POKER FACE-S BAN IN GUJARAT: Pre-empting the Legal Arguments

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By -Sakshi Pawar (Gujarat National Law University)

Poker has the feeling of a sport, but you don’t have to do push-ups.~ Penn Jillette

The Gujarat High Court is currently in the process of hearing the dispute pertaining to the legalisation of Poker. The crux is that gambling can be legalised or banned under the State List II, Entry 34 and the states have the discretion to decide which games fall under the ambit of gambling. Presently, Gujarat has banned gambling but has failed to enumerate any criteria or provide a list of games that would be called gambling (unlike West Bengal, Kerala, Nagaland and Sikkim). Therefore, it is now upon the judiciary to determine whether Poker is akin to gambling and therefore banned in the State.

Another pertinent reason to discuss various facets of the poker legalisation argument will be the recent league started by Raj Kundra called the Indian Poker League (IPL). Raj Kundra in continuing his tryst with sports leagues has now ventured into creating a Poker league in India with the aim of popularising Poker as a game (Indian Express). This league is set to be a two-day event held in October 2017 in Mumbai and has also been recognised by the International Federation of Poker (IFP). In fact, Mr. Kundra is so intent on incentivising the game that he has also secured a spot for the Indian team at the Nations Cup to be held in Oxford in December 2017.

The hearing of the Gujarat High Court which will now happen on November 23, 2017, is widely anticipated by gambling enthusiasts, investors and policymakers alike. The decision has the potential to affect the legalisation of Poker in other states as well. To discuss whether Poker should be legalised in Gujarat, I will expand on a) the legal principles and b) standards of morale which have been relied upon in other states and countries.

WHAT IS GAMBLING?

“Life, like poker, has an element of risk. It shouldn’t be avoided. It should be faced.” ~ Edward Norton

Gambling is a game consisting of consideration, chance and reward. If anyone of these elements is missing, the activity is not gambling.  Indian states have not defined ‘gambling’; so, to look at the definition of ‘gambling’ we can observe foreign .jurisprudence or Indian  Supreme Court (SC) cases. The most appropriate definition is found in the case of Charnes v. City Opera House:

“gambling” means risking any money, credit, deposit, or other thing of value for gain contingent in whole or in part upon lot, chance, the operation of a gambling device, or the happening or outcome of an event, including a sporting event, over which the person taking the risk has no control.

This definition of gambling is widely accepted by jurisdictions (in more or less the same words). The definition can be broken down in this manner:

1. risking money for gain
2. which is contingent in whole or part upon chance
3. or such an event over which the person risking has no control

Countries usually have a problem with the last aspect which pertains to placing bets on events in which you cannot reasonably foresee the outcome. This is why games of skill involving the aspects of experience, attention, personal attributes and the adroitness of the players are allowed and not considered as gambling. On the other hand, games of chance (gambling), include those games where the outcome is dependent on external factors (outside the control of the man) such as dice or roulette wheels. The allure of chance and its effects on the personal life have been mentioned below.

RISK-LOVING CITIZENS BUT RISK-AVERSE COUNTRIES?

I think one of the interesting things about poker is that once you let your ego in, you’re done for. ~ Al Alvarez

In most states and countries, the perception of gambling amongst the citizens is juxtaposed by the state’s approach towards it. My impression of Poker comes from watching my grandfather and his friends play the game on leisurely Sunday afternoons while indulging in light political discourse. This memory admittedly represents other such small-scale social gatherings where people partake in poker in a restrained fashion. The states, on the other hand, must observe it from a holistic angle where they condemn the bankruptcy and delinquency that is perpetuated by legalising gambling.

The vulnerable sections of society that get affected by gambling legalisation are the impressionable youth (1.), the low-income areas (2.) and the families related to them (3.). Further, it is not surprising that gambling addiction leads to substance abuse and substance abuse leads to more gambling (4.). Gambling is, therefore, a disruptive economic activity[2], as it cuts across the traditional channels of economic distribution. It brings in the possibility of an outflow of goods that are not scheduled by the basic social groups of society: families, clans, etc. In fact, it is a culmination of such factors that have led Goa and Sikkim (the only two states to legalise gambling) to consider barring their own locals from participating in these games (Goa made amendments which were not enforced, Sikkim proposes to amend its legislation). Therefore, India has a conservative stance towards gambling and they don’t wish to promulgate games based on chance.

