Nagaland law facilitates online betting in India; wagering on rummy, virtual sports to be legal

The Nagaland Legislative Assembly is reported to have passed the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Bill, 2015 recently. This will legalise online games such as poker and rummy when played for money.

By Asheeta Regidi

The terms ‘gambling’ and ‘betting’ generally bring casinos and horse races to mind. Technology has now made these possible in a whole new form, through websites, mobile phones and televisions. The regulation of such online gambling and betting is still a developing area in India. The Nagaland Legislative Assembly is reported to have passed the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Bill, 2015 recently. This will legalise online games such as poker and rummy when played for money.

The Nagaland Bill is currently awaiting the assent of the Governor of Nagaland, after which it will become a law. Once this assent is received, Nagaland will become the second state in India to regulate online gaming, after Sikkim. The final version of the Nagaland law is as yet unavailable, it will have to be seen what changes, if any, have been incorporated into it.

Betting, Wagering on Chess, Rummy, Virtual Fantasy Sports will be Legal

Sikkim’s Online Gaming (Regulation) Act, 2008, made it the first state in India to legalise online gaming and betting. This law regulates games like roulette, blackjack and poker, and sports betting on games like football and cricket, conducted online. The Nagaland Bill gives a list of games of skill, such as chess, bridge, poker, rummy, auctions, virtual fantasy sports and virtual team selection games that can be legally played for money. The Bill also provides that more such games can be added to this list on a representation made by any concerned party. This means, for example, that if a gaming operator is interested in operating a particular game of skill which is not listed, he can appeal to the Nagaland State Government to have it included.

The Nagaland Bill focuses specifically on ‘games of skill’. ‘Games of skill’ refers to games which involve the use of a person’s skill. For example, the uses of mental acumen or physical skill in games like chess and billiards. ‘Games of chance’, on the other hand, refers to games where winning is purely a matter of chance, or luck, such as the card game of ‘Teen Patti’.

For a gaming operator, understanding the difference between these is crucial for the legality of a gaming operation under online gaming laws. A game which is ‘preponderantly’ a game of skill, will be legal. If the game is improperly structured, it might fall under the purview of gambling, which will make it illegal. Under Indian laws, gambling or the playing of games of chance for money is illegal. Where games of skill are concerned however, the position is not clear. In State of Andhra Pradesh vs K. Satyanarayana, rummy was held to be a game of skill.  In Dr. K.R. Lakshmanan v. State of Tamil Nadu, it was held that horse racing was a game of skill, and playing it for money will not be illegal. As a result, the general assumption was that rummy, being a game of skill, can also be played for money. In a recent ongoing case, M/s. Gaussian Networks Pvt Ltd (“Petitioners”) v. Monica Lakhanpal and State of NCT, a District Court in Delhi ruled that online rummy played for stakes is illegal. The final outcome of this case is much awaited for its impact on the playing of games of skill for money.

All India Operations will be Permitted

In order to conduct gaming operations, the operator will have to apply for a license. The license granted under the Nagaland Bill does not restrict gaming operations to the territorial limits of Nagaland. The gaming operator may conduct operations from anywhere in India, and the games can be played by any person in India. This provision is a major cause of excitement in the gaming industry. The only restriction is that such games should not be prohibited by either the state where the gaming operations are located or the state from which individual players are playing. For example, Assam and Orissa do not permit games of skill under their gaming laws. If an objection is expressed by a state, online gaming will have to be stopped. For example, the Supreme Court recently upheld a ban by the Kerala Government on online lotteries conducted from Sikkim.

Gaming operations have commenced in Sikkim, and several licenses have been obtained. Similar to the Nagaland Bill, the Sikkim law had earlier permitted operators to offer games to people anywhere in India through their websites. However, via an amendment in 2015, online gaming operations were restricted to the physical limits of gaming parlours located within Sikkim, using intranet gaming terminals. Thus online gaming operations in Sikkim can no longer be accessed by persons outside the State. This move was expected to negatively impact gaming operators in Sikkim, who made huge investments in the hope of cashing in on the revenues from having players from all over India. Such operators will now turn to Nagaland for continuing their plans of all India operations. It is yet to be seen if the Nagaland law will also take the same turn as the Sikkim law and restrict operations within its State.

Legality of Taking Profits

The Nagaland Bill permits gaming operators to take profits, in the form of taking a percentage of the winnings of the players. It also permits the operators to obtain revenue by means of advertisements. In State of Andhra Pradesh vs K. Satyanarayana, the Supreme Court held that if any profits were being taken from the winnings, then it could be gambling, and therefore be  illegal. The decision was worded in an ambiguous way, and the position on the taking of profits was unclear. The more recent case of Mahalakshmi Cultural Association vs The Director, Inspector General of Police & Ors, before the Supreme Court, was a highly awaited judgment, which was expected to resolve this ambiguity. Unfortunately, this case was withdrawn and the issue remains unresolved.

Do State Gambling Laws Apply to Online Gaming?

Many states in India have legislations regulating gaming and gambling in general, for example, the Bombay Prevention of Gambling Act, 1887 and the West Bengal Gambling and Prize Competitions Act, 1957.  Generally, games of skill are exempted from the purview of these laws. The structuring of these laws indicates that the lawmakers had gaming in physical premises in mind, unlike online games, which do not require physical premises. As a result, whether these laws will affect online games, such as those being conducted from Sikkim and now from Nagaland, is not clear.

Under the Constitution of India, each individual state has been allowed to enact its own laws on the subject. This has, however, resulted in several discrepancies in each state’s individual approach to the subject, and also several unresolved issues. Restricting accessibility of online games only to players from states where such games are legal presents a different set of problems. A national legislation bringing uniformity and clarity in this field will be required as a solution to these issues.

The author is a lawyer with a specialisation in cyber laws and has co-authored books on the subject.

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