Gaming in India: overview

Legislative framework of gambling regulation

Legislative framework of gambling regulation

◊ Status: Law stated as at 01-Nov-2016 | Jurisdiction: India

Overview

images 1. What legislation applies to gambling?

Gambling

The Constitution of India allocates law-making powers between the central government (that is, the federal government) and the state governments. The Constitution empowers state governments exclusively to regulate all matters relating to betting and gambling. The Public Gambling Act 1867 (Gambling Act) is the federal enactment on gambling, and has been adopted by certain states of India. The other states have enacted their own legislation to regulate gaming and gambling activities within their territories (state enactments).

Examples of state enactments include the:

  • Bombay Prevention of Gambling Act 1887.

  • Andhra Pradesh Gaming Act 1974.

  • Delhi Public Gambling Act 1955.

  • West Bengal Gambling and Prize Competitions Act 1957 (WB Gambling Law).

The Gambling Act and state enactments were enacted before the development of online gambling models and essentially targeted land-based gambling. Recently, two Indian states, Sikkim and Nagaland, have enacted laws that specifically deal with online gaming and gambling.

Lotteries

Under the Constitution of India, the central government has the power to enact laws to regulate lotteries. Lotteries are expressly excluded from the scope of the Gambling Act and the state enactments. They are governed by the Lotteries (Regulation) Act 1998 and the Lottery (Regulation) Rules 2010 (Central Lottery Laws). The Central Lottery Laws allow the state governments to organise, conduct or promote a lottery, subject to the conditions specified in the Central Lotteries Laws. To this end, several states in India have issued rules to regulate/ban lotteries in their territories. Private lotteries are not permitted in India.

Casinos

There is no federal legislation that regulates casinos in India. The state enactments regulate casinos in India, including:

  • State of Sikkim: Sikkim Casinos (Control and Tax) Act 2002 and Sikkim Casino games (Control and Tax) Rules 2007.

  • States of Goa, Daman and Diu: Goa, Daman and Diu Public Gambling Act 1976.

  • State of Maharashtra: the Maharashtra Casinos (Control and Tax) Act 1976 was introduced, but never came into effect. In 2015, in response to a public interest litigation, the Bombay High Court directed the state government of Maharashtra to take a decision on whether or not to allow casinos (in Maharashtra) within six months. However, to date, the state government of Maharashtra has not taken a decision on this issue, despite the expiry of the six-month deadline.

Prize competitions

Prize competitions are games and contests such as crossword puzzle competitions, missing-word competitions, picture prize competitions or any other competitions for which monetary or other prizes are offered based on the building-up, arrangement, combination or permutation of letters, words or figures. Prize competitions are regulated by various prize competition laws. The federal enactment on the subject is the Prize Competition Act 1955 (Prize Competition Act). The Prize Competition Act has only been adopted by certain states, such as Maharashtra, Tamil Nadu, Orissa, Punjab and Gujarat. Some states have enacted their own laws to regulate prize competitions in their territories, such as the state of West Bengal.

Online gambling

The Gambling Act and most state enactments were introduced before the emergence of the internet. Therefore, the provisions of these laws do not expressly contemplate online gambling. The states of Sikkim and Nagaland are the only states to have adopted specific legislation that permits and regulates online gambling, namely the:

  • Sikkim Online Gaming (Regulation) Act 2008 and the Sikkim Online Gaming (Regulation) Rules, which encompass games such as poker, roulette and blackjack.

  • Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act 2015 and the Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Rules 2016, which regulate games of skill such as chess, sudoku, quizzes, binary options, bridge, poker, rummy, nap, spades, auction, solitaire, virtual golf and virtual racing games.

See Question 2, Online gambling for more details.

Taxes, foreign investment and exchange control

The Foreign Direct Investment Policy of India (FDI Policy) prohibits FDI in lottery businesses, including government lotteries, private lotteries, online lotteries and gambling and betting (including casinos). The FDI Policy also prohibits foreign technology collaboration in any form (including franchising, trade mark and brand name licensing and management contracts) for lottery businesses and gambling and betting activities.

Additionally, India’s exchange control rules, in particular the Foreign Exchange Management (Current Account Transaction) Rules 2000 (Current Account Rules) prohibit the remittance abroad of winnings from lottery, racing/riding or any other hobby. Remittances for the purchase of lottery tickets, football pools, sweepstakes and so on are also prohibited. Although the term “hobby” has not been defined, remittances of winnings from games such as poker or rummy are likely to be caught by the prohibition.

The Income Tax Act 1961 provides for the taxation of income received by players in the form of winnings from lotteries and other card games.

See Question 6 for details on relevant anti-money laundering legislation.

Content-related laws and advertising

Games and gaming websites in India, and gambling operators’ websites in the states of Nagaland and Sikkim, are subject to content-related laws. For example:

  • The Indian Penal Code, the Indecent Representation of Women (Prohibition) Act 1986 and the Information Technology Act 2000 penalise obscene content.

  • The Young Persons’ (Harmful Publications) Act 1956 prohibits violence in games that could corrupt the minds of young persons (under the age of 20).

  • The Copyright Act 1957, the Trade Marks Act 1999 and the Patents Act 1970 govern IP issues related to games (such as use of trade marks, copyright, design rights and patent rights in the technology infrastructure of web operators).

