Feature: Gaming Academic Prof Joe Kelly discusses regulatory developments in US, Europe and best approach for Indian lawmakers

In this post, we present an exclusive interview with Professor Joseph Kelly, a leading gaming academic from USA who has worked in the gaming industry in various jurisdictions. Professor Kelly is a co-Editor of Gaming Law Review and Economics (GLRE) and his scholarly works on gaming are cited by various Courts. Prof. Kelly’s detailed profile is available here.

In this interview, Professor Kelly discusses the degree of skill involved in the game of poker, his experiences in trying to convince Indian lawmakers to legalise casinos and his advice to the Indian gaming industry.

Q. Professor Kelly it is a privilege to have your feature. Could you tell us more about how you got interested in the gaming industry and a background about the work that you have done?

Professor Joseph Kelly (JK): I have been involved with online gambling since 1996. Since 2001, I have  worked with Catania & Ehrlich P.C. in drafting online gambling laws in Antigua ,the U.S. Virgin Islands, South Africa, several Canadian provinces and many other jurisdictions. I have been an expert witness in a London poker law case (Gutshot),California card club litigation, and have testified before numerous Parliamentary and State committees. My law review articles have been cited favourably in 10 federal and state reported decisions.

Q. You have done considerable research on Gaming Laws in various jurisdictions. Many believe that UK Gambling Act of 2005 is one of the best pieces of legislation covering lotteries, internet and physical gaming.

Which model do you think would be most appropriate for Indian lawmakers to adopt?

JK: The 2005 Gambling Act does not address taxation of  British customer’s proceeds from their play on licensed offshore sites. Almost all British online sports operators have relocated operations to Gibraltar or some other European jurisdiction .This failure to collect tax on British gamblers’ proceeds causes Great Britain to lose substantial Internet gaming revenue. It is expected that legislation will result in taxation of online players in 2014.

The most important decision India has to determine is whether gaming legislation and regulation should by the state or federal government or some combination of both .There are examples of well-established Internet gaming jurisdictions that India should review in order to utilize the best practices in jurisdictions such as New Jersey, Great Britain, etc.

 Q. India adopts a preponderance test to determine the degree of skill in games. A 1968 Supreme Court decision ruled that rummy was a game of skill and a 1996 decision has ruled that betting on horses involves substantial skill.  You have given an expert testimony on the degree of skill involved in poker in various courts. There is a matter pending on whether online poker involves skill in the High Court of Delhi. Would you reckon that poker could be held as a game of skill by Indian courts?

JK: The  Karnataka High Court in Bangalore has recently ruled that poker and other card games  are games of skill and therefore do not need a state license. Almost every recent U.S. state court decision has concluded that poker games are predominantly games of chance or prohibited for some other reason.  Other jurisdictions, such as England , concluded poker is prohibited because chance is a significant factor and therefore is illegal gambling .Only state-approved online poker or in -person poker ,such as city-licensed California card clubs, are permitted in the U.S. Poker and other card games are permitted in Great Britain’s casinos

The important thing is to ensure that all online and land-based poker and other gaming operators are suitable, solvent and engage in socially responsible policies to minimize compulsive gambling.

Q. By the same extension, would certain forms of sports betting and fantasy sports (based on the 1996 horse racing decision) as well as some other card games also be held to be games of skill?

JK: The introduction of online gaming across the globe has radically changed the gaming industry  and will continue to do so as demonstrated by  the widely diverse regulatory structures in response to the Internet gaming phenomenon.

Sports betting may contain skill. Up to $500 billion annually is wagered in the U.S., with only $3 billion wagered legally in Nevada. Strict regulatory control is necessary to keep out organized crime, collect taxation and minimize game fixing .It is estimated  that annual illegal sports betting in India is about 300,000 crore rupees.(L34.6Bn)

Fantasy sports is generally considered legal in the U.S., except for about 10 states.  New Jersey will allow its casinos to operate daily fantasy games. Online interstate horse race wagering is very common in the U.S., but this U.S. sanctioned wagering has been found to be in violation of the World Trade Organization/GATS.

