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Legal & Regulatory

Club Empire issued second online skill games license by Nagaland government [Exclusive]

Exclusive Just one day after the first online skill games license was awarded to K365 Web Assets Pvt. Ltd., the Nagaland government has issued the second license for online skill games to Club Empire Tech Pvt. Ltd., a Kolkata based company on Thursday, 15th December. The license has been issued for a single game, i.e. poker.

Club Empire was the first company to have obtained a Letter of Intent (LOI) from the Nagaland government in August 2016.  Commenting on the development, Swapnil Chaturvedi, co-founder of Club Empire said, “It is a remarkable move by the Nagaland government to regulate and streamline the hitherto unregulated online gaming market. The license has opened new opportunities in marketing, strategic tie-ups and building players’ trust. Club Empire under the licensing regime will soon launch its revolutionary poker product that will enhance player experience.”

Luv Kalra, founder of Club Empire noted, “The Nagaland licensing regime has given a path to our vision and it is time to have a regulated gaming market.” It is believed that the Nagaland government is set to issue more online skill games licenses in the next couple of months.

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Legal & Regulatory Poker

Nagaland government issues first online skill games license to Khelo365 [Exclusive]

Exclusive The Nagaland government on Wednesday started the process of issuing online skill games license under the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016 and the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Rules, 2016. The first license has been issued to M/s K365 Web Assets Pvt. Ltd., which operates the online poker website khelo365.com.

The company has taken the license only for one game, i.e poker, after completing the necessary formalities and paying the requisite annual license fees. It may be noted that the Nagaland is the first state to pass a specific law to regulate online skill games, after it passed a law to that effect last year. Consequently, the Nagaland government had notified the Rules under the Act in May 2016 and framed guidelines on the procedure to obtain the license.

The first Letter of Intent (LOI)/provisional license under the Skill Games Act and Rules was issued to online rummy company Club Empire Tech Pvt. Ltd. in August 2016. Subsequently, around ten more LOIs have been issued by the government to different companies till date.

The government however after examining the relevant documents including Random Number Generation (RNG) certification, software certification, company incorporation and tax related documents etc. finally decided to issue the first ‘go live’ license earlier this week. Sources in the government indicate that more licenses will be issued in the next couple of months to companies who have been issued the LOI and who get their documents scrutinised by the Director, Nagaland State Lotteries.

The license issued by the Nagaland State Lotteries indicates that the licensee may offer its services to all states or union territories where games of skill are permitted. Further, the license also indicates that online websites may advertise their services to all such territories where games of skill are exempted from the definition of gambling.  The licensee is also required to provide the government access to a dashboard to enable the authorities to check the activities undertaken by the website in real time. Other conditions mentioned in the Act and Rules are also reiterated in the final license.

Reacting to the development, Vinod Manoharan, Managing Director of K365 Web Assets Pvt. Ltd. said, “We are happy that the Nagaland government has finally issued the license to regulate online skill games. We are proud to be the first company to have procured the license and to have submitted all our documents to a regulatory authority. The license issued by the Nagaland government will end the debate on the legality of online poker once and for all, and will enable this industry to boom.”

He added that his company was in the process of finalising mass media campaigns with advertising agencies to create awareness about the game of poker and ensure its growth.

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Legal & Regulatory

Nagaland government issues first LOI for online skill games

The Nagaland government has issued its first Letter of Intent (LOI) to Club Empire Tech Pvt. Ltd., an online rummy website, as per the company press release.

The LOI/provisional license has been issued for a bouquet of skill games has been issued by the Directorate of State Lotteries under Rule 4(6) of the Nagaland Prohibition of Gambling and Promotion and Regulation of Games of Skill Rules, 2016 read with the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016.

Club Empire Founder & CEO Luv Kalra confirmed to Glaws that his company had secured the LOI based on submission on various documents to the government of Nagaland such as audited accounts, Articles & Memorandum of Association, certificate of incorporation, business plan etc. Kalra added that though his company only offers online rummy at present, he plans to expand to other games such as e-sports, virtual sports, binary options, virtual sports league fantasy games and poker and therefore has applied for the ‘bouquet of games’ license option.

