Exclusive As per latest information from the Sikkim government, a total of three ‘go live’ licenses for online gaming have been issued so far to Best & Co (a subsidiary of Future Gaming), Maarm International and Essel Group. Sources familiar with the latest turn of events in Sikkim have indicated that all four companies are actively working towards starting operations in the state very soon and are working overtime to have the technology and infrastructure in place to start operations.
It is also understood that M/s Pan India Network Ltd, part of the Essel Group of Companies, which runs Playwin lotteries in Sikkim and other parts of the country had started offering wagers on virtual horse racing in Sikkim this month, but had to stop operations after experiencing technical difficulties and due to objections being raised by officials of the lottery department on the manner of conducting the games. Officials of Pan India could not be reached for comment despite repeated attempts and hence the exact details of the indicent could not be confirmed.
However, as per accounts from other sources familiar with the matter, Sikkim lottery department bureaucrats are understood to have told Pan India officials to stop offering online gaming services until some rules and legislative provisions are amended. The government is expected to either promulgate an ordinance to amend the Sikkim Online Gaming (Regulation) Act, 2008 (which may later be passed as a legislation) or amend the Sikkim Online Gaming (Regulation) Rules, 2009 through a notification.
This move is expected to bring align license conditions with the legislative provisions and bring clarity as to the manner and extent of operation of online gaming, restrict gaming activities to the territorial boundaries of Sikkim and officially insert the condition of intranet in the rules. At least two of the licensees, Maarm International and Pan India, are on the verge of updating their technical infrastructure and are expected to start full-fledged operations within the next few weeks. The license holder and some other provisional license (PL) holders are also likely to start operations in the near future and are making all attempts to set up the necessary facilities. More updates would be posted once details are available.
Update: The article had earlier incorrectly mentioned that a total of four ‘go live’ licenses have been issued and hence has been changed accordingly.
The Laxmikant Parsekar led Goa government has hiked casino license fees for the second consecutive year. While making his budget speech, Chief Minister Parsekar, who also holds the Finance portfolio made the announcement of the increase in the annual license fees. The fee for every category of onshore casino has been raised by Rs. 50 lakhs per annum, while for offshore casinos the fee has been raised by one crore rupees. Thus, onshore casinos upto 100 square metres in area had to pay Rs. 2 crores as license fee last year, will now have to pay Rs. 2.5 crores. An offshore casino having passenger capacity of 100 persons had to pay Rs. 6 crores as license fee, but will now have to pay Rs. 7 crores (complete table given below).
An application fee of Rs. 20 lakhs for onshore and offshore casinos has been introduced. Similarly, a security deposit of Rs. 20 lakhs for both types of casino during application and Rs. 10 lakhs during renewal has also been introduced. The Goa government hopes to earn Rs. 15 crores of additional revenue from this increase.
The issue of casinos evoked a heated debate in the legislative assembly, with a ruling BJP MLA claiming that casinos generate a lot of revenue and that MLAs get their salaries because of the casinos. The opposition Congress raised the issue of offshore casinos in the assembly and Parsekar responded by saying that the government was committed to relocate offshore casinos from River Mandovi within the next two years but would not abolish casinos altogether, as it would send a bad signal to potential investors.
Extract from the CM’s budget speech
47. Speaker Sir, I propose to revise the application fee, annual recurring fee and security deposit, for land based and off-shore casinos. The details are provided in Annexure – E.
Annexure – E
1. Application Fees:
a) On shore / Land based Casinos: Rs. 20 lakhs irrespective of the number of machines.
b) Off-shore Casinos: Rs. 20 lakhs for machines / tables irrespective of the number of their number or size or capacity of vessel.
On shore / Land based casino
Area & Fees
Upto 100 sq. m. – Rs 2.50 crores
Above 100 sq. m. upto 300 sq. m. – Rs 3.00 crores
Above 300 sq. m. upto 500 sq. m. – Rs 3.50 crores
Above 500 sq. m. – Rs 4.50 crores
Off shore casino
Passenger capacity of vessel & Fees
Upto 100 – Rs 7.00 crores
Above 100 upto 200 – Rs 7.50 crores
Above 200 upto 400 – Rs 8.00 crores
Above 400 – Rs 9.00 crores
Rs 20 lakhs at the time of grant of new license and Rs 10 lakhs at the time of renewal, in the case of both On shore / Land based casino and Off shore casino.
