IMGL Magazine November 2022

IMGL magazine




IMGL Magazine • October 2022 • 1

IMGL Officers

Cosmina Simion Secretary Simion & Baciu Romania +40 31 419 0488 Diane Mullenex Assistant Treasurer Pinsent Masons London +44 20 7490 9250

IMGL Officers 2022

Marc H. Ellinger President

Ellinger and Associates Jefferson City, Missouri +1 573 750 4100 Quirino Mancini Executive Vice President Tonucci & Partners Rome, Italy +39 06 322 1485 Marie Jones First Vice President Fox Rothschild LLP Philadelphia, Pennsylvania +1 609 572 2259 Marc Dunbar Second Vice President Dean Mead & Dunbar Tallahassee, Florida +1 850 933 8500 Peter Kulick Treasurer Dickinson Wright PLLC Lansing, Michigan +1 517 487 4729

Susan Breen Assistant Secretary Mishcon de Reya London +44 20 3321 7434

Birgitte Sand Vice President, Affiliate Members Birgitte Sand and Associates Copenhagen, Denmark +45 24 44 05 03

Ernest C. Matthews IV Vice President, Affiliat Members Internet Sports International, Ltd

Las Vegas, Nevada +1-702-866-9128

Kathryn R. L. Rand Vice President, Educator Members University of North Dakota Law School Grand Forks, North Dakota

+1 701 777 2104


President’s message

Growth, development & the IMGL: our future is bright! Marc Ellinger , President INTERNATIONAL MASTERS OF GAMING LAW W elcome to the latest edition of the IMGL Magazine and my last message as President (more on that encourage you to take advantage of these savings by booking now. We have also finalized some wonderful hotel, dinner, and reception choices for our Zurich conference September 6-8, 2023. Programming for both these events

later). Thanks to editor in chief, Dr. Simon Planzer, and head of publications, Phil Savage, for their work once again in ensuring the IMGL Magazine is a must-read production. This edition is full of valuable information with a focus on emerging markets and technologies in line with IMGL’s mission to expand as opportunities open up for regulated gambling and gaming. There is, of course, more to the IMGL than an engaging magazine. Whilst in London for our autumn conference, I had the opportunity to meet with the heads of several IMGL committees and review initiatives which reflect these themes. Tomas Enrique Garcia Botta has agreed to take on the Emerging Markets Committee with a mission to grow IMGL membership in new and promising jurisdictions. Similarly, Joseph Borg is heading up a new committee on Emerging Technologies. I’m sure we will all benefit from his expertise in these new frontiers for gaming. I want to make a special note of another important new initiative; the IMGL writing competition for students of gaming law, which Kathryn Rand and her colleagues on the Education Committee have inaugurated. Entries for the first competition closed in October and we have received some high- quality work. The prize for the winner is to have their piece published in this magazine and the chance to address our conference in April so all attending the 2023 Spring Conference in Napa should benefit from their work. Speaking of our conferences, discounted tickets and accommodation for Napa, April 26-28, 2023, are currently available and I

has started and there will be an exciting education agenda as well as a high-quality networking and social program. If you have topics you would like addressed in Napa or Zurich, please let us know as soon as possible. As I pass the baton to the next IMGL President, Quirino Mancini, there are so many people I must thank for their help and support. First my wife, Christine who has supported me and allowed me the time away to work on behalf of the IMGL; to my law partner, Stephanie Bell, who has carried so much of the workload over the last three years; and to our Executive Director and President’s Award winner, Brien Van Dyke, for her outstanding contribution to the success of the IMGL. I want to thank our Executive Committee and Committee Chairs who work to develop and execute new educational opportunities and programs. Their commitment is the foundation on which the entire IMGL relies. Most importantly, I want to thank you, my fellow IMGL members, for your dedication and service to the IMGL. Knowing your commitment, I am confident that the organization will go on to ever greater heights. On a final note, soon-to-be President Mancini has already started laying the groundwork for the next two years and beyond. Please join me in supporting him and answering his calls to move the IMGL to the next level. I know that his leadership will result in an even bigger and better IMGL in the future. Enough from me…I’m off to the bar. So, for one final time…cheers! Marc


