In a small region with few industries and sparse population, the state of Sikkim needs to rely on other sources for its revenue. One area where it is most finding success is gaming and gambling. The Himalayan state has one of the most liberal laws on the subject in the country, with allowance to casinos in five-star hotels as well as online and paper lotteries. More recently, it has legalized online gaming and sports gaming through the Sikkim Online Gaming (Regulation) Act, 2008.[1] These games include any games of chance or skill, including poker, roulette, blackjack, card games, machine games, etc.
Under the same, read with the rules framed thereunder,[2] desirous persons can apply for licenses to install, operate and maintain ‘online gaming servers’. Initially, the Act had contemplated that these licensees would offer the games across India through websites and online services. However, upon concerns over violation of the IT Act, 2000 and overarching legislation which would traverse into other states’ jurisdiction, the Act was amended in 2015 to offer only gaming opportunities within its territorial borders – hence, online gaming services were limited to intranet terminals at gaming parlours only. Thus, Sikkim has placed itself in a peculiar position where even sports games of chance are allowed, but online fantasy sports (such as Dream11) which have been deemed to be games of skill, are prohibited, for they do not take place on the intranet, or within the territorial boundaries of Sikkim.[3]
For those who wish to obtain a license under the aforementioned Sikkim Act and rules, the process is not particularly cumbersome, but is quite expensive.
Who Can Apply under Sikkim Online Gaming (Regulation) Act, 2008
Largely, there is no restriction on any person to apply. A ‘person’ under the Act has been defined to include partnership firms, or companies.
License Application Formalities
Persons desirous of applying for a license may make an application to the government through Form I of the Sikkim Online Gaming (Regulation) Rules, 2009.
Fees
An application fee has been prescribed of five hundred rupees. Further, upon examination of the application, the license for operation may be granted on payment of a fee of another one lakh rupees. This license is valid for a period of one year, and may be renewed for further period of one year on payment of one lakh rupees.
Levy
Through a notification dated 1st April 2010,[4] a levy to the tune of 10% of the gross gaming yield (i.e. total bets/stakes made, and prices of all chances sold, less the value of all winnings and prices due – as per section 2(g) to the Act) or five crore rupees, whichever is higher, is required to be paid to the government every month.
Further, the licensee shall also execute a bank guarantee of five crore rupees at the time of issue, and a fresh bank guarantee to the same amount shall be executed upon renewal of license every year.
Other Post-Application Requirements
Every licensee is required to maintain a website which shall mandatorily certain information including full name and address, date of issue of license, license number, summaries of arrangements for registration, etc.
Advertising requirements involve prohibition of indecent, offensive, misleading or false statements, prohibition of direction towards minors, as well as information to enable a person to determine the expected percentage return to him. Accounting requirements include maintenance of accounts of all online games conducted including details of gross gaming yield and levies payable to the governments.
Apart from these, other requirements for actual operation of the games have been set out in the Schedule to the Rules, which includes rules on randomness, independency of game outcomes from hardware, proper information relating to rules of the game such as restrictions, instructions, wagers, as well as reporting requirements.
Penalties
Penalty equivalent to one-fifth of the levy will be charged upon the licensee in case levy is not paid on time, or the statement in Form 3 regarding the same is not filled.
A fine not exceeding five thousand rupees may be placed upon the licensee or any person who is the designated official of the assignee in case advertising rules are not complied with, or if certification rules are not complied with. A maximum fine of one thousand rupees is prescribed in case a minor is found to be admitted or registered or playing such online games. Lastly, a fine not exceeding ten thousand rupees may be placed upon the licensee or operator for failure to keep or submit accounts, or upon contravention of conditions of license.
Offences under the Act are cognizable, bailable, and compoundable.
Current Scenario
Largely, it seems as though not many companies are taking up the opportunity. High fees and levy requirements exclude smaller entities from opening such a business. As of today, only four provisional licenses have been issued, two of which are in operation.[5] High initial costs can only be incurred by large casinos, expecting national and international tourists to bail them out.
That said, it may be a good start to the casino culture in India, as it seems to be following the footsteps of Malaysia, which has only one operational casino in the country, bringing in over $100 million every year.[6]
To know more about gaming law in India, click on the links below –
- Gaming and Sports Laws in India
- Understanding Online Gaming Law in India
- Legality of Different Types of Online Games
- Gambling: A Subject for State Legislation
- Licenses Related to Gaming Law in India
[1] Sikkim Online Gaming (Regulation) Act, 2008, Sikkim Act No. 23 of 2008 (29.07.2008) <https://www.indiacode.nic.in/bitstream/123456789/11161/1/the_sikkim_online_gaming-edited.pdf>
[2] Sikkim Online Gaming (Regulation) Rules, 2009, Notification No. 10/Fin/Adm (Finance, Revenue & Expenditure Department, Govt. of Sikkim) dated 23.01.2009 <http://sikkimarchives.gov.in/gazettes/GAZZ2009.pdf>
[3] Shri Varun Gumber v. Union Territory of Chandigarh and Ors. CWP No. 7559 of 2017 (P&H High Court).
[4] Notification No. 337/FIN/DSSL/972 (Finance, Revenue And Expenditure Department Government Of Sikkim) dated 01.04.2010
[5] Legalising gambling a huge bet for Sikkim; lottery operators considering ‘gaming shop’ model (Economic Times) <https://economictimes.indiatimes.com/news/politics-and-nation/legalising-gambling-a-huge-bet-for-sikkim-lottery-operators-considering-gaming-shop-model/articleshow/50631922.cms>
[6] Conor Mulheir, ‘Genting Singapore profit and revenue increase in H1’ (iGaming Business) <https://igamingbusiness.com/genting-singapore-profit-and-revenue-increase-in-h1/>
Suyash Bajpai, Intern at S.S. Rana & Co. has assisted in the research of this article.