A BRIEF OF THE LEGAL ANALYSIS

I’m not like a poker player. I’m not into the bluff. My way is to look someone in the eye and tell them the way I’m intending to go. My cards are always on the table. ~ Tori Amos

For those of you not familiar with the gameplay of Poker and its variants you can find the same on this Youtube link for Texas Hold ’em Poker and Wiki link for Poker and all its variants.

The intriguing part about Poker is that it requires you to place bets in the blind without knowing the cards of your opponents. Further, these cards are dealt at random. The chances of you knowing the cards after using mathematical probability are too tough (mathematical configuration in a stack of 52 is fairly high). This is why it may be considered as a game of chance and therefore akin to gambling.

However, these arguments have been disregarded by experts such as Harvard Professors and the author of Freakonomics, Steven Litt. They consider that winnings at Poker are due to the execution of acquired skills. There has been proof of people who practice playing poker as professionals and win consistently at it. Therefore, it is possible for Poker to also be considered as a game of skill.

Given below is a summary of the principles that courts have deliberated upon to try and finally decipher if it is a game of skill or chance.

THE BRITISH LEGISLATION: POORLY DRAFTED EXCLUSION CLAUSE

Life, like poker, has an element of risk. It shouldn’t be avoided. It should be faced. ~ Edward Norton

The British Parliament had a controversial stance on gambling even prior to their colonisation of India. Their prohibition of gambling was discriminatory, for it allowed the aristocrats to play it while preventing the lower classes from indulging in it (reflected in their gambling legislation in the 16th century[3]). In the 18th century, they paved the way for lower class gambling through Lotteries[4]. The consequence was a rise in the spectre of crime waves which became a cause for judicial and parliamentary concern.

A few years later, the same situation arose in India. The East India Officers around the 1800s caught a drift of the natives suffering from gambling addiction (Satta, speculation on gold, silver, cotton, number of rains for a certain period etc.) and affecting the servants of the Company with the same. These practices were viewed with alarm by the colonials and the native elite who were attempting to modernise the economy. In 1867, when the Public Gambling Act (PGA) was passed, the British stated general moral decline (bankruptcy and gamblers selling women and children) to legislate against gambling[5]. The Act had an exclusion clause which stated that all games except those of mere skill would fall under the Public Gambling Act, 1867 (section 12).

Keeping in mind the inherent discrimination in the British legislation, it was questionable as to whether the element of skill and chance was the real determinant of what constituted gambling. The discussion of skill and chance has been dealt with previously in our article on online gambling. It has been interpreted by courts now that it a ratio of these in a game which determines whether it can be considered gambling or not. That is in fact not necessarily the case as the exception of skill was used to slide in a legalisation of horse betting which was very popular in England at that time. The government’s reasoning for this was that while Satta became a problem for the lower classes, horse betting was ‘an expensive hobby of a small class that could well afford the cost and could be trusted to protect their own interests’. Since admission to clubs was expensive and the events were held rarely their regulation could be done and the chances of the aristocrats losing control and betting excessively was considered rare (they have educated after all). This makes the skill chance ratio test to determine what can be included or excluded as gambling a little questionable.

WHETHER FOREIGN JURISPRUDENCE CLASSIFIES POKER AS GAMBLING?

“A man can be the greatest poker player and he might know all the numbers, but he might get beaten by a really savvy kid who works in a grocery store, and that’s what’s so great about this game.” – James Woods

Poker as a game of chance:

