In 2018, the Law Commission of India released its report entitled Legal Framework: Gambling and Sports Betting Including in Cricket in India (Report). A day after releasing the Report, the Commission released a press note stressing that its recommendation was to ban betting and gambling in India. However, if the central government or state governments were to consider regulating gambling, the Report set out some positive and logical measures to combat certain industry issues. The Report is under consideration by the government.
On the heels of the Report, on 28 December 2018, the Sports (Online Gaming and Prevention of Fraud) Bill, 2018, (Sports Bill) was introduced as a private members bill in the Lok Sabha (the lower house of the Indian Parliament). The Statement of Objects and Reasons accompanying the Sports Bill has underscored that it has been introduced with the dual aims of (i) preserving integrity in sports and (ii) introducing a regulatory regime for online sports betting.
However, with the dissolution of Parliament prior to general elections, the Sports Bill lapsed. It has not been re-introduced.
The All India Gaming Federation (AIGF), a self-regulatory body for online games of skill, has written to the Prime Minister of India demanding that the Enforcement Directorate investigate and take action against offshore betting websites that are illegally offering websites to Indian citizens and accepting bets from India, in contravention of the Information Technology Act, 2000 (IT Act) and the Foreign Exchange Management Act, 1999 (FEMA).
As per certain news reports, the state of Maharashtra is planning to legalise online betting to generate revenue for the state.
The question of whether sports betting is a game of skill is pending before the Supreme Court in the case of Geeta Rani v Union of India &Ors (Geeta Rani Case). If the judgment concludes that sports betting is a game of skill, it will be exempt from most gaming enactments and will be able to be offered in most Indian states that recognise an exemption for games of skill.
In so far as poker is concerned, an appeal is pending against the judgment of the High Court of Gujarat which has held that poker is a game of chance/gambling activity.
Further, the Telangana Gaming Act, 1974 (Telangana Act) was recently amended to delete the exception for games of skill from the Telangana Act, vide the Telangana Gaming (Amendment) Act, 2017 (Telangana Amendment Act). The Amendment Act is currently being challenged before the High Court of Hyderabad.
In the state of Andhra Pradesh, the Andhra Pradesh Gaming Act, 1974 (AP Act) and the Andhra Pradesh Gaming Rules, 1976 regulate gaming in the state. In a recent update, the Andhra Pradesh Governor promulgated the Andhra Pradesh Gaming (Amendment) Ordinance, 2020 (AP Ordinance) to amend the AP Act, which came into effect immediately. The AP Ordinance has specifically prohibited staking money on games of skill. The exemption for games of skill which formerly existed under the AP Act has also been deleted. Accordingly, games of skill appear to be prohibited by the AP Act. The Ordinance has been challenged before the High Court of Andhra Pradesh.
A review petition was filed against the order of the High Court of Kerala in the matter of Play Games 24X7 Pvt. Ltd v Ramachandran K & Anr.. However, the court dismissed the petition, and held that whether playing rummy for stakes or not (including online rummy) would amount to a violation of the Kerala Act would have to be seen on a case-by-case basis.
The dismissal of the review petition has called into question whether any games of skill can be played for stakes.
Certain self-regulatory gaming bodies in India have adopted skill charters and guidelines to ensure player protection, transparency measures, etc.
Betting and gambling are matters for the states under the Constitution of India, so each state has the exclusive legislative competence to enact laws relating to betting and gambling within the state. The Public Gambling Act, 1867 (PGA) has been adopted by certain states in India, while other states have enacted their own legislations to regulate betting and gambling activities within the state (state enactments).
The PGA and most of the state enactments (collectively, gaming enactments) were enacted prior to the advent of virtual/online gambling and therefore primarily prohibit gambling activities taking place within physical premises, defined as a “common gaming house.”
Betting on games of chance is prohibited under most gaming enactments. As stated above, the question of whether sports betting is a game of skill is pending before the Supreme Court in the Geeta Rani Case.
In the case of Dr. K R Lakshmanan v State of Tamil Nadu (Lakshmanan Case), the Supreme Court held that betting on horse racing was a game of skill. Accordingly, betting on horse racing is treated as a game of skill and is exempt from the prohibitions under most gaming enactments.