IMGL Magazine • November 2022 • 3


Regulatory frontiers Simon Planzer PhD , Editor in Chief W ith huge jurisdictions on the cusp of opening up to regulated gaming, emerging markets are a focal

successful. Indeed, a profound understanding of local culture certainly is vital in pursuing success. The importance of cultural awareness was recently picked up by a panel that offered insightful perspectives during the IMGL London conference. Many of you will have had these moments of realization, a sense that gaming regulation is only part of a more complex picture. Social norms as well as cultural and religious traditions may impact business realities and they are more difficult to grasp when not reflected in gaming regulation. Why should we concern ourselves with markets which are far away from our day-to- day work? There are many good reasons for gaming lawyers to educate themselves outside their comfort zone. And there are equally good reasons for legislators to do so, notably in Europe where business conditions for regulated gaming have significantly tightened. The regulatory approaches in some emerging markets remind us of a seemingly simple recipe of regulatory success, what I would call ‘the triple win’. It is a framework that is good for

point of this issue of the IMGL Magazine. The contributions from Africa, Asia, and Latin America provide us with valuable insights into the opportunities and challenges inherent with each set of regulations. As a business owner, it is usually wise to plan ahead, and the case of Peru illustrates how companies that have been active in this unregulated market can bring their businesses into compliance with forthcoming regulation. Our expert colleagues from India remind us of the commercial importance of the skill element in gaming. The doors to regulated gaming opportunities open where this element can be convincingly argued. Where the argument of skill is not available, the same doors swing us back to more limited opportunities enshrined in the legislation of each state. Caroline Kongwa rightly points at the sheer size and diversity of the African continent and the need to adapt business approaches to the local realities if foreign companies wish to be


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IMGL autumn conference, London September 2022

Emerging Markets focus

Is it time for Africa?

A turning point for India’s online gaming industry Entering new markets: cultural sensitivity required

Embracing the Metaverse

It’s a fine thing: explaining the UKGCs enthusiasm for financial penalties

The end of unregulated loot boxes? Florida stands up a new regulator

SCOTUS decision settles tribal bingo dispute Reform of Curacao’s gaming license regime

Peru primed and ready for takeoff

Slow and steady may win the race in Chile

4 • IMGL Magazine • November 2022


the state (notably, revenues), the customer (notably, consumer protection and choice) as well the operator and its B2B relationships (sustainable, profitable business). This pragmatic recipe is able to bring high channelization rates, which in turn keeps consumers in the regulated (national or regional) framework, and it preserves the tax revenues for the state. Finally, the regulatory frontier can not only be measured geographically but also in terms of technology. Digital innovation is a constant driver of growth and opportunity in the gaming industry - and comes with regulatory challenges. One panel during the IMGL London conference dealt with the Metaverse. And Ascanio, Asensi and Kim offer their perspectives on primary legislation on loot boxes in Spain and the Netherlands in the aftermath of the FIFA game judgment. While not reporting on emerging markets, Heidi McNeil Staudenmaier, Marc Dunbar, and Stefan Sluijter offer a tour d’horizon from the Americas analyzing new developments in tribal gaming due to Supreme Court case law; putting the spotlight on the state of Florida where a new regulatory authority emerges; and reporting on Curaçao where new gaming legislation brings amended licensing and supervisory rules. Whilst I have the opportunity, I would like to wrap up my editorial by thanking President Marc Ellinger for his tireless and dedicated leadership of IMGL! Yours sincerely, Simon

VOLUME 2 • NO.1 JANUARY 2022 IMGL magazine

VOLUME 1 • NO.3 OCTOBER 2021 IMGL magazine

IMGL Magazine • October 2021 • 1 UK Gambling Act Review Expert views on a change in regulatory regime IMGL magazine INCLUDES ANALYSIS ON: TRIBAL SPORTS BETTING, MALTA’S FATF GREY LISTING, DISTRIBUTED GAMING, EUROPEAN DIGITAL SERVICES, ESPORTS INTEGRITY, EUROPEAN MARKETING REGULATION ...AND MUCH MORE VOLUME 1 • NO. 1 SPRING 2021 Beautiful Boston: IMGL in-person events return



IMGL Magazine • Summer 2021 • 1

IMGL Magazine • Spring 2021 • 1

IMGL Magazine is owned, published and distributed by: The International Masters of Gaming Law PO Box 27106, Las Vegas, NV 89126 USA The IMGL is a domestic non-profit corporation registered in Nevada, U.S. with registration number NV20121147120 Editor in Chief: Simon Planzer PhD, Publication & Marketing Committee: Co-chairs , Stephanie Bell and Simon Planzer Members : Henrik Hoffmann, Kok-Keng Lau, Christine Masse, Peter Kulick, Anna Soilleux-Mills, Veronique dos Reis Head of Publications: Phil Savage Design and production: SportBusiness Communications. Copyright: All rights reserved to IMGL. No part of this publication may be reproduced or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without prior permission from the publisher. The articles expressed in this publication do not necessarily reflect the views of IMGL but those of the authors. The publisher and editor do not accept any liability for the contents of the authors’ contributions.

