How to offer online games involving stakes in India ?

January 11, 2018

Gambling Laws

Legitimacy of Online games in India

As per Google report, by 2021 Indian gamer’s base will reach to 310 million people and the online gaming industry will be worth USD 1 billion. It is reported that around 1/3rd of online entertainment wallet is spent on online games in India . Thus establishing the growing base of online games and the involvement of money spent on the same. The Information Technology (IT) Act, 2000 establishes various offences relating to online activity, even though there is no specific mention of online games involving stakes of being illegal. But an enabling provision empowering the Indian government to block foreign websites is included in the IT act 2000.

Gambling, sports-betting and lotteries

Gambling comes under entry 34of the state list, whereas online gambling is subjected to central laws. Online gambling is usually includes of poker, casino, and sports betting Indian gambling market as per estimates is worth USD 60 billion.

Game of skill and game of chance

The Supreme Court of India has explained skill in terms of “superior knowledge, training, attention, experience and adroitness… although the element of chance necessarily cannot be entirely eliminated”. Whether the dominant element, is ‘skill’ or ‘chance’ is what determines the character of the game. As per the courts a game of chance is one in which the element of chance predominates over the element of skill, and a game of skill is one in which the element of skill predominates over the element of chance game of skill which might involve an iota of chance is considered as legal in India.

As we already know a game of chance involving betting of money is gambling. In most states gambling is an offence at a glance the same are:

  1. Maharashtra govt. has declared online gambling as illegal under Bombay Prevention of Gambling Act, 1887 but through The Bombay Lotteries (Control and Tax) and Prize Competitions (Tax) Act, 1958 the same government has allowed Playwin to operate in the state.
  2. Sikkim govt. permits online lottery and legalizes through Sikkim Online Gaming (Regulation) Rules, 2009 license online gambling given that the server resides within the state. Sikkim government is also responsible for running playwin.
  3. Karnataka government has recently banned playwin to operate in its state.
  4. Goa permits both land based casino as well as casino on boats under Goa Daman and Diu Gambling Act, 1976.
  5. Telangana under section 15 of Telangana State Gaming Act, 1974 has made an amendment by including all games of skill fall within the head of “online gaming with stakes” thus forbidding games of chance as well as skill and making them punishable.
  6. West Bengal does not hold gambling as legal.
  7. Gujrat high court has proclaimed online gaming as a game of chance.

Mitigation of illegality through obtaining license by Nagaland govt. for online gaming with stakes

As per the preamble of
Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015 (hereinafter referred as the Nagaland act) its aim is to prohibit gambling and promote online games of skill.

As per the definition clause under sec 2 (1) of the act, once a license under this act has been obtained betting or wagering on online games or providing a medium for playing games of skill shall not amount to gambling, given that the operation of such games is taking place in states where there is no prohibition on playing game of skill and where as per the state law game of skill is not considered as gambling.

Licensing authority under this act is the Finance Commissioner of Nagaland. This Act by providing a license provision grants legal protection to a game of skill against prosecution, provided that the given game is not being operated in such a state where online game of skill is considered as gambling and upon the condition being complied such game will be considered a genuine business venture not amounting to gambling.

A regulating body under this Act will overlook compliance by the license holders and levy penalty in case of breach which will also act as a dispute resolution.

With the growing demand for online gaming platforms and the amount of money being invested by Indian gamers for the thrill of playing games online involving stakes, there is a growing need for judiciary & legislation to regularize the same. The Nagaland act comes into picture giving respite to the stakeholders through the new licensing regulations thereby paving a way for other states to follow & frame guidelines on the similar pattern.

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