The advertising of gambling is regulated by the Telecom Commercial Communications Customer Preference Regulations 2010,which prohibit unsolicited commercial communications to persons that have opted out of receiving them. These regulations also provide that that telemarketing can only be carried out by operators that obtain a licence from the Telecom Regulatory Authority of India. See Question 15 for more details on the legislation that applies to the advertising of gambling.

Definitions of gambling

2. What is the legal definition of gambling in your jurisdiction and what falls within this definition?

General definition

Games of mere skill are excluded from the scope of the gambling state enactments and therefore do not amount to gambling. The Supreme Court held that a game of skill is one that is mainly and preponderantly a game of skill (State of Andhra Pradesh v K. Satyanarayana and Ors). Therefore, a game of skill can include some element of chance, provided that it is preponderantly a game of skill.

Land-based gambling

“Gambling” is defined under certain state enactments as the act of wagering or betting. However, this definition does not include both:

  • Wagering or betting on a horse race when this wagering or betting takes place on the day on which the race is to be run and in an enclosure run by the stewards controlling the race with the consent of the state government for that purpose.

  • Lotteries.

The Public Gambling Act 1867 (Gambling Act) defines gambling by reference to activities taking place in physical premises or a “common gaming house”, and does not contemplate online gambling. A “common gaming house” is any house, walled enclosure, room or place in which cards, dice, tables or other instruments of gaming are kept or used for the profit or gain of the person owning, occupying, using or keeping this house, enclosure, room or place, whether by way of charge for the use of the instruments of gaming or of the house, enclosure, room or place, or otherwise.

Most states have also adopted this definition of gambling, and adopted specific definitions of “instruments of gaming” (including Andhra Pradesh, Delhi, Goa and Assam). For example, the Delhi Public Gaming Act 1955 defines “instruments of gaming” as any of the following:

  • Any article used or intended to be used as a subject or means of gaming.

  • Any document used or intended to be used as a register, record or evidence of any gaming.

  • The proceeds of any gaming activity.

  • Any winning of prizes in money or otherwise distributed or intended to be distributed in respect of any game.

The definitions of instruments of gaming under other state enactments largely mirror this definition.

Online gambling

There are generally no specific definitions of online gambling under the state enactments. However, skill-based or preponderantly skill-based games can be played online in certain states in India under a licensing regime.

The Sikkim Online Gaming Act 2008 defines “online games” as any of the following:

  • Any game of chance or involving a combination of skill and chance, including but not limited to poker, roulette and blackjack.

  • Any game played with cards, dice or with any machine or instrument by means of money or money’s worth, as may be prescribed from time to time.

The state of Nagaland regulates licences for games of skill that can be conducted online under the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act 2015 (Nagaland Online Gambling Act). Sikkim also introduced a licensing regime for online games under the Sikkim Online Gaming (Regulation) Act 2008 (Sikkim Online Gaming Act).

The Nagaland Online Gambling Act defines gambling as including wagering or betting on games of chance, but not wagering or betting on games of skill. The Nagaland Online Gaming Act clarifies that games of skill are games that involve a preponderance of skill over chance. The Nagaland Online Gaming Act lists the games that are deemed games of skill by the government of Nagaland (these are chess, sudoku, quizzes, binary options, bridge, poker, rummy, nap, spades, auction, solitaire, virtual golf, virtual racing games (including virtual horse racing and virtual car racing), virtual sports, virtual fighting, virtual wrestling, virtual boxing, virtual combat games, virtual adventure games, virtual mystery and detective games, virtual stock/monopoly games, virtual team selection games and virtual sport fantasy league games). In addition, the following games are also included in this list:

  • Games that have been declared or determined to be games of skill by Indian or international courts or other statutes.

  • Games for which there are domestic and international competitions and tournaments.

Additionally, the Finance Commissioner of Nagaland or any authority empowered on their behalf can add any game that meets the above definition to the list of games of skill, either on their own motion or at the request of any party (Nagaland Online Gambling Act).

Regulatory authorities

3. What are the regulatory or governmental bodies that are responsible for supervising gambling?

Enforcement authorities

In India, gambling is regulated by the state governments. Therefore, the police departments of state governments are largely responsible for enforcing the gambling state enactments. As states can organise, conduct and promote lotteries and issue rules in this regard, most states have legislated to give search and seizure powers to their police departments to ensure compliance with the federal lottery laws. Certain criminal investigation agencies, such as the Central Bureau of Investigation and Enforcement Directorate, have also been involved in the investigation of cases relating to sports betting.

Licensing authorities

Certain states in India have enacted provisions for the licensing of casinos. In these states, licence applications are made to the authorities appointed to that effect, for example:

  • In the state of West Bengal, a permit can be obtained from the:

    • Commissioner of Police, if the permit is sought in Kolkata; or

    • District Magistrate or Sub-divisional Magistrate, if the permit is sought elsewhere in the state.

  • In the state of Sikkim:

    • an application for a casino licence application must be made to the authorised officer in the Directorate of Sikkim State Lotteries of the Finance, Revenue and Expenditure Department; and

    • an application to conduct online games must be made to the state government.

  • In the state of Nagaland, an applications for a licence to conduct online gambling activities must be made to the Director of Lotteries (Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act 2015 (Nagaland Online Gambling Act) and Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Rules 2016).