IMGL Magazine • November 2022 • 5


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6 • IMGL Magazine • October 2022

London conference report

Keynote speaker Brigid Simmonds, OBE, chair of the UK Betting and Gaming Council

IMGL autumn conference was a credit to London There may have been an unprecedented inflow of visitors but the IMGL autumn conference went ahead in some style as Phil Savage reports. U nprecedented is a word that IMGL President Marc Ellinger has heard too much of when it comes to IMGL conferences under his tenure. For his first

standard of hospitality at London’s Landmark Hotel and with events at the Arts Club, Les Ambassadeurs Club, Flight Club (for the young lawyers networking event) and Home House, we hardly missed the fact that Kensington Palace, venue for the Gala Dinner, was not available. As ever, the standard of networking was second to none, offering the chance to catch up with old friends and make new ones in stylish surroundings. The social highlight of the event was undoubtedly the Gala Dinner and we were grateful to the Landmark for agreeing to accommodate us at very short notice. A crowd of 180+ diners enjoyed some excellent food and wine and the opportunity to here Marc pay tribute to those who he had relied upon throughout his time as IMGL President. Aside from the touristic and networking benefits, an outstanding education programme with some excellent speakers and panellists was at the centre of the conference. It had been widely expected that the UK government’s review

conference it was an unprecedented lockdown as a result of COVID-19 and for his last event it was an unprecedented inflow of visitors to London following the death of Her Majesty Queen Elizabeth. It was a source of great relief that the second of these unprecedented events caused rather less disruption than the first. Thus, the IMGL Autumn Conference London 2022 was able to proceed almost exactly as planned, and it was a memorable few days for all manner of reasons. It was certainly a unique time to be in London and those who took time out to visit the Westminster area to pay their respects, view the myriad floral tributes or see the crowds queuing will have a personal experience they will treasure. For those who avoided the crowds there was a still a great deal to enjoy. We were treated to an exceptional

IMGL Magazine • November 2022 • 7

London conference report

of the 2005 Gambling Act would have been published and would be the main talking point of the event. With the derailing of Boris Johnson and liz Truss’s premierships, this has taken a back seat (and may be abandoned altogether) but there was no shortage of information about the future shape of the UK gambling market. The opening keynote speaker was Brigid Simmonds, chair of the Betting and Gaming Council (BGC), the industry body representing the leading gambling operators in the UK. She pointed to the group’s work in raising standards and driving down problem gambling to 0.2 percent of the total number of players. This was in contrast to other European jurisdictions where regulation was working against the stated objectives of legislators. In Norway where the state holds the monopoly for gambling, 66 percent of players do so offshore.

Similarly in France, where online gaming is illegal and 57 percent of punters play offshore. Bulgaria, with its high tax rate, and Italy, where advertising is banned, suffer similarly low channelization rates. This compares to the UK where the regulated market has no major restrictions but where only just over two percent of online gambling takes place offshore. Simmonds pointed to engagement by the BGC with government to head off what she called “well-intended, but ill-judged changes to regulation”. She was hopeful that the forthcoming White Paper, whenever it was published, would avoid measures which would reduce the size of the regulated market and associated tax revenues and drive people towards the black market with none of the protections of the regulated market. Despite Ms Simmonds assertion that there had been deep engagement with the UK regulator and great efforts to win over a sceptical media/public, numerous panellists expressed the view that the PR battle in the UK and Europe had either not been taken seriously enough or had been lost altogether. Speaker after speaker warned that the regulatory tide was going out leaving consumers potentially unprotected and operators in the regulated market facing higher costs and competition from the grey market. They encouraged industry players to build stronger relationships with regulators to help secure the industry’s prospects for the future. This was particularly clear during a session on regulation versus innovation. a better balance between regulation and innovation. Panellists pointed to examples of unregulated tech companies like Google and Facebook which rolled out hundreds of iterations to their platforms every day. By contrast, betting apps were soon left with poor functionality and looking antiquated as regulations disuade operators from keeping pace with consumer expectations. Whilst the mood may have been somewhat gloomy among attendees from Europe’s mature markets, the same was not the case elsewhere. There were several sessions dedicated to Emerging Markets panel and these were particularly upbeat. They were complemented by another session which focused on the cultural sensitivities required to take advantage of newly opening jurisdictions making it a truly expansive programme. A panel dedicated to emerging technology completed the picture and showed that it is not just geographically where new opportunities abound. It is these sessions that we summarize in the forthcoming pages.