1. United States: Several states in the USA have given a decision on this matter, all of them agree upon the test of preponderance of skill. Now, most of these states have also stated that Poker is, in fact, a game of chance. Let’s have a look at the reason through famous case laws Joker Club v. Hardin[6]: Most popularly cited judgment in all Poker cases. Facts of the case: The plaintiff wanted the land to be leased out to him to run a Poker club. Lessor asked him to obtain a declaratory judgment that Poker was legal in North Carolina. Importance: It is a fairly recent case and the statements of witnesses called to carry a weight in subsequent judgments. Here, four witnesses testified for the plaintiff and one for the State. Let’s look at the witnesses that came for the plaintiff. A professional poker player testified that “there are certain strategies to poker that allow a player to improve his mathematical odds over the course of a game. He indicated that while in a single hand of poker, chance may defeat a skilled and experienced player, the skilled player is likely to prevail when multiple hands are played.” Another consultant who played at tournaments agreed that in the long run, skill prevailed in a poker tournament. He mentioned a list of skills that can be acquired to win at poker such as “patience, memory, and the ability to analyse odds“. A casino manager testified that there are numerous skills needed for a player to succeed in poker as well. An amateur player stated that in his experience, poker is a game where skill prevails over chance. The plaintiff had, therefore, produced a solid list of witnesses in the form of professional player, casino manager, regular recreational player and an amateur player who agreed that skills in poker could be gained in the long run and of games with greater duration in time. For the state, a law enforcement officer who had been playing the game for 39 years appeared and he said that although poker had an element of skill, he had seen a poker tournament where someone with a 91% chance of winning had lost to someone with a 9% chance. This witnesses’ statement had more impact on the court. This is why the court didn’t look at the aspect of how much chance was involved in playing the game but whether the skill was enough to thwart the element of chance and that was not held to be true. Therefore, Poker was considered as a game of chance. In the case of D’Orio v. Startup Candy, the court thought that the element of chance rested on the amount of information that was given in the game and since it was a game of incomplete information with cards being dealt face down it was a game of chance.  In State v. Taylor, poker was considered to be a game of chance as the chance determined the outcome and “no amount of skill can change a deuce into an ace“. Moreover, in the case of One Electro-Sport Draw Poker, it was held that while “skill improved the outcome of poker” it did not determine it.
2. England: While determining the tests of skill and chance and what games are considered gambling we should be looking to England’s common law. However, that has changed since the old days, for now, gambling is legal in brick and mortar premises in the United Kingdom (UK Gambling Act, 2005, s. 1(a)) which is the very thing banned in India in the form of ‘common gaming houses’. The only restriction in England is that permissions are required to be taken for such things. Moreover, England also regulates online gambling and its Act of 2005 has always been referred to as a model for gambling laws. There is a major difference between the India and England as India excludes games of ‘mere skill’. For the UK Law that is not the test. Section 6 of UK’s 2005 Act, considers gambling to be anything which includes chance as well as skill (1968 Act as well as 2005 amendment). The prosecutor doesn’t have to show a dominance of chance. The only requirement is to show an element of chance. As per the case of R v. Kelly, the defendant was running unlicensed poker houses where poker would be played. He contested the fact that license was not needed as Poker did not fall under gambling. The court finally concluded that Poker was gambling because of the element of chance in determining the outcome of the case. There is no threshold of chance established as a mere existence of it is enough to classify a game as gambling.

Poker as a game of skill:

1. France: France has also legalised gambling and licenses are given for it. Initially, the test in France was different. They looked at the game in a mathematical manner to see if skill would dominate over chance. If this was shown to the court it would be agreed to be a game of skill. The second criterion was that of social risk, that is the stakes that are involved. If it is a low-risk game, then there won’t be a problem. However, Poker can be played with high stakes if the players are addicted to the game and that may lead to social problems. Therefore, the French Supreme Court (The Cassation court) had concluded that if poker was played for money it would be considered as a game of chance and any house hosting such games would need a license. Now, they have begun to follow the US test of preponderance. On the basis of this, the previous Cassation Court decision has been scrapped by the French Criminal Court which recently declared Poker to be a game of skill in July 2011. The court looked to the testimonies of a top-ranked professional poker player, a national champion bridge and chess player and a professor of mathematics who occasionally plays poker. The witnesses convinced the judges that with time, the good players can repeatedly win games. If chance determined the outcome then this wouldn’t have been possible. Moreover, the skill involved was high, with analysing the opponents body language and also creating deceptive body language. Therefore, they decided that skill predominated chance, making Poker legal in the country.
2. Netherlands:  Has identified it as a game of skill by a judgment in 2014, by stating that after observing the structure of the game which included the skill of bluffing, it was hard to see that it could be a game of chance.
3. Italy: Their legislation considers Poker to fall under skill gaming.

The views taken in other jurisdictions are quite similar to these and can be found on this link.

