With the advent of online gaming and the perception that it has of gambling, you will see several online gaming brands bombard their potential customers with the phrase “game of skill.” They will also say that, as opposed to online games, gambling and betting is a “game of luck,” but what exactly do these terms mean?
More importantly, how do they generally relate to the online gaming industry? Why, for some bizarre reasons, do online gaming platforms that let their users play games like poker, rummy, or even place bets on fantasy leagues insist that they are games of skill and not games of luck?
Luck vs. Skill: The debate
In its most basic form, a game of luck is any game that requires no particular skill for a player to emerge victorious. The results of a game are based purely on chance or luck. Most game elements are so random that it is almost impossible for anyone other than a seasoned player to see a pattern.
On the other hand, a game of skill is precisely the opposite – a game that requires some skill from the player, be it mental insight, intellect, exceptional skill, or even brute strength. The chances of a player winning a game depends on their talent, the strategies they use, and the experience they have in that game.
The issue is that most online games that pose as a game of skill have a significant component of luck or chance. On the other hand, it is also true that games like poker, rummy, and blackjack require some skill and strategy from a user, whether a novice or a skilled player.
What does the law say?
The stance that the Government of India has taken on this sends mixed signals – on the one hand, it has recognized games like online rummy, poker, and other e-sports, which involve a significant bit of luck as games of skill, and is therefore taxing them at 18 percent. On the other hand, it is looking for ways to tax such games at 28 percent. According to the most recent GST guidelines, only games of luck will be taxed at that rate.
Then, there is the case of fantasy leagues. In any given fantasy league game, the idea is that a player will create an imaginary team comprising real-life players and bet on the team to win. While a user may use a bunch of different strategies and analyses to develop the team, they are betting on their team at the end of the day. The act of betting means that there is a bit of luck involved, that a player is taking a chance.
On two separate occasions, the Supreme Court of India has ruled that fantasy games, like online poker and rummy, are games of skill, even though several people who want these industries to be regulated and not just taxed believe these games are, in fact, games of luck.
According to a joint report by ASSOCHAM and Ernst and Young, online skill gaming has multiple unique features that led them to conclude that the industry deserves a helping hand from the Government for it to flourish. By 2023, the sector’s size is expected to reach $2 billion in India alone. Imagine the tax revenue coming in from an industry still nascent. Online gaming businesses are protected under Article 19(1)(g) of the Indian constitution – the freedom to practice any profession or to carry on any occupation, trade, or business – and operate as legitimate business entities.
Be that as it may, online gaming is facing a real perception problem for some valid reasons. It is challenging for a regular person to differentiate between a game of skill and luck. That is why online gaming platforms, especially those based on rummy, poker, or any fantasy leagues, often bend over backward to position themselves as games of skill.
That is why you will come across arguments from the online gaming lobby that these platforms are just technological products to facilitate the gaming experience for the end user. They also argue that the operators have no participation in how a particular instance of a game plays out, a claim which has repeatedly proven false.
Irrespective of what one’s stance is on whether online games like poker, rummy, and fantasy leagues are games of skill or games of luck, what one cannot deny is the fact that these games need to be regulated.