Pradesh with immediate effect. These amendments to the AP Gaming Act have been made by promulgation of the Ordinance pursuant to the extraordinary legislative powers of the Governor under Article 213 of the Constitution of India since the AP State Legislature is currently not in session. The Ordinance will have to be tabled before both the houses of the AP State Legislature once in session and will have to be approved with or without changes within six weeks of reassembling, else it will cease to operate.

Right in the midst of India’s premier sporting event, the Indian Premier League, the timing of this development does not augur well for the Indian online real money gaming industry. At a time when advertisements by real money gaming companies have been bombarding television screens and Dream11, India’s first gaming unicorn is bankrolling the Indian Premier League as the title sponsor, the industry is set to lose the customer base in a belt that has predominantly seen a high density of online real money gaming players.

KEY CHANGES

The Ordinance has made the following key changes to the AP Gaming Act:

COMMENTS

The market value of the gaming industry in India was around INR 62billion (~US$ 845.5million) in 2019 and is estimated to go up to over INR 250 billion by 2024 (~US$ 3.4billion) (source: Statista.com). Armed with the largest youth population in the world, India remains one of the most attractive markets for online gaming. However, owing to a lack of progressive regulatory policy framework, the stakeholders (especially, the legitimate business operators) in the online gaming industry in India often face the brunt knee-jerk legislative actions, government investigations and lawsuits.

The Supreme Court of India has observed multiple times that the gaming laws in various states do not apply to games where there is a preponderance of skill over chance. Therefore, games where skill dominates/preponderates over chance typically enjoy the protection and privileges which are guaranteed to all other business, trade and profession under Article 19(1)(g) of the Constitution of India. The Ordinance appears to be in conflict with the settled position of various games being classified as ‘games of skill’ and, therefore, falling outside the purview of the gambling laws. While regulation of gaming is a state subject under the Constitution of India and the Government of Andhra Pradesh has exercised its special legislative power and promulgated the Ordinance, it needs to be seen whether the Ordinance will face the same opposition before courts as happened with the amendments that the State of Telangana made in the year 2017 in its gaming laws (which matters are currently sub judice).

Lately, various courts in India have also nudged the state governments to look into the legislative void around online gaming in the state specific legislations (refer to our ERGOs here and here). One would have expected that these nudges will make the governments look into the suggestions of various experts and stakeholders and come up with a progressive regulatory framework aiming at increasing the revenue for the governments and creating employment –especially in the present times where government coffers are depleting and unemployment is increasing. Focus should be on creating awareness and framework around responsible and legitimate gaming as a mode of entertainment (and not a source of profit or income). Given the track record and the potential of this industry, regulation (through stakeholder discourse and consultation), and not prohibition, should be the approach. Au contraire, the steps such as this Ordinance will only hurt the legitimate operators who want to operate within the bounds of law and will cease operations in states that are banning in toto all real money games.

-     Surbhi Kejriwal (Partner), Rishabh Bharadwaj (Partner) and Kevin Shah (Senior Associate)

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