Supervisory authorities

There are additional officers that are responsible for supervising the conduct of licensees, for example:

  • In the state of Sikkim:

    • the authorised officer has the same powers as the police for conducting inquiries relating to any offences under the Sikkim Casinos (Control and Tax) Act 2002 and the Sikkim Casino Games Commencement (Control and Tax) Rules 2007; and

    • an authority consisting of technical, administrative and legal officials is responsible for overseeing and regulating the functions of gaming organisations and companies involved in online games and sports (Sikkim Online Gaming (Regulation) Act 2008 and Sikkim Online Gaming (Regulation) Rules).

  • In the state of Nagaland, an Expert Committee is responsible for:

    • ensuring that the operation of games of skill comply with the provisions of the Nagaland Online Gambling Act;

    • analysing developments in the sector of games of skill; and

    • suggesting amendments to the Nagaland Online Gambling Act to the state government of Nagaland.

Gambling products

4. What gambling products have been specifically identified by legislation, and what different requirements have been established for each?

Most state enactments do not identify gambling products, but provide a definition of gambling (see Question 2). Most state enactments also exclude games of mere skill from the scope of gambling, without identifying which specific games are games of skill. Therefore, where an action is brought against an operator in relation to a particular game, the courts will adjudicate on whether the relevant game is a game of mere skill or a game of chance, based on the facts of the case.

The gambling products that are specifically identified by certain state enactments are described below.

Card games

The West Bengal Gambling and Prize Competitions Act 1957 specifically excludes poker, rummy, nap and bridge from the definition of betting or gambling. Therefore, playing any of these games in West Bengal will not amount to gambling.

In the state of Nagaland, the following games are classified as games of skill (Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act 2015 and Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill, Rules (Nagaland Online Gambling Law)):

  • Poker.

  • Rummy.

  • Nap.

  • Bridge.

  • Spades.

  • Solitaire.

Gaming operators in Nagaland can apply for a licence to provide these games online.

In the state of Sikkim, the following games are classified as games of skill or games that involve a combination of skill and chance (Sikkim Online Gaming (Regulation) Act 2008 and Sikkim Online Gaming (Regulation) Rules (Sikkim Online Gaming Law)):

  • Poker.

  • Rummy.

  • Bridge.

  • Nap.

  • Blackjack.

  • Punto banco.

Gambling operators in Sikkim that intend to offer these games online can apply for a licence.

Daily fantasy sports

Under Nagaland Online Gambling Law, games of skill include games where the “skill lies in team selection or selection of virtual stocks based on analysis”. This Law also specifies that virtual sport fantasy league games and virtual team selection games are games of skill, and that games of skill can be virtual sports-based games.

Betting

Under most state enactments, the definition of gambling includes betting or wagering, except wagering or betting on a horse race (see Question 2, Land-based gambling).

Sports betting

Betting or wagering on horse racing is subject to certain conditions (see Question 2, Land-based gambling).

In the state of Sikkim, licences are available for the offer of “sports games” in addition to online games (Sikkim Online Gaming Law). Sports games are defined as games involving the prediction of results of sporting events and placing a bet on the outcome, in part or in whole, of these sporting events.

The online gambling laws of Sikkim and Nagaland allow betting or wagering on certain virtual sports, as follows:

  • Under Sikkim Online Gaming Law, it is possible to bet or wager online on sport games such as football, cricket, lawn tennis, golf, horse racing and other sport games that involve the prediction of the results of the sporting event and placing a bet on the outcome of that sporting event.

  • Under Nagaland Online Gambling Law, the following games are classified as games of skill and can be validly offered online for betting and wagering by gaming operators:

    • virtual golf and virtual sports such as virtual soccer, virtual cricket and virtual archery;

    • virtual snooker, bridge and pool;

    • virtual fighting and virtual boxing; and

    • virtual fantasy sports leagues.

See Question 7 for more details on the licensing regime for online games in the states of Nagaland and Sikkim.

Casino games

The Goa, Daman and Diu Public Gambling Act 1976 allows the operation of licensed games of electronic amusement/slot machines in casinos as well as table games and gaming on board offshore vessels.

In the state of Sikkim, applicants can apply for a licence to operate casinos, subject to the conditions of the Sikkim Casinos (Control and Tax) Act 2002 and the Sikkim Casino Games Commencement (Control and Tax) Rules 2007 (see Question 5). Under the Sikkim Online Gaming Law, licences can also be obtained for roulette and blackjack.

In the state of Maharashtra, the Maharashtra Casinos (Control and Tax) Act 1976 was introduced to legalise casinos, but never came into effect (see Question 1, Casinos).

Slot and other machine gaming

In the states of Goa, Daman and Diu, it is possible to apply for a licence to operate licensed games of electronic amusements or slot machines. However, there are restrictions on the number of slot machines permitted per licence. The maximum number of machines that can be applied for is 20. In some states, there are local laws that regulate gaming parlours.

Bingo

The Public Gambling Act 1867 (Gambling Act), the state enactments and the Lotteries (Regulation) Act 1998 and Lottery (Regulation) Rules 2010 (Central Lottery Laws) do not specifically refer to bingo. There is no judicial precedent that clarified the meaning of this term.

However, when the service tax was sought to be levied on the marketing and promotion of games of chance, the Finance Act 1994 clarified that the scope of the words “service in relation to the promotion or marketing of service provided by the client” includes any service provided in relation to the promotion or marketing of games of chance organised, conducted or promoted by the client, in any form or under any name, whether or not conducted online, including lottery, lotto and bingo. In other words, bingo was used in the same context as lotteries and lotto.