A Public Interest Litigation (PIL) has been filed by Jay Sayta (petitioner and founder of this website) to direct the government of Maharashtra to enforce the long-pending Maharashtra Casinos (Control & Tax) Act, 1976. The fact that the Maharashtra Casinos Act has been passed by the legislative assembly and legislative council and assented by the governor (This was first reported on glaws.in here and here). The petition thus raises an important constitutional question of whether a situation can arise when the executive government completely disregards the will of the legislature and falls to apply its mind on enforcement of the legislation or give an indication of timelines for implementation.
A case of a legislation not being enforced for 38 years has never being raised before the courts. Jurists have termed the situation of the executive not notifying any legislation as a ‘constitutional conundrum’ making it a fit case for judicial intervention. Enforcement of the Casinos Act will not only ensure that the will of the people as reflected by the law passed by the legislative assembly is implemented but also help eliminate the financial woes of the government as the government will raise thousands of crores in revenues.
Further, the Act will promote tourism and ensure that citizens do not suffer criminal action for an acceptable form of recreation and a legitimate avenue of entertainment. The petition is likely to be listed for hearing before a division bench of the Bombay High Court in the next 7-8 days.
About the Maharashtra Casinos (Control & Tax) Act
The Maharashtra Casinos (Control & Tax) Act was passed in the legislative assembly and assented by the Governor on 19th July, 1976 after much discussion and deliberation in the house. The statement of objects and reasons of the Casino Act indicates that legalising gambling was desirable for the purpose of promoting tourism and increasing revenues to the exchequer. The Act provides for licensing of casino games in public places on payment of such license fees as may be prescribed. The Act defines casino games to include all games of betting or wagering including games of chance played by means of machine or instruments making it possible to regulate both online and offline gaming.
The Act also provides for a reasonable rate of taxation not exceeding twenty-five per cent to be imposed on license holders and allows the state to frame rules to regulate gambling advertisements, prevent underage gambling and impose other restrictions as may be necessary.
Exclusive Almost three months after the Sikkim government issued the first regular or ‘go live’ license to a subsidiary of Future Gaming, the Sikkim lottery department today issued a second regular license to M/s Maarm International Private Limited for a period of five years from 1st April 2015 to 31st March 2020.
The regular license has been issued on the same conditions that were imposed on Future Gaming earlier. The conditions include making the online sports betting/gaming facilities available only within the state of Sikkim through intranet connection, ensuring that online gaming activities do not traverse to other states/Union territories, onus on licensee to provide online facility/network to players etc. The license has been issued on payment of a consolidated fee of one crore rupees for a period of five years with an option to further renew the license for a period of five more years. It is understood that some other lottery operators and gaming companies are also in a contention to get a regular license and are in the process of completing necessary formalities.
Manoj Sethi, Director of Maarm International said that he is extremely pleased that the Sikkim government has issued the ‘go live’ license to their company. Sethi added, “We are very happy that the Sikkim government has started the process of online gaming regulation. We have made all preparations and started building the necessary infrastructure as well as technical support. We hope to start operations within the state of Sikkim as soon as possible and definitely by April 2015. We are also in talks with the Central government and other state governments to ensure that online gaming is legalised in more states and Union territories.”
Sethi also stated that his company would collaborate with Jalaram Group of Industries and its founder Mohan Ganatra and Golden Lotteries, which is an established lottery brand in Sikkim, to provide state of the art gaming facilities in Sikkim. Future Gaming CEO Kapil Khanna had earlier stated that his company was trying to start online operations at the earliest and would definitely aim to go liv by April. It is thus evident Sikkim residents will at least have an option of wagering on at least two legal online gaming websites by the time the new season of Indian Premier League (IPL) kicks off.