 Q.You have also worked on gaming and legalising casinos in India. Could you share some insights on your experience?

JK: I love everything in India, except for its legal system.  I was very impressed with the Indian Judges whom I met at Indian Legal Conferences.When we met with the Chief Minister of Goa in 1997, he listened to my arguments for a 5 star hotel/casino but rejected them.

 In India, it is essential to know who is the head of the family that makes the final decision. It is also essential to avoid cultural mistakes. For example, plans for a 5 star hotel/casino failed because the planners created public opposition when it was revealed  that cocktails would be served by female servers.

Professor Joe Kelly

Q. Apart from betting on horses, casinos in two states and lotteries in a few states, gambling is largely prohibited in India. Lotteries are regulated at the federal level while legislation on other forms of gaming is left up to the individual state governments. There have been demands by experts and industry bodies to regulate sports betting at the federal level. Also regulation of inter-state and trans-national online gaming would seem impossible by individual state governments (as it seems to be the position right now).

Do you think a federal regulation on all forms of gaming, lotteries etc. would be more feasible and how do you see the Indian gaming industry progressing in the next few years?

JK: Federal regulation and control in India would be most desirable. Federal control with a strict Gambling Commission could ensure that operators are suitable and solvent and that gambling is operated honestly. It would be important that tax revenues  be shared with the states of the gambler. This would also permit a state to opt-out of any legal gambling. Existing casinos in Goa and Sikkim might be exempt from federal regulation.

India has become a high tech world capitol. The federal government could make sure that all online operators pay upfront costs of suitability investigation and pay all taxes.

While federal online regulation may be desirable, it will not work in countries such as the U.S., primarily because of a history of state jurisdiction over gaming . Instead, New Jersey, Nevada, Delaware and the U.S. Virgin Islands are and will be licensing non-sports online gambling. More states and Native American tribes will also be legalizing online intrastate gambling and eventually form interstate compacts.

Q. India also has special Constitutional protection for tribal areas just like USA.  Do you think the ‘Indian gaming’ model can be replicated and will it benefit the tribal communities and promote tourism in remote areas?

JK: The 1988 Indian Gaming Regulatory Act (IGRA) has generally been considered a success. It has resulted in much litigation and is badly in need of amending. I would not recommend anything but federal oversight for India.

 Q. You are also Co- Editor of Gaming Law Review and Economics (GLRE). Can you share some details about the journal and its objectives?

JK: GLRE is the most scholarly gaming law journal and has been cited as authority in U.S. federal and state courts more than any other publication. GLRE is a peer-reviewed journal and  concentrates on obtaining the best gaming articles from authors throughout the world. GLRE is available in 140 countries around the globe.

Q. Finally, your prediction on how the gaming industry will progress especially with some positive developments in online gaming in USA and some Asian countries.

JK: Legal online gambling will continue to grow in the EU the U.S., and most other jurisdictions. It is becoming increasingly obvious to governments that gambling prohibition, like that of alcohol, will not work.

For example, we have absurd laws in certain states such as Washington, where an online-poker player is committing a class C felony (a most serious crime) if he plays poker online for money. No player will be prosecuted but it creates disrespect for the law in general.

Q. Any other comments or observations especially for those associated with the Indian gaming industry?

JK: The Indian gaming industry has to convince the federal government that regulated gambling is essential. Indians love to gamble and the illegal market is thriving. A 5 star casino hotel will also keep money in India since the “high rollers” will no longer have to go to Nepal or Great Britain. Regulated Indian online gambling will also attract reputable online gambling operators that are licensed in well-regulated jurisdictions. They will be attracted to India partly because it has achieved status as a “high-tech” country.

I had a frustrating experience when we drafted proposed laws for an Indian Province, then governed by the Congress Party. We made sure that all drinks would be served by men. As we were ready to leave for India to finalize the project, the B.J.P., which then governed India at the federal level, stated  that a 5 star hotel casino would not be allowed.