Under the Sikkim Online Gaming Law, bingo can be operated online under a licence.

Lottery

Lotteries are expressly excluded from the scope of the Gambling Act and the state enactments, and therefore do not amount to gambling. Lotteries are governed by the Central Lottery Laws and the lottery laws of each state. The Central Lottery Laws allow state governments to organise, conduct or promote a lottery subject to specific conditions, including the following:

  • Prizes must not be offered on any pre-announced number(s) or on the basis of a single digit.

  • State governments must print lottery tickets in a prescribed format.

  • Proceeds of the sale of lottery tickets must be credited to the state’s public account.

  • A lottery must not run more than one draw per week.

Certain states have outlawed lotteries altogether (for example, the state of Madhya Pradesh). Private lotteries are not permitted in India.

Binary options

Offshore websites offering binary options to Indian residents are heavily regulated under Indian law.

Binary options are included in the definition of games of skill under the Nagaland Online Gambling Law.

Land-based gambling

Regulation/licensing

5. What is the licensing regime (if any) for land-based gambling?

Available licences

There are only a small number of states in India that allow operators to conduct gambling activities under a licensing regime.

Goa, Daman and Diu. The Goa, Daman and Diu Public Gambling Act 1976 (Goa Gambling Law) contains provisions on the operation of licensed games of electronic amusement/slot machines in five-star hotels as well as table and games on board offshore vessels. The Government of Goa issues casino licences to operators that conduct gambling activities in five-star hotels and on offshore vessels. However, a licence can only be applied for a maximum of 20 slot machines.

Sikkim. The Government of Sikkim regulates and licenses operators that wish to organise gambling activities under the Sikkim Casinos (Control and Tax) Act 2002 and the Sikkim Casino Games Commencement (Control and Tax) Rules 2007 (Sikkim Gambling Law). Licensees can only conduct gambling operations in five-star hotels.

West Bengal. An operator can apply for a permit to organise games of skill in a public market, fair, carnival or in the street, or in any place that the public can access (West Bengal Gambling and Prize Competitions Act 1957 (WB Gambling Law)).

Eligibility

Goa, Daman and Diu. Any individual, firm or body corporate can apply for a licence (Goa Gambling Law). Casinos operated on offshore vessels may require certain regulatory approvals from non-gambling authorities, including a no objection certificate from the captain of ports to ply the vessel in inland waters. A gambling operator can apply for a licence if it obtains the relevant authorisations.

Sikkim. Any person, firm or company wishing to operate casino games can apply for a licence (Sikkim Gambling Law).

West Bengal. Any “organiser” of games of skill can apply for a permit (WB Gambling Law).

Application procedure

Sikkim. A licence application must be made to the state government, who will examine the application (Sikkim Gambling Law). After making any inquiry as it considers necessary, and on satisfaction that the applicant has a five-star hotel with capabilities to operate a casino, the state government can grant a six-month provisional licence on payment of a fee of INR100,000. A provisional licence is issued to enable the licensee to set up the necessary infrastructure to commence the operation of casino games at any time within that period. When the applicant fully complies with the terms and conditions of the licence, the Government of Sikkim can grant a regular licence on payment of a fee of INR50 million.

West Bengal. An application for a permit to host games of skill in a public place must be made to the Commissioner of Police if the permit is sought in Kolkata, or to the District Magistrate or Sub-Divisional Magistrate if the permit is sought elsewhere in the state.

Duration of licence and cost

Goa, Daman and Diu. The cost of a licence is INR2 million for onshore and offshore casinos, regardless of the number of tables or machines installed in the licensed premises (Goa Gambling Law). The following annual licence fees are payable:

  • About INR25 million per annum, per 100 square metres for land-based casinos in five-star hotels.

  • INR70 million for offshore casinos.

These licence fees are subject to annual increases.

Sikkim. The fee for a provisional licence is INR100,000 and the fee for a regular licence is INR50 million (Sikkim Gambling Law). The duration of a regular licence is five years.

West Bengal. Permits are issued for specific events. The duration of a permit can be as short as a single day. The cost of a permit in West Bengal is INR10.

6. What are the limitations or requirements imposed on land-based gambling operators?

Prohibitions

There are certain prohibitions on gambling advertising in the states that have enacted legislations to permit and regulate gambling (see Question 15).

In the state of Sikkim, persons below the age of 18 years cannot enter casinos, and their employment in casinos is prohibited (Sikkim Casinos (Control and Tax) Act 2002 and Sikkim Casino Games Commencement (Control and Tax) Rules 2007 (Sikkim Gambling Law)).

In certain states, licences cannot be transferred to third parties.

Restrictions

Under the gambling state enactments, there are certain restrictions on the products that can be provided under the respective licences. For example, in West Bengal, permits are only available for the conduct in public places of games such as bridge, poker, rummy or nap (West Bengal Gambling and Prize Competitions Act 1957).

Under the Sikkim Gambling Law, licences cover the offer of casino games (that is, games in which chance, rather than skill, determines the outcome). A licensee that intends to offer new games must obtain prior written approval from the state government. Additionally, licensees must:

  • Collect entry fees on behalf of the state government.

  • Maintain books of accounts and registers in accordance with a prescribed format.