In a move that surprised political observers, key opposition leader Maithripala Sirisena who was until recently a member of the ruling coalition defeated incumbent Sri Lankan President Mahinda Rajapaksa by a convincing majority earlier today. The surprise victory of Sirisena who is described as socially conservative is expected to have implications on the gaming industry in the Asia-Pacific region. One of the key promises of Sirisena’s election manifesto is to disallow casino licenses given to the “Water Front” and “Lake Kere” projects granted under the Strategic Development Projects Act due to reservations raised by Buddhist monks, though interestingly a pro-casino Minister, Faizer Mustapha from the Rajapaksa cabinet joined the Sirisena camp. (Mustapha however promised to abide by the new leader’s position on gambling).
Sirisena has also vowed to stop the tax holidays given to the integrated casino-cum-resort projects and has taken a conservative stand against vices prevailing in Sri Lankan society. Australian billionaire James Packer and his Crown Group was expected to invest around US $400 million in an integrated casino resort in the island nation but that project is unlikely to proceed now. Similarly, the two other resorts; a US $650 million project from local conglomerate John Keells Holdings and a US $300 million project by local businessman Dhammika Perera are likely to take a hit due to the change in the political dynamics of the island nation.
It is learnt that the existing Sri Lankan casinos operate by exploiting legal loopholes and do not have a formal casino license, but operate on the basis of a taxation receipt. The Sri Lankan Parliament however has passed the Casino Business (Regulation) Act in December 2010 which enlists conditions to obtain a casino license, but the legislation has not been implemented yet. It is unclear whether Sirisena intends to shut down existing casinos and other gaming operations as well, but given his public statements and moral inclinations, it is definitely clear that he will not make things easy for the casino industry.
New Goa Chief Minister Laxmikant Parsekar recently announced his stand on casinos in a press conference in the state capital. In a marked departure from his predecessor Manohar Parrikar’s anti-casino stand, Parsekar acknowledged the economic benefits of allowing casinos stating that casinos contribute considerable revenues to the state exchequer and it would not be feasible to shut down existing casinos. As per a Press Trust of India (PTI) report, Parsekar put the blame on the previous Congress government for granting casino licenses and added that casino owners could approach the courts to strike down any decision to shut down gaming abruptly and hence he would not “disturb” existing businesses.
Parsekar remained ambivalent on the decision to shift offshore casinos out of River Mandovi into the Arabian sea indicating that status quo would be maintained and Parrikar’s decision to shift casinos by December 2015 may not be implemented. Parsekar however did not mention any date for implementation or notification of the 2012 Goa Gaming Amendment Act which introduces a series of tough measures for the casino industry such as formation of a Gaming Commission to issue tourist permits for casinos, strict conditions for transfer of casino licenses and bar on locals from entering casinos.
Commenting on the development, Shrinivas Nayak, Director of Pride Group of Casinos and Hotels who represents an association of Goa casinos, said in a statement, “We welcome the stand taken by the honourable CM. This will not only provide stability to the industry but also encourage investors to invest more in tourism and other sectors in the state.”
Former Chief Minister Manohar Parrikar who is currently serving as India’s Defence Minister had introduced a series of tough measures against the casino industry including hike in entry fees and taxation. Parsekar who took charge as Chief Minister in November 2014, is perceived to be close to Parrikar. However he has taken a divergent view on the casino industry which is likely to be criticised by opposition parties and civil society groups who want to shut down all casinos in the tourist state.
Reports in the media indicate that the Andhra Pradesh government led by Telugu Desam Party (TDP) chief N Chandrababu Naidu has received a proposal to develop casinos in the port city of Visakhapatnam (Vizag) on the lines of offshore casinos in Goa. The Andhra government reportedly wants to develop Vizag as a global tourism destination and attract visitors from India and abroad.
A report in Deccan Chronicle indicates that casino operators from Goa have put proposals before the Andhra government. Those familiar with the matter indicate that the proposal was put forth by Delta Corp Chairman Jaydev Mody. It is believed that a large portion of gamblers in Goa casinos belong to the Andhra Pradesh-Telengana region and contribute a large sum to Goa’s tourism revenues. A cash-strapped Andhra government reeling under the impact of Cyclone Hudhud is facing a fiscal crisis due to various populist schemes introduced by it. Promoting tourism and developing Vizag into a global tourist hub with state of the art recreational facilities and casinos could be the ideal way to attract tourists from across the globe.