Kalra also added that he expects the process of securing the final license to be completed in the next couple of months. As per the Rules, the Nagaland government has to now forward the application to an ’empanelled firms’ to scrutinise the  license after which the final license would be awarded by the government. Around four other companies have also applied for skill games licenses as per sources.

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Legal & Regulatory

Nagaland govt notifies Online Skill Games Rules, to issue LOIs very soon [Exclusive]

Exclusive The Nagaland government has notified the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Rules, 2016 (“Online Games of Skill Rules”). As per information received by Glaws.in, the Rules were notified and published in the official gazette on 12th May, 2016.

Further, sources have indicated that the government has initiated the process of accepting applications and is slated to issue Letters of Intents (LOIs) to at least four companies as per the Rules.  Following are the salient features of the Rules and guidelines issued by the state government for obtaining the license:

Licensing process

  • Any person, firm or company desirous of obtaining a license has to apply to the Nagaland government in a prescribed format along with an application fee of fifty thousand rupees.
  • Only persons or companies who do not have a criminal record or those that have not indulged in gambling are eligible to apply for the license.
  • The controlling stake and executive decisions of the applicant have to be made within India.
  • The state government has to forward the application forms for the license to empanelled firms, i.e. law firms, chartered accountants, financial experts and IT firms of repute to scrutinise and certify the application and simultaneously grant an LOI to the applicant.
  • In case of refusal of the empanelled firm to give certification to the applicant, he/she can approach an expert committee constituted by the Nagaland government comprising of government officials and external persons to reconsider the decision.  An ad-hoc committee of 3 persons (one government official, one online gaming professional and one person associated with sports in Nagaland) is contemplated to perform the functions of the expert committee, until it is notified and constituted.
  • The Licensing Authority (i.e. the Finance Commissioner or any other designated government authority) is not bound by the recommendations of the empanelled firms or expert committee.

Licensing fees and taxes

  • The fees for the license is Rs. 10 lakhs per game per annum or Rs. 25 lakhs per annum if a applicant wants to offer a bouquet or variety of games. The license is valid for five years and a provision has been made to double the license fee after the first three years, i.e. Rs. 20 lakhs per game per annum or Rs. 50 lakhs per annum for a bouquet of games.
  • In addition to the recurring license fee, the license-holder also has to pay a gaming tax/royalty of 0.5% of the gross revenue generated, minus any service tax, bonuses, cashbacks, payment gateway charges etc.

Dispute resolution and other conditions

  • The procedure for resolving any disputes between the expert committee and licensing authority or any aggrieved applicant is through a single arbitrator appointed in accordance with the Rules and Arbitration and Conciliation Act, 1996.
  • Certain guidelines such as non-acceptance of minor players, ensuring compliance with Know Your Customer (KYC) and Anti-Money Laundering Norms, non-acceptance of foreign deposits etc. have been inserted to ensure protection of consumers.
  • Additionally, the license holders have to deposit monies generated from the online skill games website into a designated account mandated by the Nagaland government. The license holder is also expected to provide a statement of accounts to the government. It is unclear whether the state government can access the accounts operated by the license holder.

Given the stringent conditions imposed by the Nagaland government, including comparatively high rate of fees and taxes as well as some ambiguity surrounding the process of awarding licenses, many in the gaming industry remain sceptical of the desirability of obtaining the license.

Categories
Legal & Regulatory Poker

Kerala government considering notifying poker as a skill game, 1976 notification already grants immunity to rummy [Exclusive]

Exclusive The Kerala government has announced its decision to consider including poker and bridge in the category of games of skill by way of amending a hitherto unknown notification dated 30th September 1976.

The notification, unearthed  by Jay Sayta, founder of this website, is pursuant to Section 14A of the Kerala Gaming Act, 1960. Section 14A of the Kerala Gaming Act is a peculiar provision and is in addition to Section 14, which in general exempts games of mere skill from the ambit of gambling.