  • Ensure that no inconvenience or disturbance is caused to occupants staying in the premises or the vicinity of the premises where casino games are to be operated.

In the states of Goa, Daman and Diu, casino licensees are subject to certain requirements, including (Goa, Daman and Diu Public Gambling Act 1976):

  • Maintaining five-star status for hotels.

  • Reporting requirements in relation to transactions.

  • Maintaining customer information.

  • Restrictions on the number of slot machines allowed.

The Lotteries (Regulation) Act 1998 and Lottery (Regulation) Rules 2010, and state-specific laws, place restrictions on the conduct of lotteries, including:

  • Limiting the number of lotteries to 24 per day.

  • Fixing the minimum price of tickets and the minimum value of the first price.

  • Placing an obligation on state governments to publish the result of a lottery in one national newspaper and two state-wide newspapers.

Lottery tickets can only be printed at a government press or a high-security press included in the panel of the Reserve Bank of India or the Indian Banks’ Association.

States organising lotteries must maintain records of the tickets printed, both sold and unsold. Certain states also limit the ability of casino operators to organise lotteries beyond these states’ territories. Casino operators must obtain the relevant permissions and pay the requisite fees to other states in which lottery tickets are distributed.

Regarding social responsibility requirements, certain state enactments require licensees to:

  • Ensure that children below a certain age are not employed within, or granted access to, gambling facilities.

  • Disclose certain information on their website and on any brochure they issue.

However, there are currently no detailed social responsibility federal requirements for licensed gambling operators in India.

Anti-money laundering legislation

Under the Prevention of Money Laundering Act 2002 (PMLA) and its accompanying rules, gaming entities must keep a record of all transactions above a certain threshold or of certain categories of transactions, including:

  • Cash transactions exceeding INR1 million.

  • Cash transactions connected to each other of less than INR1 million and taking place within one calendar month.

  • Suspicious transactions.

Gaming operators must also maintain records of their clients’ identities for a specific period of time after having ceased transactions with them. Therefore, gambling operators must verify and maintain a record of the identity, current address, nature of business and financial status of any client that opens an account with them.

Online gambling

Regulation/licensing

7. What is the licensing regime (if any) for online gambling?

The states of Sikkim and Nagaland are the only states in India that have enacted legislation to permit and regulate online games. The state statutes that govern the licensing regime for online gambling and skill games respectively are the:

  • Sikkim Online Gambling (Regulation) Act 2008 and its accompanying rules (Sikkim Online Gaming Law).

  • Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act 2015 and its accompanying rules (Nagaland Online Gambling Law).

Available licences

Nagaland Online Gambling Law. The Nagaland Online Gambling Law only permits skill- based games. Licences allow operators to organise betting or wagering on online games of skill or to make a profit through the operation of online platforms for playing games of skill. Games of skill are all games where there is a preponderance of skill over chance, and include card-based games (such as poker, rummy and solitaire), quiz/strategy-based games (such as chess or sudoku) and action, sports and adventure games (such as fantasy leagues and virtual sports) (Nagaland Online Gambling Law). See Question 2, Online Gambling for a complete list of all skill-based games for which a licence is available in Nagaland.

A licence can cover a single game or multiple games.

Sikkim Online Gaming Law. The following games are permitted and can be conducted under a licence:

  • Roulette.

  • Black jack.

  • Pontoon.

  • Punto banco.

  • Bingo.

  • Casino brag.

  • Poker.

  • Poker dice.

  • Baccarat.

  • Chemin de fer.

  • Backgammon.

  • Keno.

  • Super pan 9.

  • Virtual sport games, such as football, cricket, lawn tennis, chess, golf and horse racing.

  • Other sports games that involve a prediction of the results of a game and placing a bet on its outcome, in part or in whole.

Eligibility

Nagaland Online Gambling Law. A licence can be granted to an individual, a public company or a limited liability company incorporated in India and with a substantial holding and controlling stake in India (that is, the ownership of more than 50% of a company’s voting stock must be Indian). Only entities that have no interest in any online or offline gambling activities in India or overseas can apply for a licence. Applicants must not have any criminal history or have been charged with, or convicted for, any offence under the Foreign Exchange Management Act 1999 or for money laundering in India and abroad.

Firms and companies must ensure that their controlling stake remains in India and that all executive decisions are taken in India. The operations of both the companies holding the licence and those providing technology support (such as the platform, software, servers and so on) must be controlled, maintained and operated from India.

Sikkim Online Gaming Law. Any company, partnership or body corporate registered in India can apply for an online gaming licence.

Application procedure

Nagaland Online Gambling Law. An applicant must make an application to the licensing authority (that is, the Director of Lotteries) and identify the games for which it is seeking a licence. The application must include:

  • Certain supporting documents (such as credentials of the operator and its business plan).

  • A non-refundable licence fee of INR50,000.

The Director of Lotteries will then forward the application to a panel of experts comprising lawyers, chartered accountants and IT companies. In the meantime, the Director of Lotteries can issue a “letter of intent” to the applicant if it is satisfied, on a basic inquiry, of the completeness of the application and eligibility of the applicant.

The panel of experts must examine the application and make a decision within 30 days of receipt of the application. If the panel issues their certification, the Director of Lotteries will issue a licence within 14 days of the panel’s decision.

The Director of Lotteries must take a decision on whether or not to issue a licence within six months from the date of receipt of the application.