Most gaming enactments have carved out an exception for “wagering or betting upon a horse-race” from the definition of gaming/gambling, subject to fulfilment of certain conditions (horse racing exemption). However, the horse racing exemption is subject to certain conditions under the gaming enactments, such as when wagering or betting takes place on the day on which the horse has run, in an enclosure that has been sanctioned by the state government, etc. In the case of online horse racing, it would be difficult for these conditions to be met. However, one can explore arguing whether a horse racing product is a game of skill independent of the horse racing exemption.
Recently, during the outbreak of COVID–19, two Indian horse racing clubs (the Bangalore and Calcutta Turf Clubs) received permission from the state governments of Karnataka and West Bengal, respectively, to offer online betting on horse racing conducted in these clubs.
For information on betting on casino games, or on fantasy sports, please refer below.
Depending upon the format, bingo may fall within the definition of a “lottery” or under the general definition of betting/gambling under most gaming enactments, as it is a game of chance and prohibited in most Indian states. See below for a discussion of lotteries.
Casino games are predominantly chance-based, so are treated as betting and gambling activities, and are therefore prohibited under most gaming enactments. This applies for both digital and land-based casino gaming.
The Sikkim Online Gaming (Regulation) Act, 2008 (Sikkim Online Act) covers certain casino games such as roulette, casino brag, and blackjack, which may be offered through the state-wise intranet within the state of Sikkim only.
Under the Lotteries (Regulation) Act, 1998 and the Lotteries (Regulation) Rules, 2010 (Lottery Laws), state governments are empowered to organise, conduct and promote lotteries subject to certain conditions.
Some states regulate physical lotteries (such as Sikkim), and lotteries have been banned in certain states (such as Madhya Pradesh). Some states specifically provide for online lotteries (such as Punjab).
The state governments are empowered to appoint individual or corporate entities as “distributors” or “selling agents” to market and sell lotteries on behalf of the organising state under the Lottery Laws.
Section 294 A of the Indian Penal Code, 1860 (IPC) specifically prohibits private lotteries. Certain states have repealed Section 294 A of the IPC and enacted their own legislation banning lotteries other than non-profit lotteries (such as the states of Andhra Pradesh, Gujarat, Karnataka and Maharashtra). Certain other states have introduced legislation expressly banning lotteries in their states (eg, the state of Bihar, vide the Bihar Ban on Lottery Act, 1993).
Certain versions of fantasy sports games can be argued to be preponderantly skill-based games in the Indian context. Accordingly, such games can be treated as exempted under the gaming enactments.
The High Court of Punjab and Haryana held Dream 11’s format of fantasy sport to be a game of skill in the case of Shri Varun Gumber v UT of Chandigarh &Ors. (Varun Gumber Case). Thereafter, the High Courts of Bombay and Rajasthan also recognised that the same format of fantasy sport was a game of skill in Gurdeep Singh Sachar v Union of India and Chandresh Sankhla S/o Jagdish Singh v The State of Rajasthan, respectively. However, as of the time of writing of this article (November 2020), there has been a stay order imposed on the judgment of the High Court of Bombay by the Supreme Court. Accordingly, the Supreme Court may examine this issue now.
The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016 (Nagaland Act) expressly recognises virtual team selection games and virtual sport fantasy league games as games of skill. If such games are sought to be offered online in the state of Nagaland, a licence would be required.
Social gaming refers to those games in which no prize is offered. When there is no prize of money or money’s worth offered, the game is typically not considered to be gambling under the gaming enactments. Depending upon the format and content of such games, certain other laws could be triggered, such as the intellectual property laws, and laws prohibiting certain types of content, such as the IPC or the IT Act which prohibits obscene content, or the Indecent Representation of Women (Prohibition) Act, 1986 (IRWA), which prohibits depicting women in a derogatory manner.
It can be argued that certain variations of poker are games of skill for the purpose of most gaming enactments. Accordingly, such games should be permitted to be offered in most Indian states that have an exemption for games of skill.
The gaming enactments/courts in certain Indian states have specifically recognised poker as a game of skill in the following instances:
However, the High Court of Gujarat has held, in the case of Dominance Games Pvt. Ltd v State of Gujarat & 2 Ors., that poker is a game of chance and a gambling activity under the Gujarat Prevention of Gambling Act, 1887. Accordingly, poker is currently prohibited in Gujarat. However, an appeal has been filed against this order and is pending before the High Court.