Section 14A is perhaps the only such provision in any gaming legislation in India that specifies that the government may, if they are satisfied that skill predominates chance, exempt such games from all or any provisions of the Act, subject to prescribed conditions. This provision allows  the state government to enlist games of skill. This clause also allows the government to impose any restriction on skill games

Based on this clause, the government in 1976 exempted rummy, dart throw, ball throw, shooting contests etc. from the penal provisions of the Gaming Act (thereby making playing of these games for stakes or real money completely and unambiguously legal and immune from any criminal liability). The only condition imposed by the government in the notification is that side-betting on the notified skill games is not permitted.

Sayta, based on this notification, wrote to the then Chief Minister Oommen Chandy, suggesting that the notification be suitably amended to include games like poker and bridge, since the element of skill outweighs the element of chance.  It was argued in the petition that the Karnataka High Court has already indicated poker to be a game of skill, while the statute in West Bengal also exempts poker, rummy, bridge and nap from the ambit of gambling. Additionally, it was stated in the letter, that the Nagaland legislative assembly has also enacted a new law to recognise and regulate online poker, rummy and bridge as games of skill.

The Chief Minister’s Office has responded to the application by referring it to the Home Department. Further, communication from the Home Department has stated that is considering the application and has already begun consultations with the Law Department on whether poker should be included in the notification exempting games of skill.

If the suggestions in the letter are accepted, it would be end any ambiguity on the legality of online poker and conclusively end any debate regarding the element of skill involved in the game. Perhaps, the next few months will be crucial for the skill games industry.

Categories
Legal & Regulatory Poker

Implications of the 'poker for stakes' Delhi HC order [with order copy]

Exclusive On 21st April, Justice Indermeet Kaur of the Delhi High Court, allowed the parties to withdraw the civil revision petition filed in Gaussian Networks Pvt. Ltd. v. Monica Lakhanpal & Another, at the request of Dr. Abhishek Manu Singhvi. The order, now available in the public domain can be accessed here. In the order, Justice Kaur notes that the petitioners do not wish to get any academic questions answered from the court and therefore have decided to withdraw the petition:

Learned senior counsel for the petitioner submits that the judgement is in the teeth of law laid down by the Apex Court in the judgment reported as (1996) 2 SCC 226 Dr. K.R. Lakshmanan Vs. State of Tamil Nadu and another as also another judgment of the Apex Court reported as (1968) 2 SCR 387 State of Andhra Pradesh Vs. K. Satyanarayana and Others. Submission being that where a competitive skill is involved along with a substantial degree of exercise of skill, it cannot be termed as a ‘gambling activity’.

A copy of an RTI information has also been placed on record, obtained from the Government of Nagaland, Department of Justice and Law wherein the answer to the query was that the games of poker, rummy and bridge involve skill and are not gambling as per the provisions of the Gambling Act, 1867. Submission again being reiterated that the impugned order has proceeded on a mis-appreciation of law.

Be that as it may, Dr. Abhishek Manu Singhvi, learned senior counsel for the petitioner submits that he does not wish any academic question to be answered and at this stage prays that permission may be granted to the parties to withdraw their reference which they had made before the Trial Judge.

Permission is accordingly granted to the petitioner to withdraw this revision petition i.e. C.R.P. No.119/2012 titled as “Gaussian Network Pvt. Ltd. Vs. Monica Lakhanpal & Anr”. Accordingly, the observations made by the Trial Judge in its order dated 17.09.2012 i.e. in Suit No. 32/2012 titled as “Gaussian Network Pvt. Ltd. Vs. Monica Lakhanpal & Anr” no longer survive.

Implications of the order

As explained by Dr. Singhvi, the eagerly anticipated matter in the Delhi High Court was withdrawn to avoid a ‘hit wicket’ and prevent a negative stigma being attached to the game of poker, even though the matter was just an opinion sought from the court and arising out of a contractual arrangement.