Chair of the organising committee, Susan Breen welcomed attendees.

8 • IMGL Magazine • November 2022

Emerging markets & culture

Emerging Markets & Culture


IMGL Magazine • October 2022 • 9 IMGL Magazine • November 2022 • 9

Emerging markets & culture

Is it time for Africa? It is tempting to see Africa as an homogenous mass culturally and economically. But, as Caroline Kongwa , told the IMGL conference in London, it is a complex region where opportunities are as diverse as the Continent’s languages and regional dialects.

L atest data by the African Development Bank (AfDB) on the African Economic Outlook 2022 shows that real gross domestic product (GDP) in Africa rebounded strongly in 2021, growing by 6.9%, after easing of COVID-19 restrictions in most countries, and associated growth in domestic consumption and investment. However, the AfDB also reflects that Africa’s real GDP growth is projected to decelerate to 4.1% in 2022, reflecting uncertainties related to the persistence of the COVID-19 pandemic and other external factors. But, although faced with challenges, there are potential opportunities that are emerging for the African region, with the gaming industry at the centre of prospects for the growth and further recovery of the continent. There is, of course, no single African market and the continental average hides a broad range of local realities in its 55 countries. Economic growth in 2021 was highest in North Africa (11.7%) and East Africa (4.8%). In 2022, growth is expected to decelerate to 4.5% in North Africa

and to stabilize at 4.7% in East Africa. West African average growth in 2021 was 4.3% and is projected to remain strong at 4.1% in 2022. Growth in Central Africa is projected to rise to 4.6% in 2022, up from 3.4% in 2021. After a 6% contraction during COVID, Southern Africa’s estimated growth of 4.2% represented the largest recovery underpinned by strong recovery in Botswana (12.5%), Mauritius (4.0%), and South Africa (4.9%). This is projected to slow to 2.5% in 2022 as the effects of large fiscal stimuli peter out. The scale of potential that the Continent represents is seen in the current gambling regulations across the continent that see the majority of African countries permitting gambling, with about a fifth of these allowing online gambling. The Sahara is the great dividing line with countries in the north tending to have the most restrictive approach to gambling regulation and some countries continuing to outlaw gambling all together. This leaves great potential for future regulatory developments in the sector.

10 • IMGL Magazine • November 2022

Emerging markets & culture

MAIN AFRICAN MARKET CONDITIONS South Africa has the most mature gambling market on the African continent, with gambling revenues reaching R34 billion ($US2.1 billion). Sports and horse-race betting, and land-based casinos have been licenced by the nine provincial governments since the mid-1990s. The country also regulates bingo and limited pay-out machines which have since grown in market share. Technological innovation and advancement within existing markets

However, the Act has never been brought into effect, leaving online gambling to be regulated by the earlier 2004 Act. A National Gambling Amendment Bill, 2018 was presented to Parliament and is up for mediation between two houses of parliament. Recently, a proposed Remote Gambling Bill has been tabled in 2022 and it remains to be seen when this will be enacted. Nigeria may not currently have the Continent’s largest economy but it has the largest population (200 million plus and many with a passionate interest in football) and the highest

economic growth rate. Gambling at the national level in Nigeria is regulated by the National Lottery Regulatory Commission (NLTC). The law distinguishes between games of skill (which are legal) and games of chance (which are illegal). Legal forms of

has presented the Continent with an opportunity to introduce new modes of gambling. The emergence of smart mobile devices and lower

gambling include the lottery, land- based casinos and sports betting, whereas roulette, dice games and non- skilled card games are considered illegal. There is no specific provision in the law to regulate online gambling but that has not

costs of data has reduced barriers to entry in the gambling industry and

enables operators to offer online sports betting, online gambling, fantasy sport and e-sports. South Africa’s parliament approved an Act well over a decade ago which was designed to bring online gambling within the law and make it safer for players. The National Gambling Amendment Act of 2008 introduced a number of definitions and clarifications required to regulate the online gambling space. It laid the foundations of a fair and secure environment regulated by the state in a way that protects citizens and ensures transparent operation by operators. The Act also specified the procedure of applying for and acquiring gambling licences, determining who has the authority to issue such licences, what prerequisites have to be met by the company and/or the person applying for the licence, and under what circumstances a licencing authority may cap the maximum number of gambling licences.

prevented operators from obtaining national licences from the NLRC. Whilst that may appear to be a functioning system of regulation, these licences don’t grant access to local retail

markets and that poses a real problem especially for start-ups and new entrants. COVID demonstrated that there will be a large and receptive market for online gaming in the future. Kenya’s current regulatory framework is governed by the Betting, Lotteries and Gaming Act 1966 and the Betting, Lotteries and Gaming Regulations 1966. A recent development is that the Finance Bill 2022 proposes the