Please see 2.1 Online.
In the case of betting on real horse races, the conditions prescribed under the horse racing exemption would need to be met. Turf Clubs regulate betting on physical horse races within their premises, and one of the conditions to which the horse racing exemption is subject is that such betting takes place within an enclosure which Turf Clubs have set apart for betting. Accordingly, betting on physical horse races must take place within the confines of the Turf Clubs. Such betting would also be subject to the rules of the independent Turf Clubs.
Please see 2.1 Online.
Only the states of Goa, Daman and Diu and Sikkim regulate casino games in land-based form. The casinos in Goa and Daman and Diu are regulated under the Goa, Daman and Diu Public Gambling Act, 1976 (GDD Act), which prescribes a licensing regime for "games of electronic amusement/slot-machines" in five-star hotels, and table games and gaming on board in offshore vessels, under the terms of a licence in Goa, Daman and Diu. The casinos in Sikkim are regulated under the Sikkim Casinos (Control and Tax) Act, 2002 (Sikkim Casino Act), which, read with the Sikkim Casino Games Commencement (Control and Tax) Rules, 2007 (Sikkim Casino Laws), also prescribes a licensing regime for casino games in five-star hotels in the state of Sikkim.
Please see 2.1. Online.
In addition to the laws discussed above, the Prize Competitions Act, 1955 (PCA) may also apply. The PCA was enacted to regulate certain types of competitions. In the case of R.M.D. Chamarbaugwala &Anr. v Union of India &Anr., the Supreme Court held that the PCA would only apply to prize competitions that were of a gambling nature. However, due to the types of games covered under the PCA (ie, crossword prize competitions, etc), there is an anomaly in the scope of the PCA, read with the gaming enactments, and in the nature of games for which a licence is required under the PCA.
Furthermore, the Foreign Exchange Management Act, 1999 (FEMA), read with the Foreign Exchange Management (Current Account Transaction) Rules, 2000 (Current Account Rules), mandates that remittance for the following is prohibited.
Skill games may be covered under the above prohibitions, especially under the heading "any other hobby".
“Gambling” or “gaming” as per most gaming enactments is understood to mean “the act of wagering or betting” for money or money’s worth. However, typically, under most gaming enactments “gambling” or “gaming” does not include:
Please refer to 3.2 Definition of Gambling.
Only the states of Nagaland and Telangana have specifically extended their state enactments online. The state of Sikkim has introduced a licensing regime for online games and sports games offered through the state-wide intranet under the Sikkim Act.
The State of Telangana defines “gaming” as “playing a game for winning of prizes in money or otherwise and includes playing a game of mutka or satta or online gaming with stake and lucky board and wagering or betting; except where such wagering or betting takes place upon a horse race.”
In the state of Nagaland “Gambling means and includes wagering or betting on games of chance but does not include betting or wagering on games of skill”.
The state of Sikkim defines “online gaming” as “any gaming, where any player enters or may enter the game or takes or may take any step in the game or acquires or may acquire a chance in any online gaming or sport gaming, by means of a telecommunication device including the negotiating or receiving of any bet by means of a telecommunication device”.
Under the gaming enactments, most offences and prohibitions are in relation to a “gaming house” or a “common gaming house” (except in states such as Assam and Orissa, where the activity of gaming, irrespective of the medium or location where it is offered, may be a punishable offence). These gaming enactments provide for various offences with respect to gaming/gambling. The liability for offences under the gaming enactments usually vests upon the following parties.
While the gaming enactments more or less prescribe fines and/or imprisonment, the amount of such a fine or period of imprisonment may differ from state to state.
The Public Gambling Act, 1867 imposes a penalty of INR200 (approximately USD3) or imprisonment for a term not exceeding three months for owning, keeping or having charge of a gaming house, and a fine of INR100 (approximately USD1.5) or imprisonment for a term of one month for being found in a gaming house.
The Bombay Prevention of Gambling Act, 1887 imposes a fine and imprisonment for offenders. A first offence is punishable with a fine and imprisonment of at least INR500 (approximately USD7) and three months respectively; a second offence with a fine and imprisonment of at least INR1,000 (approximately USD14) and six months respectively and a third or subsequent offence with a fine and imprisonment of at least INR2,000 (approximately USD29) and imprisonment for one year respectively. In states, such as Nagaland, the fines for contravention might be significantly higher. For brevity, these have not been included.