Some reports also indicate that the Andhra government is keen to allot land near Vizag to have a Disneyland in the state on the lines of the Disney park in Paris. While it is understood that the Andhra government has neither accepted nor rejected the casino proposal, Naidu is likely to assess the sentiments of the locals and impact on those living in the state before taking any final decision. It may be recalled that states like Maharashtra, Haryana, Odisha, Jammu & Kashmir etc. have considered proposals to legalise casinos but have rejected the idea because of opposition from political and social groups. More recently the government of Punjab was considering allowing casinos in Ludhiana as part of a tourism project but later dropped the plan because of opposition from religious and social groups.
Sources however indicate that the Andhra government might not be in any hurry to react to the proposal. It remains to be seen if Naidu, who is seen to be a pragmatic and astute politician would be able to allay local apprehensions and clear the project, given its obvious benefits.
Exclusive After five years of ambivalence, the Sikkim government has finally issued the first regular license for starting online gaming operations to a subsidiary of M/s. Future Gaming Solutions Private Limited headed by lottery king Santiago Martin. Kapil Khanna, Chief Executive Officer (CEO) of Future Gaming confirmed to GLaws.in over phone that Future Gaming has recently been issued a regular gaming license by the Sikkim government. Khanna further added that Future Gaming has been the first Provisional License (PL) holder to be awarded a regular license. Khanna also said that Future Gaming would launch its operations in the state of Sikkim very soon, possibly in the next few days.
Initially it was perceived that online gaming services could be offered across India on the basis of Sikkim licenses and PL holders were waiting for clarifications from the Central government. However it is now understood that the Union Ministry of Home Affairs had issued a clarification to the Sikkim Finance department in April 2014 indicating that online gambling regulation also falls within the ambit of state legislatures under Entry 34 List II of Seventh Schedule (of the Constitution) as long as such gambling is restricted to the territorial boundaries of the state and online gambling services are not offered to other states/Union territories.
As per the conditions of the Sikkim Online Gaming (Regulation) Act, 2008 and rules/notifications thereunder, licensees would be able to offer games such as poker, baccarat, roulette, blackjack, sports betting etc. once the website goes live. It is understood that apart from Future Gaming, other PL holders are also in the process of acquiring a regular license and starting operations very soon.
It has to be noted that despite waiting for over five years for clarifications from the Central government, the Sikkim online gaming licenses have disappointed many in the gaming industry since online gaming and sports betting would have to be restricted only to the state of Sikkim (which has a tiny population and small gaming market). The possibility of offering gaming services in other states exists only if such states pass a similar law legalising online gambling or gives their consent to allowing Sikkim websites to operate within their territorial boundaries, which at present seems to be a tall order.
However, the launch of gaming websites in the state of Sikkim may prove to be an important first step in emboldening other states to pass similar legislations and may even require the Central government to step in. Inter-state pacts or agreements between the state of Sikkim and other states to offer online gaming services also cannot be ruled out. The Indian online gaming situation now looks similar to gaming regulations in USA (where individual states are allowed to regulate online gaming within their territorial boundaries). Delaware was the first state in USA to legalise online gaming followed by Nevada and New Jersey (Delaware and Nevada have also signed an inter-state gaming pact).
In the gaming context, Sikkim seems to be the Delaware of India. Sikkim has been the first state to allow land-based casino and online lotteries and has been the most liberal in allowing almost all forms of gaming. It remains to be seen how online gambling regulation in India will pan out post this experiment by the Sikkim government.
Three months after the turmoil in the Nepalese gaming industry, the Nepal government has introduced major changes in the taxation structure in the budget for the year 2014-15. After Nepalese casinos were declared illegal following non-payment of royalties and other taxes by casinos, the Supreme Court passed an interim order in June 2014 directing the government not to shut down mini casinos in three and four star hotels.
After months of uncertainty, the Nepalese government based on representation from various casino companies decided to change the royalty and taxation structure. 75% of the total royalty and penalties due has been waived off for casinos which had closed down business prior to 18th October 2013 by submitting a written application to the government. Similarly, 25% of the total royalty and penalties due has been waived off for casinos which had closed down business in May 2014 by submitting a written application to the government.