Sikkim Online Gaming Law. An applicant must make an application to the Government of Sikkim and provide copies of the applicant entity’s governing documents.

On receipt of the application, the Government of Sikkim will examine the application. The Government of Sikkim can grant a provisional licence on payment of a fee of INR10 million, to enable the licensee to set up the necessary infrastructure to be in a position to commence its operations.

Once the Government of Sikkim is satisfied that the applicant is fully ready to commence operations and has complied with the provisions of the Sikkim Online Gaming Law, the Government can grant a regular licence for the operation of online games and sports games.

Duration of licence and cost

Nagaland Online Gambling Law. A licence is valid for a period of five years and is automatically renewed every year on payment of an annual licence fee. The application fee for a licence is INR50,000. In addition to the application fee, operators must pay annual fees and royalties to the state. The following annual licence fees are payable:

  • INR1 million per game for the first three years, and INR2 million thereafter.

  • INR2 million for three or more games for the first three years, and INR5 million thereafter.

In addition, a licensee must pay 0.5% of its gross revenue as a royalty to the state.

Sikkim Online Gaming Law. A licence is granted for a period of five years, with the option of subsequent renewal. The licence fee is INR10 million and is payable annually.

Gaming operators in Sikkim must also pay 10% of their gross gaming yield or INR50 million, whichever is higher, to the Government of Nagaland every year. All promotional and free bets or stakes are excluded when calculating the sum payable.

8. What are the limitations or requirements imposed on online gambling operators?

The restrictions and limitations applicable to online gambling operators are set out in the state enactments and licence terms for each state. Certain important restrictions are highlighted below.

Online skill-based games are unregulated, except in the state of Nagaland. Therefore, skill-based games operators are not subject to statutory limitations or requirements in other states. However, the fees charged by operators must be reasonable. In the case of State of Andhra Pradesh v K Satyanarayana & Ors, the Supreme Court examined whether the fee of a club offering rummy, which was charged per game played, was high enough to be described as an attempt by the club to make a profit or gain, so as to qualify as a “common gaming house”. Although the Supreme Court ruled that, on the facts of the case, the club was not a common gaming house, the outcome may be different for operators charging higher fees.

Prohibitions

In the states of Sikkim and in Nagaland, only players who are above the age of 18 can play on gaming operators’ websites.

Restrictions

Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act 2015 and its accompanying rules (Nagaland Online Gambling Law). The following restrictions and requirements apply in the state of Nagaland:

  • Licensees cannot offer licensed games in other states where these games are categorised as gambling.

  • Brand names, trade marks or logos that are associated in any part of the world with gambling cannot be used for running games of skill in Nagaland.

  • Licensees must provide access to their dashboard to the licensing authority for supervision purposes.

  • Licensees can be required to set up an office in the state within 12 months from the date of issue of the licence.

Sikkim Online Gambling (Regulation) Act 2008 and its accompanying rules (Sikkim Online Gaming Law). The following restrictions are in place in the state of Sikkim:

  • Licensees can only offer the games specified in the licence, either on the physical premises of gaming parlours or through intranet gaming terminals within the state.

  • Gambling operators must maintain a website containing its credentials, number of licences and certain other key information.

  • Any advertising of online games must include the operator’s website address containing the above information.

Anti-money laundering legislation

The Public Gambling Act 1867 (Gambling Act) does not contain any express anti-money laundering provisions. However, the Prevention of Money Laundering Act 2002 applies to online gambling operators (see Question 6, Question 6, Anti-money laundering legislation).

Certain state gambling enactments also impose accounting and disclosure requirements.

Under the Sikkim Online Gaming Law, every licensee must maintain books of accounts for online games, including details of gaming yield and the levy payable to the state government.

In Nagaland, every licensee must maintain a designated account for all financial transactions connected to the operation of games of skill. The licensee must deposit its gross revenues into this designated account to ensure transparency and control by the state government.

B2B and B2C

9. Is there a distinction between the law applicable between B2B operations and B2C operations in online gambling?

B2C operators are online operators that offer their services directly to customers. B2B operators provide their services to customers through indirect means.

The Public Gambling Act 1867 (Gambling Act) and the gambling state enactments do not make a distinction between B2B and B2C operators. However, penalties imposed under certain state enactments only apply to B2C gambling models. The only two states in India that have legislated to permit and regulate online gambling are the states of Sikkim and Nagaland. The Sikkim and Nagaland state laws only cover B2C operations.

In unregulated markets, both B2B and B2C models are used for the online operation of skill-based games.

Technical measures

10. What technical measures are in place (if any) to protect consumers from unlicensed operators, such as ISP blocking and payment blocking?

The Public Gambling Act 1867 (Gambling Act) and the gambling state enactments do not prescribe technical measures to protect consumers from unlicensed operators. However, there are other laws that provide for technical measures to regulate unlicensed operators.

The Payment and Settlement Systems Act 2007 regulates payments through pre-paid instruments, including e-wallets. When setting up payment systems for online gaming websites, online gaming operators must consider the category of pre-paid instruments that the wallet or account falls within. Certain payment systems require authorisation from the Reserve Bank of India.

The Information Technology Act 2000 (IT Act) and the Information Technology (Intermediary Guidelines) Rules 2011 (IT Rules)require intermediaries (such as ISPs) to remove or block access to any content that is deemed unlawful, including content relating to or encouraging money laundering or gambling. An intermediary must take down unlawful content within 36 hours of obtaining knowledge of such content, either by itself or after being brought attention to it in writing by an affected person (IT Rules).