IMGL Magazine • November 2022 • 11

Emerging markets & culture

increasing of excise duty from 7.5% to 20% for betting or gambling wagers, as well as for prize competitions and lotteries, with the exception of charitable lotteries. Further to this, a new 15% fee for all gambling advertisements charged by all television stations, print media, billboards, and radio stations for advertisements was also included in the Finance Bill 2022. Having considered the outlook of proposed legislative reform in South Africa and other African jurisdictions, regulators are often confronted with the criticism that legislative development does not keep up with technological advancement and thus certain legislation is deemed to be outdated or does not provide for innovation. Gambling regulation seeks to regulate the licensee, the gambling activity and the negative impact to the gambler amongst others. The purpose of technical standards would support an argument as to why legislation should remain technologically neutral. If the development of technical standards is accommodated in a jurisdiction’s legislative framework then technological advancement and innovation can be incorporated in the licensing regime. New gambling products, machines and devices can be introduced into the market without a need for continuous legislative amendment. TECH TACTICS Africa has been all about retail and brick and mortar, however the recent rapid spread of mobile technology points the direction for the future. Technology is enabling regulators to install monitoring systems to track gambling transactions, reduce leakage of taxation and implement consumer protections. In South Africa currently, a National Central Electronic Monitoring System exists to monitor the limited pay-out machine industry. However, there is an opportunity for the regulator to extend the system to other

modes of gambling. The Ghana Revenue Authority (GRA) introduction of a new digital way to collect taxes from the gambling industry to prevent leakage, since April 1, 2022. Uganda seeks to create National Central Electronic Monitoring System to prevent operators from evading tax. The creation of a central monitoring system in Nigeria also includes changes that would improve taxation and clamp down on unlicensed operators. The opportunity to implement Electronic Monitoring Systems, paves the way for the establishment of player accounts which advances the know your customer (KYC) and responsible gambling principles. Further benefits would be the tracking of financial transactions which would result in increased state revenues from gambling businesses, a better understanding of the size of the industry, improved anti-money laundering procedures, and increased enforcement efforts against licensees that breach their licence requirements. CONCLUSIONS There are still risks of doing business in Africa whether these be legal, regulatory, financial, political or economic. There are also emerging social risks as rapid technological advances mean a shift in the profile of many punters. The instant gratification which tech enables means that an increasing number of youth are participating in gambling-related activities without considering the potential problems attributable to compulsive and addictive gambling. Africa certainly represents huge potential, and that potential gets closer to being realized as each year passes. Those tempted to take the plunge may find that approaches which have worked elsewhere need to be adapted. But the market entry challenges have a flipside in terms of the competitive environment. If it was easy everyone would be doing it.

Caroline Kongwa is Chief Strategic Advisor to The National Gambling

Board, South Africa.

12 • IMGL Magazine • November 2022

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IMGL Magazine • October 2022 • 13

Emerging markets & culture

2022: a turning point for India’s online gaming industry Recent developments are likely to see a burgeoning of gaming in one of the world’s largest markets as Gowree Gokhale and Tanisha Khanna report

T he start of 2022 heralded a new era for India’s online gaming industry. Historically, real money gaming has been plagued with social and ethical concerns. However recently, the Indian Government has begun to recognize the gaming industry as a pillar of the Indian economy. Indian courts have also reiterated that offering online games of skill is a protected business activity 1 , and playing such games is protected as freedom of speech and expression 2 under the Indian Constitution. Indian gaming companies have achieved unicorn status and have been listed on the stock exchange.

investment, and employment. Today, the Indian film industry is a leading film market globally. As India’s online gaming industry stands at this critical turning point, conducive regulations, which are in the offing, will likely have the same impact.

The meteoric rise of India’s online gaming industry (to INR 120 billion in 2022 3 ) in the last few years can be compared to that of Bollywood’s in the ‘90s. The hitherto unorganized filmmaking industry was accorded ‘industry’ status by the Government in May, 1998, marking a significant change in state attitude towards it. This sparked increased consumption, 1 RMD Chamarbaugwala & Anr. V Union of India & Anr. [1957] 1 SCR 930, RMD Chamarbaugwala & Anr. V Union of India & Anr. [1957] 1 SCR 930 2 All India Gaming Federation vs The State of Karnataka & Ors, WP 18703/2021. 3 On the flipside, there has also been greater scrutiny of the industry. There has been scrutiny of offshore gambling platforms offered remotely in India, and unlawful gambling advertisements. The Ministry of Electronics and Information Technology (“MeiTy”) has directed telecom service providers to block access to foreign betting and gambling websites offered remotely in India. This came following large scale foreign remittances made by Indian players to bet on such platforms, in violation of exchange control regulations. Tax authorities and India’s Enforcement Directorate have also scrutinized potential tax evasion and foreign exchange and money-laundering violations by gaming operators.