The fact that no adverse comments or observations were made will provide relief for the gaming industry. Further, recording of the RTI query in the order, that was answered affirmatively by the Nagaland government as well as favourable observations in the recent past by the High Courts of Karnataka and Calcutta indicates that poker is not being viewed in a negative light.

The recent law passed by the Nagaland legislature to regulate online skill games like poker shows that only three paths are available to state governments- (i) regulate and license games of skill; (ii) restrict the activity and (iii) permit the activities to continue unhindered (status quo). However, the gaming industry is unlikely to get any conclusive and binding clarity on the legality of online skill games, at least in the next couple of years.

Note: A copy of the Delhi High Court order dated 21st April 2016 can be accessed here.

Categories
Legal & Regulatory Poker

Dr. Singhvi prevents 'hit wicket' as Adda52 poker for stakes matter withdrawn

Exclusive In what could  be perceived as an anti-climax to the eagerly awaited Gaussian Networks v. Monica Lakhanpal & National Capital Territory of Delhi  case, the Delhi High Court disposed the matter  on 21st April, in light of several new developments in the games of skill industry and at the request of the parties.

Justice Indermeet Kaur while allowing the revision petition to be withdrawn, accepted the proposition that the case was instituted under Order 36 of the Code of Civil Procedure and was thus non-adversarial litigation, which was not intended to be binding on the parties.  Justice Kaur also set aside the observations and the 2012 order of the Additional District Judge, New Delhi which ruled that online poker was a game involving chance and thus illegal.

Senior Advocate and Rajya Sabha Member of Parliament Dr. Abhishek Manu Singhvi (who incidentally also represented the online rummy companies in the Mahalakshmi Cultural Association matter), while appearing for Gaussian Networks contended that an opinion under Order 36 of CPC could not decide on rights in rem and in the instant case, a dispute arising out of a contract between the two parties could have wider ramifications. He further added that recent developments, including the withdrawal of the rummy for stakes Mahalakhsmi Cultural Association matter, favourable decisions for poker by the Calcutta and Karnataka High Courts and a Bill passed by the Nagaland legislative assembly recognising that games of skill can be commercially played affirmatively answered the questions raised in the petition.

Dr. Singhvi further said that in retrospect the filing of the petition was a ‘huge blunder’ to approach the court for an opinion and said the parties would be ‘hit wicket’ if there was a plausible negative verdict in the matter. He further contended from centuries there has been a common law exemption to games of skill which has also been etched in statutes of various states like Tamil Nadu, Andhra Pradesh etc., which he described as a ‘hallowed exemption’.

Lawyers appearing for both Gaussian Networks and Monical Lakhanpal contended that playing games of skill virtually through the internet also requires substantial amount of skill. It was also argued that playing games of skill virtually was less pernicious as there were no noxious circumstances like sale of liquor or other illegal activities, which was a possibility in case games of skill were played physically. The senior counsel also added that playing games of skill in physical locations might require police regulation, but that it was certainly not required in the virtual world.

Dr. Singhvi also apprised the court of judgements declaring rummy and betting on horse-racing to be games of skill and exempt from penal consequences of gaming legislations as well as the provision in the West Bengal Gambling and Prize Competition Act, 1957 which exempted the games of poker, rummy, bridge and nap from the definition of gambling.

He also added that various professional tournaments are organised for the game of poker and it is taught by top universities such as MIT and Harvard. He further noted that poker was recognised as a mind sport by the International Mind Sports Association  (IMSA) and playing the game required nerves of steel and tremendous analytical skills.

Analysis

The setting aside of the adverse district court opinion by the Delhi High Court is a positive development for the skill games industry. Coupled with other developments such as partial recognition of the game of poker by a couple of High Courts and express recognition through a new statute by the Nagaland government,  it is increasingly becoming clear that courts will uphold the legality of online skill games.

However, the fact that it took the parties three years to withdraw the matter and prevent a ‘hit wicket’ has only resulted in lawyers laughing all the way to the bank (much like the rummy for stakes matter).