An intermediary will be liable for any third-party unlawful content if it fails to take down this content expeditiously on acquiring actual notice, or on notification by the appropriate government agency, that any information, data or communication link residing in, or connected to, a computer resource controlled by the intermediary is being used to commit the unlawful act (IT Act). In the landmark judgment of Shreya Singhal v Union of India, the Supreme Court ruled that the provisions of the IT Act and the IT Rules must be interpreted to mean that the intermediary must receive a court order or notification from a government agency requiring the removal of specific information.

Mobile gambling and interactive gambling

11. What differences (if any) are there between the regulation of mobile gambling and interactive gambling on television?

Indian law does not make a distinction between the regulation of mobile gambling and interactive gambling on television, as the applicable gambling laws do not address the use of technology in gambling. However, the states of Sikkim and Nagaland have enacted legislation that governs online gambling (see Questions 7 and 8).

Social gaming

12. How is social gaming regulated in your jurisdiction?

Social gaming and casual gaming that do not involve wagering or betting do not fall within the scope of the Public Gambling Act 1867 (Gambling Act) or the gambling state enactments. In other words, social gaming is not regulated in India. However, whether a game format involves betting or wagering is determined on a case-by-case basis.

Additionally, the provisions of the Prize Competition Act 1955 (Prize Competition Act) and related prize competition laws may apply to social games that are based on the building-up, arrangement, combination or permutation of letters, words or figures. The Prize Competition Act prohibits prize competitions in which:

  • The total value of the prize or prizes (whether in cash or otherwise) offered in any month exceeds INR1,000.

  • The number of entries exceed INR2,000.

Any person intending to conduct prize competitions that exceed the above thresholds must obtain a licence. However, not all states have passed legislation incorporating the Prize Competition Act.

Under the Foreign Exchange Management (Current Account Transaction) Rules 2000, the remittance abroad of income from winnings from lotteries, racing/riding or any other hobby is prohibited. Remittances abroad for the purchase of lottery tickets, football pools, sweepstakes and so on, is also prohibited. Although the rules do not expressly prohibit remittances for the purpose of casual/social gaming, these may be construed as prohibited under these rules.

Gambling debts

13. Are gambling debts enforceable in your jurisdiction?

Gambling debts are not enforceable under Indian law. The enforcement of agreements and contracts is regulated primarily by the Indian Contract Act 1872, which provides that agreements by way of wagers are deemed void and unenforceable (section 30).

Tax

14. What are the applicable tax regimes for land-based and online gambling?

Land-based gambling

Under the Income Tax Act 1961 (Tax Act), gambling operators that award winnings from lotteries, crossword puzzles, card games and games of any other sort exceeding INR10,000 must deduct tax from these winnings at a rate of 30%. Any bookmaker or licensee conducting horse racing activities, who is responsible for distributing winnings in excess of INR10,000, must also deduct tax at a rate of 30%.

In relation to horse racing, the term “winnings” means the amounts received by the punters in excess of the bets laid by them on the winning horses. Therefore, winnings do not include stake money and are limited to prize money received on a horse race by the punters.

Gambling operators need not pay service tax, as betting or gambling is classified as a non-taxable service under the Finance Act 1994 (Finance Act). Lotteries are also classified as non-taxable services under the Finance Act.

Commissions paid to persons stocking, distributing, purchasing or selling lottery tickets are subject to withholding tax at the rate of 10% (Tax Act).

Certain states also impose entertainment taxes on:

  • Casinos and casino games, whether operated in hotels or in offshore vessels.

  • Horse racing, either live or displayed for viewing through electronic media.

Online gambling

In the states of Sikkim and Nagaland, online gambling operators must pay royalties to the respective state governments (see Question 7, Duration of licence and cost).

In a circular, the Central Board of Direct Taxes clarified that a person who maintains an e-wallet/virtual card account on a website hosted in a foreign country, and uses that account to play online games or poker, must assess and disclose their winnings to the tax authorities. The circular also clarifies that an e-wallet or virtual card account is similar to a bank account where inward and outward cash movements take place. Therefore, any winnings placed on these accounts must be disclosed.

Advertising

15. To what extent is the advertising of gambling permitted in your jurisdiction? To the extent that advertising is permitted, how is it regulated?

Most gambling state enactments prohibit printing, publishing, selling, distributing or circulating in any manner any newspaper, news sheet or other document, or any news or information with the intention of aiding or facilitating gambling.

The Indian Penal Code 1860 prohibits advertisements for lotteries, unless they comply with the provisions of the Lotteries (Regulation) Act 1998 and Lottery (Regulation) Rules 2010. The advertising of prize competitions is prohibited, unless it has been duly authorised by the relevant authority (Prize Competition Act 1995).

In the state of Sikkim, licensees can advertise online games, provided that they comply with certain requirements. For examples, advertisements of online games must (Sikkim Online Gaming (Regulation) Act 2008 and Sikkim Online Gaming (Regulation) Rules):

  • Include the address of the online gaming operator’s website, which must include certain prescribed information.

  • Not be indecent or offensive.

  • Be based on facts.

  • Not be directed at any person under the age of 18.

  • Not be directed at any jurisdiction in which online games are prohibited.

