With the online gaming expanding its scope in the Indian market, laws are coming up to administer this domain for its appropriate legal functioning. As per the guidelines of the Supreme Court of India laid down in State of Bombay Vs. RMD Chamarbaugwala (AIR  1957 SC 699), the legality of the game is to be assessed on the extent of skill involved in it. The Indian law has classified games into two broad categories viz. game of skill and game of chance. Through a catena of cases, it was held that the games involving some amount of skill are legal, while those involving only chance are not legal to play.

Betting/ gambling being a part of the state list are covered under the exclusive jurisdiction of the State legislatures. Depending upon various factors the States have framed their respective legislations in this regard. While betting in all forms is banned in Orissa and Assam, the Government of Telangana has recently came up with an ordinance which on the same lines specifically prevents online betting. Following a different approach, the Government of Sikkim legalizes certain forms of online gambling.

In a first of its kind approach, the Government of Nagaland is 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 said act exclusively prohibits gambling which include games involving wagering or betting based on chance and not skill. The act is applicable on all games of skill where there is preponderance of skill over chance even though they may include placing wagers or bets.

Licensing Requirements

In order to obtain a license with respect to online skill based games the following requisites are to be fulfilled:           

  • The Applicant is a person or entity incorporated in India and has substantial holding and controlling stake in India.
  • The Applicant should not have any criminal record.
  • The controlling stakes and decisions are to be made in India.
  • The Application in the prescribed format is to be submitted along with the application fee of INR 50,000.
  • The Applicant is required to submit documents like Random Number Generation (RNG) Certification, Software certification, Company Incorporation and tax related documents with the application.

Payment of Fees     

The Applicant is required to pay a fees of INR 1,000,000 per annum for each game or INR 2,500,000 per annum for a variety of games.

Issue of License

The application and documents provided by the applicant are scrutinized by the Director, Nagaland State Lotteries. Upon being successfully examined by the Director as stated above and after complying with the formalities prescribed with payment of the requisite fees, the license is granted to the applicant by the Nagaland State lotteries within 6 months from the date of receipt of the application.

Applicability

The licensee can offer their services to all States or Union Territories where games of skill are permitted. License also allows the online websites to advertise their services their game in all such territories where games of skill are exempted from the purview of gambling. The Government access is to be provided to enable the authorities to ensure the activities undertaken by the licensee on real time basis.

Validity of License

The license would be valid for a period of five years and the license fee would double after the first three years, i.e. INR 2,000,000 per game per annum or INR 5,000,000 per annum for a bouquet of games. The license-holder 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.     

Licensees under the new Legislation

Under the provisions of the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act and Rules, 2016 licenses have been obtained by M/s K365 Web Assets Pvt. Ltd., Pokabunga, Pokerhigh, Club Empire, PokerBaazi, Baazi Networks Pvt. Ltd and Sachar Gaming Pvt. Ltd.

Conclusion

The said new legislation is a clear systematic approach with regards to the laws governing online skill games. In the past, various State statues had been brought into effect which manage the gaming and gambling in different states of India. But ambiguity persisted with regards to the games being played online as the law generally remains unclear with respect this modern mode of gaming. Although, some recent legislations have come up to supervise the online gaming, it is only the Nagaland Act which explicitly provides license with respect to online skill games. This provides a legal mechanism controlling the working of online skill games. Recognizing the skill based games as legal under the law, this enactment provides assurance to the gaming industry of the legality of their business and thus boosts their morale.