POST-INDEPENDENCE INDIA: UPHOLDS PREPONDERANCE TEST

“It’s a great battle, and it really is a battle, and there are people from all walks of life, you know, never judge anybody at the table.” ~ James Woods

Now we will discuss which of these factors taken into consideration by the foreign courts can be found in the Indian courts. The Supreme Court of India has laid down the dominant factor test in two of its cases which are the cases of State of Andhra Pradesh v. K. Satyanarayana[7] and Dr K.R. Lakshmanan v. State Of Tamil Nadu And Anr Supreme Court[8]. The Satyanarayana case held rummy to be a game of skill because the fall of the cards must be memorised and the building up of Rummy requires considerable skill in holding and discarding cards.  In the Lakshmanan Case, the issue before the Supreme Court was with regards to horse betting. The Court reiterated the test in Satyanarayana case and held it to be a game of skill as participants were required to have considerable knowledge in terms of the pedigree of the horse involved and their past performances. Thus, any judgment upon the performance of any horse requires the exercise of skill.

Four elements of the dominant factor test that can be demarcated for academic discussion are:

1. Is the contest impossible to win without skill and is there an opportunity to use the skills and information for entrants to make informed decisions?
2. Does the average player have enough skill to participate in the game?
3. Does skill determine the actual result of the game – skill should not play the role of a mere promotion of a favourable outcome?
4. Are the participants aware of the skill and criteria that will be used to determine the winner?

The final part of the analysis of the legality of poker in India address these four tests in detail.

INDIAN CASES WHICH HAVE ALREADY DEALT WITH POKER

Poker is a skill game pretending to be a chance game. ~ James Altucher

1. M/S Gaussian Network Pvt. Ltd v. Ms Monica Lakhanpal decided on September 17, 2012 –

The plaintiffs were seeking a declaration from the Delhi District Court that online poker sites were legal as per Delhi’s gambling laws. The Court’s reasoning was following the lines that poker was a game of chance and even more so if played online (explanation in our previous article). An appeal was filed in the Delhi High Court against this order but was withdrawn in fear of a negative judgment which would perpetuate a negative stigma of Poker.

There were interesting arguments made by the petitioner. They relied on surveys and studies conducted by popular mathematicians and also how Poker was taught as a course in MIT and Harvard. These popular mathematicians were Steven Litt (he wrote an article on luck v skill in Poker) and Professor Nesson from Harvard (who gave an interview on the importance of learning poker). Furthermore, examples from tournaments such as Poker World Championship were showcased which implied that it was a game of skill along with Bridge, Rummy and Billiards, for they were all governed by the International Mind Sports Organisation (IMSA) as Mind Sports or games of skill.

However, the Court relied on the foreign judgments that have stated that Poker is a game of chance to state otherwise primarily relying on the preponderance test.

2. Indian Poker Association v. the State of Karnataka decided on October 8, 2013 –

It’s a hand-span of a judgment which assumes poker to be legal and says that it will only be banned if played illegally, in a fashion that does not allow it to be played as a game of skill. The conditions when that can happen are not given. This leaves it to be a very open-ended judgment

OUR ANALYSIS

• Skill v chance: Is that the relevant test for India?

There are three factors to show that India needs to change its approach to the skill v chance debate, that is (i.) the legislative intention and (ii.) the current approach of the United Kingdom.

(i.) The legislative intent of the Britishers was to prevent the low-income families from over-indulging in gambling. The focus of the legislature was not on the skill v. chance debate. Therefore, while interpreting this provision the legislative history should be kept in mind.

(ii.) The UK test of gambling is an ‘element of chance’ that shows gambling. Whether skill or chance ‘prevail’ is irrelevant (as mentioned in the R v. Kelly case above). The Indian courts have read into the statute, the US test of dominance instead of the UK test of the mere element of chance. Since our laws come from England, proximity would require that their test is applied. That would, in essence, mean that Poker could not be legalised (it has a mere element of chance).

• If skill-chance ratio were to be applied, then would Poker pass the skill test?

The Gujarat Prevention of Gambling Act, 1887 exempts games of mere skill (section 13). The same provision was also there when rummy was legalised. While legalising rummy the court held that merely because a game dealt with random allocation of cards would not make it a game of chance. This shows a forward approach of the judiciary. If the court equates the two games, it might mean that Poker can be legalised. However, if the court does an in-depth analysis of the skill chance test alone, they make uncover a few factors which may lead them to think otherwise.