Note: The copy of the order disposing the matter is not yet available. Detailed analysis of the order will be published soon after the order is uploaded.

Categories
Legal & Regulatory

Nagaland Governor approves the Online Skill Games Bill

Exclusive PB Acharya, the Governor of Nagaland has given his assent to the landmark Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Bill, 2015 under Article 200 of the Constitution. It is learnt that the Governor gave his assent to the Bill on 7th April 2016. The duly promulgated Act is now set to be published in the Official Gazette.

After the Governor’s approval, the Skill Games Bill has become an Act duly passed by the legislative assembly. The Online Skill Games Bill was passed by the Nagaland Legislative Assembly on 18th March, 2016, almost 9 months after being originally introduced in the House.

The Skill Games Bill has now become a duly passed Act of the legislative assembly. Sources now indicate that the process of drafting Rules and issuing licenses under the new law will commence in the next two to three months.

Categories
Legal & Regulatory

Breaking news: Nagaland legislative assembly passes the Online Games of Skill Bill

Exclusive As per latest reports from sources, the Nagaland legislative assembly has passed the  Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Bill, 2015 today. A report in regional daily The Morung Express indicated that the select committee formed to examine the Bill was satisfied with all clauses and approved the Bill yesterday without any significant changes. The Morung Express reported as follows:

Khriehu Liezietsu, Chairman of the Select Committee on Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Bill, 2015 presented a copy of the Report of the Select Committee.

The recommendation of the Committee stated that it has thoroughly examined the Bill and deliberated on its social and legal implications and it is satisfied with the legalities and the revenue that would be generated.

Accordingly, the Committee unanimously recommended that the said Bill be passed. The report of the Committee was considered an adopted on March 8, 2016.

The Online Games of Skill Bill, that was originally introduced by Chief Minister TR Zeliang in July 2015 is finally going to see the light of the day. The Bill is set to change the way government and regulators perceive games like poker, rummy and fantasy sports.

The Bill envisages a licensing regime for specified skill games played online and clearly indicates that the listed games do not amount to gambling even if stakes or profit element is involved. Perhaps, the path-breaking legislation introduced by the Nagaland government can prompt other states to introduce a regulatory framework for skill games as well.

The Bill passed by the legislative assembly now awaits the assent of the Governor after which rules and licensing policies will be framed by the state government. The entire process of drafting the rules and license conditions is expected to take a few months.

Categories
Legal & Regulatory

Virginia becomes the first American state to regulate fantasy sports, other states may follow suit soon

Virginia became the first American state to regulate fantasy sports when Governor Terry McAluiffe signed a first-of-its-kind law, the Fantasy Contests Act last week. The Act provides for regulation of online fantasy contest websites on payment of a registration fee of $50,000 under the state Department of Agriculture and Consumer Services.

The law inter alia prevents employees or related parties of fantasy sports companies from playing on the websites, bars those below 18 years of age from accessing the website, provides for an opt-out system for players and lays down other norms for transparency of conduct of business. The Act also clarifies that fantasy sports does not fall within the ambit of gambling.

The Bill passed by an overwhelming majority in both houses of the Virginia legislative assembly and assented to by the Governor is a major victory for fantasy sports operators in USA, who were mired in various controversies in the past one year or so. Government officials in states like New York, Nevada, Texas and Illinois have opined that the activity is illegal and not merely based on skill. However, with Virginia taking the lead, some other states like Indiana, California, Florida, Mississippi and Vermont are also likely to legislate and regulate the activity as a skill-based game.

The Virginia law will not only have implications in USA but may also prompt Indian state governments to regulate various skill games to protect the interests of consumers instead of keeping the issue in a grey area.

As per reports, the Nagaland Online Skill Games Bill, which will regulate and license rummy, poker, fantasy sports and other games, is likely to be tabled for passage in the legislative assembly this week. The Nagaland Bill along with the fantasy sports scenario in USA may prompt other state governments in India to license and regulate online games of skill.