As stated in 1.1 Current Outlook, the Sports Bill was introduced as a private member's bill in the Lok Sabha. However, with the dissolution of Parliament prior to general elections, the Sports Bill has lapsed and it has not been reintroduced.
Further, as covered in 1.1 Current Outlook, in the state of Andhra Pradesh, the AP Ordinance has been introduced. A challenge is pending against the Ordinance.
There are only a small number of states in India that allow operators to conduct gambling activities under a licensing regime. The regulatory authorities for these states are as follows.
The gambling enactments are prescriptive in so much as most of the states prohibit gaming/gambling, but carve out an exception for games of skill. Hence, should a game qualify as a game of skill (please refer to 3 Legislative Framework for more details) the prohibitions under the gaming enactments would not apply.
Depending upon the type of product, and the medium through which the relevant product is sought to be offered, licences may be required. The most common are set out below.
Licences for offering casino products in five-star Hotels in Goa, Daman, Diu and Sikkim are available under the GDD Act and the Sikkim Casino Laws, respectively. Licences for offering casino products offshore in Goa, Daman and Diu are available under the GDD Act. The GDD Act contains provisions on the operation of licensed games of electronic amusement/slot machines in five-star hotels as well as tables and games on board offshore vessels. However, a single licence can only be applied to a maximum of 20 slot machines.
Operators in India may offer skilled versions of poker without a licence in all Indian states except Sikkim, Nagaland, Telangana, Andhra Pradesh and Gujarat. In Nagaland, operators would need to procure a licence to offer such games.
In the case of betting on physical horse races, a licence would be required. This does not include foreign horse races.
In so far as betting on horse races online is concerned, there are also no licences required. Based on the Lakshmanan Case, it can be argued that such games are games of skill and exempt under most gaming enactments. Innovative structures can be put in place for a foreign operator to offer such games.
In the case of betting on physical horse races, the conditions under the horse racing exemption would need to be fulfilled. Further, permissions/authorisations may need to be obtained from the relevant Turf Club.
As stated in 1.1 Current Outlook, the question of whether sports betting is a game of skill is pending before the Supreme Court in the Geeta Rani Case. Only the State of Sikkim offers a licence to offer sports betting through the intranet within the State of Sikkim only.
If the fantasy sports game qualifies as a game of skill, no licence is required for offering such products under most gaming enactments. However, a licence must be obtained for offering such games in Nagaland, under the Nagaland Act.
Under the lottery laws, state governments may appoint an individual or a corporate as a “distributor or selling agent” through an agreement to market and sell lotteries on behalf of the organising state. Such persons would need to obtain authorisation from the state governments. Private lotteries are prohibited in most Indian states under the IPC.
No licences should be required for such games in most Indian states.
As stated above, games of skill operate under the exclusion for such games under most gaming enactments. There is no licensing regime for such games at a federal level. Only the states of Nagaland have enacted a licence regime specific for online games of skill under the Nagaland Act. Sikkim has a broader set of games covered under the Sikkim Act under which the games can be offered via intranet within the state of Sikkim.
As per the gaming enactments, there is no limit on the number of licences that may be offered, although there are restrictions in the licence vis-à-vis the number of slot machines (for example) that can operate under a single licence.
However, in Goa, there have been news reports indicating that the renewal of casino licences may be an issue. Furthermore, with regard to casino licences granted in the state of Daman and Diu, a subsidiary of Delta Corp (a leading casino operator in India) has filed a petition before the Bombay High Court seeking a direction to the Daman and Diu government to grant a licence under the GDD Act. There are no permanent licences issued yet for Daman and Diu and the effectiveness of the licensing provisions have hence not been practically tested.
The durations of the licences available are as follows:
Some of the key licence application requirements are set out below.
The licensee must be an entity incorporated in India, have a substantial holding stake in India, and have no criminal history; and the licence is only issued to those entities which have no interest in online or offline gambling activities in India or abroad.
As per the Nagaland Act, the controlling stake must be in India, and executive decision-making powers of licensees are required to be performed from within the territorial boundaries of India. The Nagaland Act unfortunately does not provide any guidance on a threshold for this requirement to be met.