See also Question 1, Content-related laws and advertising.

Developments and reform

Legal development

16. Has the legal status of land-based and online gambling changed significantly in recent years, and if so how?

Land-based gambling

The legal status of land-based gambling has not changed significantly in recent years. The most recent major development was the introduction of games of electronic amusement/slot machines in the states of Daman and Diu.

Online gambling

There have been significant legislative developments relating to online gambling in India.

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 (Black Money Act). The Indian Parliament recently passed the Black Money Act to address the issue of undisclosed assets and income held outside India.

However, it was unclear whether overseas financial accounts included all e-wallets and gambling accounts held in offshore e-wallets and gambling websites, respectively. In September 2015, the Central Board of Direct Taxes clarified that winnings from offshore online gambling accruing in e-wallets or virtual card accounts that were initially funded by taxable income in India are akin to a bank account where inward and outward cash movements take place. Therefore, these e-wallets and virtual card accounts must be valued and disclosed to the tax authorities.

Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act 2015. The Governor of the state of Nagaland recently gave his assent to this Act. The Act provides that the definition of gambling excludes games of skill, and that licences can be obtained for wagering or betting on online games of skill.

The Government of Nagaland recently enacted the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Rules 2016, which came into force on 12 May 2016.

Sikkim Online Gaming (Regulation) Act 2008. This Act was amended in August 2015. The amendments provide that online games and sports games operated in the state of Sikkim by a licensee cannot be offered outside the state.

Case law. In 2012, the High Court (HC) of Madras ruled that the game of rummy played with stakes amounted to gambling. The Madras HC order only referred to land-based rummy. The order was challenged before the Supreme Court of India. Certain online gaming operators intervened in the matter, as they were likely to be affected by the order. On 13 August 2015, the Supreme Court noted that the government had not made a policy decision on whether online rummy qualifies as gambling under the law.

The question of whether online games of skill can be offered for money on virtual platforms was debated in separate proceedings before the District Court of Delhi, in M/S Gaussian Networks Pvt. Ltd.. The parties sought the Court’s opinion on whether there was any restriction on taking stakes for games of skill offered on profit-making websites. The District Court of Delhi stated that playing skill-based games for money in a virtual space amounted to illegal gambling. The judge observed that the degree of skill in games played in a physical form could not be equated online. The rationale of the Delhi District Court’s judgment appears to be that the degree of chance increases in online gambling, and that the possibility of manipulation is more pronounced in a virtual environment. This opinion was challenged before the Delhi High Court. On 21 April 2016, the Delhi High Court allowed the parties to withdraw their petition and observed that the observations made by the trial judge of the Delhi District Court no longer applied.

Reform

17. What, if any, are the likely short-term and long-term developments/legislative amendments concerning gambling in your jurisdiction? Are there any proposals for reform?

The All India Gaming Federation has approached the government to discuss proposals to allow foreign direct investment and foreign technology collaboration in the gaming sector.

Land-based gambling

The Maharashtra Casinos (Control and Tax) Act 1976 never came into effect, as it was never notified by the state government. In 2015, in response to a public interest litigation, the Bombay High Court directed the state government of Maharashtra to take a decision on whether or not to allow casinos in Maharashtra within six months. However, to date, the Government of Maharashtra has not taken a decision on the subject, despite the expiry of the six-month deadline.

Sports betting

In the wake of corruption allegations during the 2013 Indian Premier League cricket competition, the Supreme Court of India appointed a three-member committee (Lodha Committee) to investigate the issue of spot-fixing and match-fixing. The Lodha Committee recommended the legalisation of cricket betting in India, stating in its report that legalising betting would have long-term beneficial effects on the game and on the Indian economy. It also proposed certain measures for a robust legal framework for betting in India and recommended the:

  • Issuance of licences to betting houses and players.

  • Creation of a regulator responsible for issuing licences and monitoring betting houses and players.

  • Adoption of strict “Know Your Customer” requirements.

Whether the Indian Government will adopt the recommendations of the Lodha Committee remains to be seen.

Lotteries

In May 2016, a petition was filed before the Bombay High Court seeking a ban on allegedly illegal online lotteries offered in the state of Maharashtra from other states. The Bombay High Court ordered the state government of Maharashtra to reply to the petition by a certain date, failing which online lotteries would be discontinued within the state from that date. Maharashtra responded through an affidavit that appropriate rules were already in place to regulate online lotteries within the state. If the petition is successful, illegal/unregistered online lottery operators offering their services in Maharashtra from other Indian states could be banned.

*The authors would like to express their gratitude and thanks to Ms Tanisha Khanna for her assistance in preparing this chapter.

 

The regulatory authorities

The following list of state government authorities is not exhaustive.

Commissioner of Police, Kolkata

W www.kolkatapolice.gov.in/ShowContact.aspx

Description. The Commissioner of Police grants permits for hosting games of skill in public places in Kolkata.

District Magistrate, West Bengal

W www.kolkatapolice.gov.in/ShowContact.aspx

Description. The District Magistrates in West Bengal grants permits for hosting games of skill in public places in other districts of the state of West Bengal.

Finance, Revenue and Expenditure Department, Sikkim

W www.sikkimfred.gov.in/user/home.aspx

Description. The Directorate of Sikkim State Lotteries of the Finance, Revenue and Expenditure Department grants licences for the operation of online games.

Source: Practical Law

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