Further, the annual royalty for casinos has been reduced to 3 crore Nepalese rupees (approximately US $ 311,000) instead of 4 crore rupees applicable earlier. The royalty for mini casinos (casinos having only electronic gaming equipment and slot machines) has been reduced to rupees two crores per annum (roughly US $ 207,300) instead of three crores applicable earlier. A provision has also been made to allow holders of mini casino licenses to operate in four locations simultaneously while one license holder can operate only one live casino.
Interest of 15% per annum will be charged for non-payment of royalties within three months of due date with provision of further 15% per annum penalty for time period exceeding three months. The Ministry of Culture, Tourism and Civil Aviation is expected to be the nodal ministry for payment of royalties and other fees.
It is believed that the steps taken by the Nepalese government will revive the casino industry and boost tourism. Economists believe that incentives are required for various businesses to boost the fiscal health of the Himalayan state which has not performed as per expectations in the past few years. It remains to be seen whether this move to incentivise casinos can revive Nepal’s gaming industry and whether Nepalese casinos will be able to once again attract tourists from India and other Asian countries.
In this interview, we present Gowree Gokhale, Partner and Intellectual Property, Technology, Media and Telecommunications (TMT) head of Nishith Desai Associates (NDA), a leading Indian law firm with offices in Mumbai, Delhi, Bangalore, Munich, Singapore and Silicon Valley. Ms. Gokhale has over 17 years of legal experience and is well known in the technology, media & entertainment, gaming, telecom and pharma industries. In this feature, she presents her views on the many unresolved legal issues in the gaming industry as well as likely course of action that could be taken by the new government as far as regulation of online gaming is concerned.
Q. NDA is probably the only law firm in India having a big focus on gaming within its TMT practice area. Could you start by giving us a brief overview of the practice area especially work done in gaming?
Gowree Gokhale (GG): Essentially the TMT practice started with focus on technology in the early 2000s because we focused on dotcom companies and start-ups. Thereafter, we realised that there is a good scope in the media and telecom space also. Because of our focus on TMT industries and due to convergence between these areas, gaming queries started coming in more often than not in the context of development of gaming software, online or mobile contests etc.The expansion of gaming industry was the due to online and on mobile platforms. Since gaming started on a pan-India level, we had to look at each and every state law and advise clients on both Central and state legislations.
The kind of matters that we do for example, relate to mobile or television contests, advising on how to structure competition and games so that they do not tread the line of gambling. A lot of activity started in the online space with Sikkim coming up with the online gaming licenses; we advised Indian and foreign players on structuring the entire process.In the more recent past, we have regularly dealt with the structuring of rummy, poker and other games of skill.
Q. On the issue of games of skill, two important decisions are pending in courts today. The first is the Mahalakshmi Cultural Association matter which has to decide whether rummy can be played for stakes. The second is the M/s Gaussian Networks matter on whether poker is a game of skill and whether real money online poker is legal. These two decisions are widely believed to be critical for the future of the skill games industry. What is your take on these two pending matters?
GG: In so far as rummy is concerned, the legislation is pretty clear to say that if it is a game of skill, then the entire legislation does not apply. So my personal view is that if the entire legislation does not apply (by virtue of the 1968 Satyanarayana decision of the Supreme Court), there is no question of going into whether service fee is obtained or whether there are stakes. The Supreme Court has clearly ruled in the Satyanarayana decision that rummy is a game of skill. So the moment rummy is a game of skill, you do not need to go further. The only concern from the enforcement authorities would be whether under the garb of rummy the operators are carrying out other betting activities as well.
The last paragraph of Satyanarayanacase is tricky. The Chennai High Court has interpreted the last paragraph to disallow staking of money on rummy, but some other High Courts have taken a different view.
In Mahalakshmi case, it needs to be seen whether Supreme Court will deal with the question of legality of taking a share of profit from the stakes. I hope the Supreme Court gives clarity on the last paragraph of the Satyanarayana case.
As far as the District Court opinion on the Gaussian Networks case is concerned, I think the Court has gone beyond its jurisdiction in rendering the opinion. An opinion should be based on interpretation of the statute and not on the basis of conjectures (such as possibility of rigging of online games). As far the element of skill is concerned, at least as far as Texas Hold em poker is concerned, looking at the rummy decision and other jurisprudence, there is a good chance that it could be held as a game of skill.