The licensee has to provide a dashboard with a username and password to the Nagaland Authority (defined in 4.7 Application Timing) to supervise the activities of the licensee.
The licensee may be required to set up an office in Nagaland within 12 months from the date of issue of the licence.
The technology support (hosting of the website, management of the website, location of servers, etc) of the licensee is to be within India only.
Licences are offered only for games of skill offered through online media, as elaborated in 6.1 B2C Licences.
Licensees must have no interest in offline gaming activities in India or abroad; and must not be engaged in gambling.
Licensees should not have a criminal history.
Sikkim Casino Laws
Only a body corporate registered under the provisions of the Registration of the Companies Act, Sikkim 1961 may apply for a licence.
Sikkim Online Laws
The licensee must be a company/partnership firm incorporated in India.
The Sikkim Act uses potentially confusing terminology, and introduced references to "intranet" and "intranet gaming terminals". Thus, the Sikkim Act restricts the offering and playing of “online games and sports games” to the physical premises of gaming parlours through intranet gaming terminals within the territory of the state.
Goa, Daman and Diu
Only land-based operators require licences in Goa, and Daman and Diu.
While the wording of the law does not expressly prohibit a foreign operator from applying for a permit, an Indian entity would be best placed to apply, keeping in mind the application of the foreign exchange control regulations and foreign direct investment policy regulations described in this chapter.
The process and timeline for licensing applications is as follows.
The applicant should submit an application to the licensing authority (ie, the Finance Commissioner (Nagaland Authority)) identifying the games for which the licence is being sought. The application must be accompanied by documents in support of the credentials of the promoters, audited financials, the software technology platform, a proposed business plan, and financial projections.
Should the Finance Commissioner be prima facie satisfied with the application, they may issue a letter of intent to the applicant. The Finance Commissioner will then forward the application to certain empanelled firms (lawyers, financial experts, etc) who assist the state government in scrutinising all applications. The empanelled firms will then revert with either their certification or recommendations to the applicant within 30 days.
The Finance Commissioner will also have the right to refer the application to an ad hoc committee or an expert committee to determine whether the recommendations of the empanelled firms are required to be adopted. These committees are required to make their recommendations within 14 days. Once the Finance Commissioner receives the recommendations, he or she is to issue the licence within 14 days.
Some operators have received their licence within a month or two, but in practice there is no strict timeline that is followed.
Sikkim – Casino
A licence application must be made by an Indian entity to the state government, which will examine the application.
After making any inquiry as it considers necessary, and on satisfaction that the applicant has a five-star hotel with the capabilities to operate a casino, the state government can grant a six-month provisional licence on payment of a fee.
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 has fully complied with the terms and conditions of the licence, the government of Sikkim can grant a regular licence on payment of the fee.
Sikkim – Online Games
The licensee is to make an application in the form as specified in the Sikkim Act and Rules along with the application fees.
The state government will then conduct an inquiry if it deems it appropriate before issuing or rejecting the licence.
Daman and Diu
An application may be made by an individual/firm/body corporate to the Director (Tourism) of Daman and Diu. The Director will then appoint an inspection officer to inspect the licence premises. Once the Director is satisfied with the inspection, he or she will recommend to the Administrator of Daman and Diu that the licence should be granted; who will then grant or reject the licence. Please refer to 4.4 Availability of Licences. There is unfortunately no guidance on how long this licence takes to come through.
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. Currently, under the framework of other applicable Indian laws (like the foreign direct investment policy and the exchange control regulations), practically, an Indian operator would be in the best position to apply. However, there is no guidance on how long this permit takes to come through.
A non-refundable application fee of INR50,000 (approximately USD700) is to accompany the application.
The casino fee is INR5000 (approximately USD70) and the online fee is INR500 (approximately USD7).
The cost of a licence is INR2 million (approximately USD28,000) for onshore and offshore casinos, regardless of the number of tables or machines installed in the licensed premises. The following annual licence fees are payable.
Daman and Diu
There is an application fee of INR2 million (approximately USD28,000) for a set of up to 20 machines/stages/tables for five-star hotels. A refundable deposit of INR300,000 is to be paid (which will be refunded on the expiry of the licence).