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Emerging markets & culture

In this article, we recap some of the significant developments and enforcement actions driving the change in India’s online gaming industry today. OVERVIEW OF INDIAN GAMING REGULATIONS • Each Indian State has its own anti-gambling law, as under the Indian Constitution, states have the power to make laws on ‘betting and gambling’ 4 . • Most State laws exclude ‘games of skill’ from the prohibitions under these laws and prohibit offering and playing games of chance. Recently, a High Court observed that States also have the power to legislate on skill gaming 5 . • The Supreme Court of India (SC) has recognized that offering games of skill are protected under freedom of trade and business guarantees under the Constitution of India 6 . • These State laws don’t have extra-territorial applicability to offshore operators, as under the Constitution only the Central Government can make laws having extra- territorial effect 7 . • A few games, such as Rummy, Fantasy Sport, betting on Horse Racing, and Poker have been judicially recognized as games of skill by Indian courts 8 . • States like Nagaland have also enlisted certain game formats as games of skill in their state law. However, there is no federal mechanism to test whether a game is a game of skill or not GOVERNMENT BODIES MULL OVER FRAMEWORK OF FEDERAL REGULATIONS a) Inter-Ministerial Government Panel considers federal law for online skill games An inter-ministerial Government panel (“IM Panel”) comprising of Government think-tank Niti Aayog’s CEO, the secretaries of the Ministry of Home Affairs, Revenue,

Department for the Promotion of Industry and Internal Trade (“DPIIT”), as well as Ministry of Electronics and Information Technology (“MeiTy”), Ministry of Information and Broadcasting (“MIB”), and the Sports Ministry, was constituted to contemplate central regulations for the online gaming industry . While the report of the IM Panel is not publicly available, news reports suggest that it has recommended the following: • A federal law to regulate the online skill gaming industry, which will apply to both (1) domestic gaming operators, and (2) foreign operators targeting Indian users. • That Central Government would be empowered to block websites offering prohibited games. • That MeiTy would regulate the online gaming industry, while e-sports would be regulated by the Sports Ministry. Determining the approach with respect to games of chance would be left to the States. • A regulatory body which will assess if a game qualifies as a game of skill, and certify such games. • The upcoming Digital India Act would classify games of chance as a ‘prohibited user harm.’ • Limits on the amount of money individual players spend in the game. • Mandatory reporting of suspicious transactions to the Central Government’s Financial Intelligence Unit. • Mandatory responsible gaming measures, such as periodic warnings, fixing deposit and withdrawal limits. • A three-tier dispute resolution mechanism, comprising the gaming operator, self-regulatory organisations of gaming operators, and oversight body led by a Government ministry. The news reports suggest that MeiTy will finalize the report, after which it will be sent to the Cabinet for approval. b) Group of Ministers considers Goods and Service Tax (GST) rate for online gaming A Group of Ministers (“GOM”) 9 has been constituted to consider goods and service tax (“GST”) for casinos, race courses, and online gaming. The GoM will make its

4 Entry 34, List II, Constitution of India. 5 Junglee Games India Pvt. Ltd. & Anr. v The State of Tamil Nadu & Ors WP Nos.18022, 18029, 18044, 19374, 19380 of 2020, 7354, 7356 and 13870 of 2021. 6 RMD Chamarbaugwala & Anr. V Union of India & Anr. [1957] 1 SCR 930. 7 245. Extent of laws made by Parliament and by the Legislatures of States (1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State (2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extra territorial operation. 8 State of Andhra Pradesh v. K Satyanarayana 1968 AIR 825; Shri Varun Gumber v Union Territory of Chandigarh and others CWP No. 7559 of 2017; Chandresh Sankhla S/o Jagdish Singh v. The State of Rajasthan D.B. Civil Writ Petition No.6653/2019; Ravindra Singh Chaudhary v Union of India & Ors D.B. Civil Writ Petition (PIL) No. 20779/2019;, Mohan Lal Nama W/o Late Shri Murlidhar Nama v Union of India & Ors DB Civil Writ Petition No. 11122/2020; Saahil Nalwaya v. State of Rajasthan DB Civil Writ Petition No. 2026/2021; Dr. K.R. Lakshmanan v State of Tamil Nadu & Anr. 1996 AIR 1153; Indian Poker Association v State of Karnataka & Ors Writ Petition Nos.39167 To 39169 Of 2013; Kizhakke Naduvath Suresh v. State of West Bengal & Others. 9 and percent20dated percent2011.06.2021GoM percent20Casinos.pdf.