Q. There is a view that even sports betting could be classified as a game of skill in light of the decision on rummy and 1996 judgment holding horse betting to be a game of skill and consequently sports betting could even be legal at present. What is your take on sports betting and need for legalising betting?
GG: Keeping aside the question of whether betting on games of skill like horse-racing or cricket is legal now, it is important to discuss whether sports betting should be legalised and allowed in the Indian context. Philosophically we have to decide whether something which in any case may be happening on a large scale should be allowed and legalised or banned. I believe it should be legalised and regulated.
Just as cricket is a religion in India, betting on cricket is also a passion and it should be accepted. Also from the government perspective, this would be a good source of revenue. As we have seen in other jurisdictions if you give betting a legal status, it is possible to control and regulate the activity in a better manner. This issue should not be confused with the match fixing issues as is being done now. That can be separately handled.
Now coming to the question of whether sports betting is legal today, I think different state gaming legislations are worded differently, some use the term betting, so it would not be possible for me to take a view that betting on games of skill is legal.
Q. The Bombay High Court had passed an order some time ago directing the Computer Emergency Response Team (CERT) to ban online betting website Betfair. However the order has not been enforced till date.
GG: The IT (Information Technology) Act & Rules are Central Rules but if a state (like Sikkim) wants to allow online gaming then it has to implement geo-blocking which is a cumbersome process. As per the Constitution, states are empowered to legislate on some subjects. However, given the national and transnational aspects involved in online gaming, it is best that there is nationwide regulation of online gaming. I believe online gaming should be regulated a central level.
Q. Do you think it would be possible for the Central government to convince states to devolve of its powers to legislate on gaming and get a consensus for a federal legislation?
GG: There are two aspects involved. Physical gaming and casinos is something which is local and you have to create a culture and proper environment for example casinos may be permitted for tourism purposes. Thus, regulation of physical casinos may be left to the state governments. However, for something like online gaming which is impossible to regulate at the state level and things like geo-blocking can be easily circumvented, it is advisable to have a Central legislation.
It depends on the political will of the Central government. Just like Goods & Services Tax (GST), there could be a cooperative mechanism and coordination between the Centre and the States to have a legislation at the Central level.
Q. How do you see the gaming industry progressing in the near future? Do you feel there could be progress in the aim for regulating online gaming given that FICCI and other bodies have tried for the past couple of years and there has been no significant movement?
GG: I would not comment on what happened earlier. I think the earlier government did have issues on having the right majority and mandate. They had difficulties in terms of managing a coalition government. The current government has the mandate and thus it would be easier for the new government to implement a new policy. If FICCI along with other stakeholders in the industry put a right landscape outlining the positives, negatives and a way forward then to get these issues implemented would be much easier- this is just my view of how things can be taken ahead in future.
Q. What is your guess on the timelines by which we could expect action by the government on the difficulties faced by the gaming industry?
GG: It is too soon to say anything. The new government has a lot of things to resolve. They have to cover a lot of ground including gaining confidence of people and foreign companies. The change is not going to happen overnight. However if the government sees a business and commercial case it could take anywhere between a year to 2 years. It may take even longer since there are lot of laws that would have to be considered: one would have to look at IPC, Anti-Money laundering legislation, exchange control laws for cross border liquidity, payment system issues etc.
I think to get views of various stakeholders and make an informed choice; the government should come out with a consultation paper. There has to be a consolidated approach and one has to look holistically at different issues. The models of different jurisdictions will have to be studied before taking a call. It is also important to have an independent gaming commission to monitor and regulate the industry.
It will definitely take time to bring in such changes. It took a lot of time for the Competition Commission of India (CCI) to come into effect. Here, we are talking of a completely new framework, there is no policy on sports betting or gaming unlike other sectors and hence these changes will definitely not come quickly.In the short-term issues like relaxation of FDI policy, allowing foreign technological collaboration for gaming companies can be considered by the government.
 The last paragraph of the Satyanarayana case reads as follows: Of course, if there is evidence of gambling in some other way or that the owner of the house or the club is making a profit or gain from the game of Rummy or any other game played for stakes, the offence may be brought home. In this case, these elements are missing and therefore we think that the High Court was right in accepting the reference it did.