Introduction

Recently, the Governor of Nagaland gave his assent to the Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Bill, 2016, and consequently, the Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Act, 2016 (Gaming Act) was promulgated. The Gaming Act contemplates the regulation and promotion of “games of skill” through the issuance of licenses.

Games of Skill

Taking into account judicial precedents on gaming thus far, the Gaming Act has defined “games of skill” as “including all such games where there is a preponderance of skill over chance, including where the skill relates to strategising the manner of placing wagers or placing bets, or where the skill lies in team selection or selection of virtual stocks based on analyses, or where the skill relates to the manner in which the moves are made, whether through deployment of physical or mental skill and acumen.”

In addition to this inclusive definition of “games of skill”, certain specific “games of skill”, including poker, rummy, virtual football and virtual cricket, have been expressly set out in a schedule.

Licensing

The Gaming Act contemplates the issuance of a license to conduct “games of skill” (on websites, mobile platforms, television or any other online media) to a person, firm, company or limited liability company (LLC) incorporated in India which is substantially held and controlled in India.

A license may only be granted to persons, firms, companies, or LLCs, who have no interest in any online or offline gambling activities in India or overseas. Further, the executive decision-making power of the licensee is required to be based in India, and technology support, including hosting and management of the website and placement of servers, is to be located in India.

Revenue from organising games of skill

The Gaming Act expressly permits a licensee to earn revenue from “games of skill” including by means of advertising, taking a percentage of winnings, charging a fixed fee for membership, or for downloading the game.

The Gaming Act helpfully clarifies that once a license for “games of skill” has been obtained, wagering or betting on online “games of skill” or making a profit by providing a medium for playing “games of skill” will not amount to gambling (which is illegal and punishable under various central and state gambling laws).

Offer of games of skill throughout India

A licensee is allowed to offer “games of skill” across India, in states where such games are not classified as gambling. Additionally, a state government, which is of the opinion that a licensee is offering “games of skill” in such state in contravention of the Gaming Act or local statutes, may bring such contravention to the attention of the licensing authority under the Gaming Act.

Rules

The Gaming Act discusses the framing of rules for its proper implementation, and for setting out the terms and conditions under which a license may be issued. These rules may also discuss the license fee payable by a licensee to the state government and other administrative issues. These rules are presently being prepared and is expected to be notified in 2 to 3 months.

Comment

The Gaming Act has taken a strong step in advancing “games of skill” in India by defining, and providing a licensing regime for offering, “games of skill” across India. However, by limiting licensees to persons, firms, companies, and LLCs owned and controlled in India, the Gaming Act is curtailing foreign investment in this booming sector.