The cost of a permit is INR10 (approximately USD0.14).
For the first three years, the annual licence fee per game is INR1 million (approximately USD14,000), or INR2.5 million (approximately USD35,000) for a range of games.
For the next two years: the annual licence fee is INR2 million (approximately USD28,000), or INR5 million (approximately USD71,000) for a range of games per annum. In addition, licensees are required to pay an amount of 0.5% of the gross revenue generated as royalty.
For casinos, the gaming fees payable by the licensee to the state government are at the rate of 10% of the gross gaming yield or INR10 million (approximately USD114,000), whichever is higher, for the first year and thereafter with incremental increases of 15% per year in respect of the minimum assured revenue for each of the remaining four years.
For online gaming, the annual fee is INR10,000 under the Sikkim Act and Rules (approximately USD1,400), and an online gaming levy of 1% of the gross gaming yield to the state government.
The annual licence fee is INR25 million (approximately USD352,000) per annum, per 100 square metres for land-based casinos in five-star hotels; and INR70 million (approximately USD985,000) for offshore casinos.
Daman and Diu
The annual licence fee is INR2 million (approximately USD28,000) for a set of up to 20 machines/stages/tables on board offshore casinos. Furthermore, there is a fee of INR8,000 for the "mother machine" and INR6000 per additional stage of electronic amusement/slot machine in five-star hotels.
Please refer to the response in 4.6 Application Requirements. The states of Sikkim, Goa, and Daman and Diu provide for premises licensing.
With respect to land-based casinos, there have been reports in the media of the government of Goa’s intention to introduce legislation to:
As per the Nagaland Act, licences are issued for offering a variety of games of skill on online media.
The Sikkim Act and Rules allow for licences to be granted to offer a variety of intranet games (within the State of Sikkim). As per the Sikkim Act and Rules, the licensee must be a company incorporated in India, and must operate only in Sikkim.
Please refer to 4.6 Application Requirements for more details.
There are no such licences to be obtained. The Reserve Bank of India requires payment processors to obtain licences under the Payment and Settlement Systems Act, 2007, though payment gateways do not need such licences. Software developers do not generally require licences, unless they have set up in a zone such as a Special Economic Zone (SEZ) or a Software Technology Park of India (STPI), which have their own registration and compliance requirements.
Apart from contractual restrictions that may be explored, there are no measures in place to regulate the use of affiliates.
There are no licensing/regulatory requirements that apply to the use of white-label providers.
Please refer to 1.1 Current Outlook. All of these proposed policy changes/pending litigations would impact upon the online gaming sector.
At the outset, please note that only the state of Nagaland has introduced a licensing regime for online games of skill. Most of the online games being offered in India are not regulated/licensed. Such games are excluded from the prohibitions under most gaming enactments as they are games of skill.
However, under the under the Information Technology (Intermediary Guidelines) Rules, 2011, issued under the IT Act, internet intermediaries are required not to knowingly host/publish information "relating to or encouraging gambling". Any intermediary, upon being notified by a court order/order of a government agency that such content is being hosted on its platform, is required to disable such information within 36 hours.
Most gaming enactments do not prescribe social responsibility requirements for gaming operators, since they have been enacted to prohibit gaming activities. The Nagaland Rules prescribe some requirements for online games of skill offered within the state, such as by prescribing that only players above the age of 18 are permitted to play for stake on operators’ platforms.
However, in the absence of regulation, the gaming industry in India has taken the initiative to self-regulate and prescribe standards for social responsibility. Certain self-regulatory industry associations, such as the AIGF and the Indian Federation of Sports Gaming (IFSG), have prescribed such standards in their skill charters.
These requirements include:
Aadhaar is a unique 12-digit identification number used in India for availing and accessing a variety of services. It relies on the collection of an individual's biometric and demographic data. The Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (Aadhaar Act) was introduced to give statutory backing to the Aadhaar scheme. The use of Aadhar is not mandatory in India.
Certain gaming operators have required players to provide their Aadhar numbers to carry out know your customer (KYC) processes.
Furthermore, certain self-regulatory bodies have introduced measures for responsible gaming, as discussed in 7.1 RG Requirements.
