This is a guest contribution by Mukesh Choudhary, is the Editor in Chief of http://OnlinePokerNews.in. If you would like to submit a contribution please contact Bill Beatty for submission details. Thank you.
This month, Nagaland became the first Indian state to regularize the online games of skill such as poker, rummy and fantasy sports after its legislative assembly passed The Nagaland Prohibition of Gambling and Promotion of Online Games of Skill Bill, 2015. Once signed and approved by the Governor of the state, this will become the first law in the country addressing the booming industry of skill games for stakes. Nagaland will establish a licensing regime for the existing companies and operators of such games in the country as well as will open doors for the new establishments in the same domain of business. On one hand, this law will permit games of skill with real money and will prohibit any games of chance like Teen-Patti, online casino etc. on the other hand.
For better understanding of the legal and tax aspects of the bill, we consulted two law firms which have expertise in gaming and gambling laws in India. We took inputs from Mr. Vaibhav Gaggar, Managing Partner of law firm, viz; M/s. Gaggar& Associates, Solicitors & Attorneys, who are the leading legal experts/ law firm dealing with Gaming/ Gambling laws in India. Another key contributor in decoding this law is Mr. Nishith Desai from Nishith Desai Associates.
A Big Boost to the Thriving Poker Industry of India
“This Bill being the first of its kind in India and perhaps even globally should give a huge impetus to the Industry in India. Most importantly, this Bill should help the Poker Industry come out of the shadows and boldly claim its place in the gaming industry in India. According to me, the Poker Industry in India is still at the tip of the ice berg and this should help the Industry do a multiple level jump as compared to where they find themselves currently. As I see the Indian market is poised for an explosive growth, almost similar to where the industry was in Europe around the late 90’s early 2000. This Bill could fuel the next revolution”, says Vaibhav.
Positive takeaways for the existing operators running games of skill
Nishith affirms in his report that the Bill adopts the “preponderance of skill” test laid down by the Supreme Court of India (“Supreme Court”) and proposes that a “game of skill” would include all games where there is a preponderance of skill over chance, including where the skill relates to (i) strategizing the manner of placing wagers or placing bets, (ii) selection of a team or virtual stocks based on analysis, or (iii) the manner in which the moves are made, whether through deployment of physical or mental skill and acumen.
Vaibhav listed the positives of this law as:
(i) It should help erase the stigma associated with Poker being gambling as this clearly spells out that poker is not Gambling.
(ii) It should bring about serious customer confidence since the technology, play, anti-fraud and anti-collusion systems etc. would be regulated and under the scanner of authorities keeping a vigil and ensuring fair play.
(iii) It should help sift the serious operators from the fly by night operators.
(iv) The various other state governments themselves alongwith the authorities would be a lot more comfortable and confident of Poker being played from their respective states knowing that it’s not gambling and it’s regulated. This would also help differentiate between the operators who are operating it as a genuine business versus certain operators who are dealing in cash and engaging in other activities which trouble the authorities.
(v) Mainstream advertising, whether online or offline should open up.
(vi) Investor confidence should increase dramatically as there’s a lot more surety and security with a license versus operating in a completely non licensed regime.
(vii) Needless harassment by vested interests or even some authorities in the past should get drastically curtailed.
(viii) In time to come this should also translate into the operating companies holding licenses to aim for public listing.
(ix) Courts all over the Country are bound to take cognizance of the Act though it would not be binding upon High Courts of other states per se. The authorities including the Courts in other States would however need to give it due weight and where a legislature in its wisdom has found certain games to be games of skill, then it’s not easy for any State authority to negate that.
Licensing Process
The State Govt. is in the process of framing the Rules currently so the processes and scrutiny levels are yet to be defined finally. Regarding the licensing process Vaibhav says, “It appears that there’s going to be a technology, legal and financial scrutiny and due diligence of the Companies as well as the people actually driving the company to ensure that there is adherence to the legislative mandate and the Rules in letter and spirit and the Licenses are given to Companies which do not fall on the wrong side of the law and are not fly by night operators”
On the geographical location of the company, Nishith expounds, “A license may be granted to a person, company or limited liability company incorporated in India, and having a substantial holding and controlling stake in India. Further, the executive decision making powers and processes would be required to be performed from within India and the technology support, including hosting and management of the website, placement of the servers would need to be within India.”
This discards the possibilities of offshore companies operating online poker in India under this law. The state government looks to encourage domestic operators to operate all games of skill in a completely legal environment.
There are many Indian and foreign companies running games of chance like casino (live and online) which might also aim to procure the license but, the law doesn’t seem allowing this. In case a licensee is found to be engaging in “games of chance or gambling activities”, it would be liable to a fine of INR 20,00,000 (approx. USD 30,000) in the first instance and may be extended to simple imprisonment in case of a repeat offender.
On the same topic, Vaibhav says, “As the Bill reads currently it does not seem like the Companies operating Casino would be eligible for the license for games of skill. Clearly, the state government is trying to create a clear delineation between Gambling and Games of Skill and therefore this level of extra precaution it seems. At the same time, certain representations seem to have been made by some Casino Companies to be treated as par with the non-casino companies and the government seems committed to consider all points of views. The decision would of course finally lie with the government only.”
Conclusion
Both the law firms – Nishith Desai Associates and Gaggar& Associates are supportive of this long due development at the legal front of this industry. Nishith says, “The Bill is definitely a positive step towards not only clearing the ambiguity on what constitutes “games of skill” but also towards a promising license regime for potential operators to set up shop.”
Upon asking how this bill will bolster the legality of games of skill in the country, Vaibhav says, “I think this will be a major step in bolstering the legalities of “Games of Skill” in India. Since the Chamarbaugwalla (1957) and Laxmanan (1996) judgments of the Hon’ble Supreme Court of India, the fact that betting or wagering on Games of skill does not amount to Gambling has been clearly stated. Despite that, every year some authority or the other tries to overlook the law. Law is what the Legislature makes and the Courts rule upon.”
“With this initiative, coupled with the Act of West Bengal and the various High Court Orders, all wings of the State seem to be echoing the same principle now. Also, this being the first of its kind legislation in the online domain, and clearly specifying what games of skill are and how it is to be assessed whether something is a game of skill or not, I see the legalities getting a lot stronger and clearer.”
After New Jersey legalized online poker in USA, the legislatures of other states like Pennsylvania are considering doing the same in coming months. Vaibhav thinks on the same lines in India, If Nagaland bill takes off as it’s expected to, then the other states would be queuing up to bring about this regime as well. However, the first mover’s advantage both for the State government in taking such a forward thinking and globally innovative step as well as for the operators who become part of the story would be huge as compared to the ones who get left out. I see a clear situation of the “Haves” and “Have -Nots” developing.
Mukesh Choudhary is the Editor in Chief of http://OnlinePokerNews.in, the leading poker news site in India and shares India specific poker news and stories on CalvinAyre.com.