The test points to whether skill can thwart chance (as seen from several US cases). It has been shown that although skill can thwart chance with professional poker players when they play longer games but not when they play short duration games[9].  Also, it is very hard and cumbersome for this skill to come by, as it takes years to acquire. We must consider that when a common man plays the game he may not have the time and energy to invest, to actually play poker with skill. In this case, although poker is a game of skill, for a long time in India it will be played by the common recreational players in a manner where the game would pre-dominate chance. As per the M.J. Sivani And Ors v. the State Of Karnataka[10] when games of skill are played in such a manner they eventually have the purpose of the game of chance then they should be banned.

If we are to wait for so long for people to acquire skills then that can also be done in games of pure chance. A study (para 22) showed that for Electronic Gaming Machines (games of pure chance) also certain people realised which machine would yield better results because of certain factors, they also used intuition and skill to get better at the game. When the skill is such that it takes longer to acquire it should not be considered.

To conclude this argument lets answer the four elements of the dominant factor test:

(i) Is the contest impossible to win without skill and is there an opportunity to use the skills and information for entrants to make informed decisions? Although there is sufficient opportunity to use skills in a long duration game and win, there is not so much in a short game. Yes, luck can favour the one without any skill and let him win.

(ii.) Does the average player have enough skill to participate in the game? The chances are less as the number of skills are manifold and usually, a lot of time is taken to learn how to win this game.

(iii.) Does skill determine the actual result of the game – not simply some aspect of the promotion? No, as pointed out from the in the case of One Electro-Sport Draw Poker mentioned earlier, skill only promotes but cannot dictate the final outcome of the case. Remember the skill can’t turn a deuce to an ace quote?

(iv.) Are the participants aware of the skill and criteria that will be used to determine the winner? Nothing here can specifically determine the winner.

Since all the answers are inclined towards chance dominance, my conclusion would be that it would not pass the test.

• Would it be better if played only for a tournament?

The argument is that Poker can be played for a tournament where the games would be longer and only played by professionals. Oddly, in this case, as well there would be a possibility of it being played with a chance. The ‘relative skill‘ factor would come into the place where all the players are greatly skilled at playing the game and they cancel out each other (Dutch case which shows this). Then, the chance remains to govern the outcome. It is important for us to consider tournaments specifically as the present Gujarat case deals with tournament playing legalisation. Moreover, as we have mentioned earlier, there may be issues of legality that will arise eventually with regards to Raj Kundra’s Indian Poker League.

• Can poker be banned keeping in mind Article 19(1)(g)?

If it is considered as a game of gambling then it is res-extra-commercium as per the Chamarbaugwalla case and won’t be considered as a trade or profession under Article 19(1)(g). However, if it is a mixed game which is allowed by law it can be restricted under Article 19(6) as well. Here, the public interest aspect of addiction mentioned at the starting of the article can be brought into place a complete restriction on Poker. Interestingly, another aspect of addiction comes with games such as Poker which involve an element of skill. It is called the illusion of control where people think that the skill determines the outcome of the game. They find it is easier to place belief in their own skill (assuming that it plays a difference) than in games of chance. This illusion causes people to place bigger bets in the game. Therefore, they also play more frequently. The frequent playing coupled with excessive betting leads to an addiction problem.

CONCLUSION

Poker is pre-dominated by chance and would, therefore, fall under the ambit of gambling in India. This is because the finality of the outcome cannot be thwarted by skill. However, there have been recent changes in India, with regards to the Law Commission notice which requested changes that could be made to gambling laws. It would be more appropriate if India began to license gambling premises like in the UK. This less conservative stance will be appreciated by those who gamble for recreation moderately while at the same time allowing the state to earn the revenue from a burgeoning gaming market.

[1] 1957 AIR 699.

[2] p. 163.

[3] 1541 Act (33 Hen. VIII, c.9).

[4] The English State Lottery of 1731.

[5] P. 2063, 2064

[6] Court of North Carolina, May 2007, No. COA06-123.

[7] 1968 AIR 825.

[8] 1996 AIR 1153.

[9] P. 11.

[10] Para 15, Appeal (civil) 4564 of 1995.