In India, the Prevention of Money Laundering Act, 2002 (PMLA) prohibits money laundering activities. Under the PMLA, entities carrying out the activities for playing games for cash or kind (including casinos) are also required to adhere to the provisions of the PMLA. Such entities are classified as "reporting entities" under the PMLA.
As per Section 12 of the PMLA, reporting entities are required to maintain records of transactions and documents evidencing the identity of their clients.
The Advertising Standards Council of India (ASCI) is a self-regulatory industry body that has been set up for the regulation of advertisements on television/broadcasting media. With regard to prohibitions under the gaming enactments, the relevant police/judicial authorities in the respective states implement and enforce the gaming enactments. The specific regulatory authorities in states where licences are issued have been covered in 4.1 Regulatory Authority.
The ASCI has released a Code for Self-Regulation of Advertising Content in India (ASCI Code). The ASCI Code defines an advertisement as “a paid-for communication, addressed to the public or a section of it, the purpose of which is to influence the opinions or behaviour of those to whom it is addressed. Any communication which in the normal course would be recognised as an advertisement by the general public would be included in this definition, even if it is carried free-of-charge for any reason.”
There are two content specific laws that also have defined advertising: the Cigarettes & Other Tobacco Products (Prohibition of Advertisement Regulation of Trade & Commerce, Production, Supply & Distribution) Act, 2003 defines an advertisement to include “any visible representation by way of notice, circular, label, wrapper or other document and also includes any announcement made orally or by any means of producing or transmitting light, sound, smoke or gas”. In addition, the Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 very similarly defines an advertisement as “any notice, circular, label, wrapper or other document, and any announcement made orally or by any means of producing or transmitting light, sound or smoke”.
Please see 9.4 Restrictions on Advertising regarding the general restrictions and prohibitions on advertising. The specific restrictions on licensees in Sikkim and Nagaland are as follows.
Under the ASCI Code, advertisements which are in breach of the law, or that (directly or indirectly) propagate products which are banned under law are prohibited.
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. These restrictions, however, should not apply to skill games.
The advertising of prize competitions is prohibited, unless it has been duly authorised by the relevant authority.
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 IPC, IRWA and IT Act penalise obscene content, and the IPC prohibits advertisements for lotteries, unless they comply with the provisions of the Lottery Laws.
The Consumer Protection Act, 2019 (CPA) was notified to come into force in July 2020, to replace the Consumer Protection Act, 1986. The CPA classifies (i) the offering of prizes with the intention of not providing them as offered and (ii) the conduct of a contest, lottery, game of chance or skill for the purpose of promoting a product/business interest as an "unfair trade practice". The CPA also introduces certain penalties for making "misleading advertisements" by entities such as endorsers, advertisers, publishers. 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. The ASCI has released a self-regulatory code which is binding on the television/broadcasting industry; and therefore, gambling advertisements on television. This code prohibits the propagation of products, the use of which is banned under the law.
Under the ASCI Code, complaints may be filed by the general public, or suo moto initiated by ASCI itself. If an advertisement is found to be in violation of the ASCI Code, then the agency/media vehicle concerned and the relevant self-regulatory bodies are notified that the advertisement contravenes the ASCI Code. In serious violations, the media vehicle may be directed to suspend the advertisement.
For violations under the CPA, fines may be imposed, which may extend to INR1 million (approximately USD14,000). Every subsequent offence may be punished with imprisonment for a term that may extend to five years, and with a fine that may extend to INR5 million (approximately USD70,000).
There are no specific disclosure requirements for acquisitions and changes of control of gaming/gambling companies under Indian law. These requirements are largely driven by the transaction structure and the change of control clauses as agreed in company contracts.
In addition, in the event the transaction involves a listed company, certain regulatory disclosures (including stock exchange disclosures) will need to be made depending upon the nature of the transaction.
Please refer to 10.1 Disclosure Requirements.
There are no specific requirements for passive investors in acquisitions or changes of control under Indian law. However, in the event a passive investor wants to have some minimum oversight over the conduct of the company, they may consider appointing an observer on the board of such companies. This is not mandated under law but can be considered depending upon the commercial understanding between the parties.
As covered in 3.6 Penalties for Unlawful Gambling, regulatory bodies (the police/judicial bodies) may impose fines or imprisonment as under the gaming enactments.