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Emerging markets & culture

recommendations to the GST Council, which is a body comprising Central and State Government representatives that makes recommendations to the Government on GST laws. The recommendations of the GoM is being keenly observed, as it will have a significant business impact on the industry as a whole. GST is applicable at a rate of 28 percent on games of chance, and the skill gaming industry pays 18 percent GST on the commission or gross gaming revenue (GGR) (i.e., the fee charged by online gaming operators), as market practice. The GOM is in the process of assessing whether (1) GST should be charged at the rate of 28 percent on both games of skill as well as games of chance, and (2) whether it should be on the entire amount which a player deposits for a game, or on the commission amount. The industry view has been to continue the existing GST framework (i.e., GST at 18 percent on the GGR) for online skill based games. As per latest news reports, the GoM has not reached a consensus, and is seeking legal opinions on the issue . In the interim, certain skill gaming companies have received notices from GST authorities, alleging tax evasion and seeking payment of GST, calculated at the rate of 28 percent of the entire deposit amount, instead of 18 percent on the commission amount. These notices have been challenged before the High Court. c) AVGC Task Force In April 2022, the Ministry of Information and Broadcasting (“MIB”) set up an Animation, Visual Effects, Gaming and Comics (“AVGC”) Task Force, comprising Central Government bodies, industry representatives, and State Governments, to boost industry potential through various skilling initiatives and Government incentives. The AVGC Task Force will frame a national as well as state AVGC policy, which will recommend curriculum in AVGC sectors, facilitate skilling along with academic institutions, enhance employment opportunities, enhance exports and recommend financial incentives to attract foreign direct investment (“FDI”) in the sector. ADVERTISING BODY AND MIB INCREASES SCRUTINY OF GAMING ADVERTISEMENTS In the last few years, there has been a proliferation of

advertisements for gambling/sports betting platforms, surrogate advertisements for sports betting platforms, and misleading claims of winnings, etc. even in skill-gaming advertisements. Indian regulators have taken note of these issues and introduced regulations and advisories against such ads, as we discuss. However, first it is important to understand the applicable regulations. • State anti-gambling laws: Most state anti-gambling laws prohibit the offering and advertising of gambling products (i.e., games of chance)10. Sports betting is regarded as a gambling activity in India and accordingly, advertisements for sports betting are prohibited in most states. However, if a game qualifies as a game of skill, advertising such games is permitted in most Indian states. The question of extra-territorial applicability of state laws still remains open. However, at least with respect to advertisements, because of the action taken by various regulators as specified below, this issue may remain as an academic discussion. • Advertising Code: The Cable Television Network Rules, 1994, prohibits 11 broadcast advertisements that tend to incite people to crime, or which cause disorder or violence or breach of law, or presents criminality as desirable. Since gambling (games of chance) are prohibited under state laws, broadcast advertising of such products could violate these provisions. These provisions are applicable to other broadcasting companies as well. • ASCI’s Gaming Guidelines: The Advertising Standards Council of India (“ASCI”), India’s apex self- regulatory advertising body, released the ‘ASCI Guidelines for Online Gaming for Real Money Winnings,’ which prescribe guidelines for advertisements of real money gaming. These guidelines require advertisers not to target minors, carry disclaimers, and highlight financial risks involved in gaming. MIB subsequently issued a press release 12 on December 4, 2020, advising all broadcasters to adhere to the ASCI Gaming Guidelines in respect of advertisements on television. The ASCI’s guidelines are legally binding only on broadcasters, and not for advertisements through other modes of communication/non-members. • Misleading Advertising: The Consumer Protection Act, 2019 (“CPA”) prohibits misleading advertisements 13 . The Guidelines for Prevention of Misleading Advertisements

10 For example, Section 12 A of the Bombay Prevention of Gambling Act, 1887 provides that ‘A Police-officer may apprehend without warrant any person who prints, publishes, sells, distributes or in any manner circulates any newspaper, news-sheet or other document or any news of information with the intention of aiding or facilitating gaming. Similar prohibitions also exist in the Gaming Enactments of the states/union territories of Dadra and Nagar Haveli, Daman and Diu, Goa, Gujarat, Karnataka, Maharashtra, Meghalaya, Puducherry and West Bengal. 11 Rule 7, The Cable Television Network Rules, 1994 (Advertising Code). 12 13 Section 21, CPA.