There are no sanctions in the gaming/gambling sector over and above the penalties covered in this chapter. The majority of the gaming enactments are archaic, and were enacted before the internet gained popularity. In the context of bricks-and-mortar gaming houses, these fines and prohibitions have been enforced over a period of time. In the context of online gaming, since the industry has been around only for a couple of years, there is not enough of a record of enforcement from which to draw conclusions. While there are certain cases pending in courts (which have been highlighted throughout this chapter), not all cases are reported in the public domain. From the information that is available today and matters that are on public record, the authors understand that most cases are being heard and disposed of at the trial stage.
There are several modes of executing decrees and awards of damages or financial penalties in India.
Indian courts may execute an award/decree for realisation of the amounts through:
There are no recent trends of note in social gaming.
PlayerUnknown's Battlegrounds (PUBG) is a new esport game that has caused much controversy in India due to its apparent harmful effects on the youth.
The Police in Rajkot City, Gujarat have prohibited playing PUBG within the precincts of Rajkot City, and have reportedly arrested people for playing the game. The game was banned for a short duration in Ahmedabad as well. While a few of these bans have reportedly now been lifted, the Central Reserve Police Force very recently banned their officers from playing the game, stating that it affected their "operational capabilities".
A PIL (public interest litigation) has been filed before the Bombay High Court, by an 11-year-old from Mumbai, Ahad Nizam, stating that PUBG promotes immoral conduct such as violence, murder, aggression, looting, gaming addiction and cyber bullying, so should be banned.
The Bombay High Court consequently issued a direction to the Ministry of Electronics and Information Technology (MEITY) to assess and review PUBG and take action if any "objectionable content" is found.
Please see 1.1 Current Outlook and 1.2 Recent Changes.
Please see 1.1 Current Outlook and 1.2 Recent Changes.
While blockchain technology has been spoken about widely in the international gaming context, token-based implementations have not yet taken off in India, primarily due to an April 2018 regulatory prohibition on financial institutions facilitating "virtual currency" activity. This prohibition is currently under challenge in the Supreme Court of India.
Please see 1.1 Current Outlook and 1.2 Recent Changes.
As per the Indian income tax laws, any income, by way of winnings from any lottery or crossword puzzle or card game and other game of any sort, exceeding INR10,000, is subject to a withholding tax of 30% (exclusive of applicable surcharge and cess). However, in cases where the winnings are wholly in kind, or partly in cash and partly in kind (and the cash component is insufficient to honour the withholding obligation in respect of whole of the winnings), the payor is required to ensure that the tax at the above rate is paid before the release of the whole winnings to the payee.
A new tax has been imposed which is chargeable on online services or goods supplied by offshore e-commerce operators to Indian residents or persons accessing such platforms through an Indian IP address. This tax is a 2% turnover tax from sales of goods or services to Indian residents. The question of the applicability of this tax to offshore gaming operators may also arise and, based on the specific facts of the game model, it may be possible to argue that this tax should not apply. There are certain de minimus thresholds notified, below which the gross income is not subject to this tax.
Under the Goods and Services Tax (GST) Laws, services by way of admission to entertainment events or access to casinos and the like is taxable at the rate of 28%.
Furthermore, games offered under direct betting models (where the players bet against the house) constitute actionable claims. To the extent such actionable claims involve lotteries, betting or gambling, they constitute supply of goods subject to GST at the rate of 28% on the entire bet amount. Actionable claims relating to games of skill are not subject to GST.
On the other hand, games offered under the peer-to-peer model (where the players bet against each other and the gaming company merely provides the platform for facilitating such betting) constitute the provision of services by the gaming company. Such provision of services should be chargeable to GST only if it constitutes Online Information Database Access and Retrieval Services, or OIDAR). Essentially, OIDAR services are those which can be provided through minimal human intervention. The rate of tax is 28% (for games of chance such as betting/gambling) and 18% (for games of skill). The tax is levied on the service fee/commission charged by the gaming operators. If there is sufficient human intervention in the provision of the services, such as live casinos for instance, such services should not qualify as OIDAR and accordingly should not be taxable.
Please note that to ascertain the taxability, rate of taxation and the correct tax base, the exact nature of the product offering should be analysed. The outcomes would differ also based on whether the operators are based in India or are conducting such activities from outside of India.