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and Endorsements for Misleading Advertisements, 2022 (“Misleading Ads Guidelines”), introduced by the Central Consumer Protection Authority (“CCPA”) in 2022, set out conditions for advertisements to be valid and not misleading, and require that advertisements must contain ‘truthful and honest representations.’ 14 The Misleading Ads Guidelines apply to all advertisements regardless of form, format or medium. Further, they are made applicable on all manufacturers, service providers or traders of goods, products or services being advertised, advertising agencies and endorsers. • Surrogate Advertising: The Misleading Ads Guidelines also prohibit surrogate advertisements. Surrogate advertisements are advertisements for goods, products or services whose advertising is otherwise prohibited regardless of the form, format and medium of such advertisements 15 . ASCI also prohibits surrogate advertisements for prohibited products 16 . During the Parliament Monsoon Session, several ministers of the Parliament had requested a written response from MIB on illegal betting and gambling through media and online intermediaries. One of the specific queries raised was, “whether it is true that there are surrogate advertisements in all kinds of media and if so, the steps taken by the Government to stop such advertisements in future.” In its written response, the MIB stated that most Indian States have enacted their own laws to deal with betting and gambling within their jurisdiction. With respect to surrogate advertisements, the MIB reiterated the prohibition under the Misleading Ads Guidelines. The MIB also issued an Advisory on Advertisements of Online Betting Platforms 17 on June 13th, 2022 (“MIB Advisory”). In the MIB’s advisory, it has noted that a number of advertisements of online betting websites / platforms are appearing in ‘print, electronic, social and online media,’ and that such advertisements are prohibited in most parts of India. It has also stated that such advertisements are misleading and don’t appear to be in conformity with the Consumer Protection Act, 2019 (“CPA”). The advisory advises

‘online and social media, including the online advertisement intermediaries and publishers’, not to display or target betting and gambling related advertisements towards the Indian audience. It is addressed to newspapers, TV channels, publishers of news and current affairs content, and is copied to social media intermediaries. However, such advertisements persisted. News websites under the same brand as sports betting brands, were being made available on television and online. On October 3, 2022, the MIB in in consultation with the Department of Consumer Affairs, issued a second advisory. In this case, separate advisories were issued to (1) TV channels and (2) digital news publishers and OTT platforms, strongly advising them against showing (i) advertisements for online sports betting platforms and (ii) surrogate advertisements for offshore sports betting platforms in the guise of sports news websites, and targeting such advertisements toward Indian audiences. The advisory contained examples of such online advertisements, specifically capturing advertisements for prominent sports betting operators online and during TV broadcasts of cricket matches. The advisory issued to private TV channels states that advertisements for betting platforms were prohibited under the Advertising Code, and contravention may invite penal action. The advisory issued to online platforms, also pointed towards MeiTy’s power 18 to take down such advertisements under relevant provisions of the Information Technology Act, 2000 2000 (“IT Act”), discussed below. It was reported thereafter that the CCPA had issued a show cause notice to six online betting apps for violating the Misleading Ad Guidelines 19 . MEITY DIRECTS TSPS TO BLOCK ACCESS TO FOREIGN BETTING/GAMBLING PLATFORMS As recently as end October 2022, it was reported that certain Indian telecom service providers (TSP) had blocked access to several offshore sports betting and gambling platforms in India.

14 Guideline 4(1)(a), Misleading Ads Guidelines. 15 Section 2(h): “surrogate advertisement” means an advertisement for goods, product or service, whose advertising is otherwise prohibited or restricted by law, by circumventing such prohibition or restriction and portraying it to be an advertisement for other goods, product or service, the advertising of which is not prohibited or restricted by law. 16 Guideline 3.4 and 3.5, ASCI Guidelines. 17 percent20on percent20online percent20betting percent20advertisements percent2013.06.2022 percent282 percent29.pdf. 18 Under Rule 3(b) of the IT Rules, the MeiTy is empowered to direct intermediary platforms (such as ISPs, TSPs, domain name registrars, etc.) to take down unlawful content, including content which relates to or encourages money laundering or gambling.’ There is no specific advertising related prohibition for online publishers to take down unlawful content under the IT Rules. 19

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Under Section 69 A of the IT Act, MeiTy is empowered 20 to issue directions to intermediary 21 platforms (such as internet service providers, network service providers, TSPs, etc.) to block access to content on certain grounds 22 . The grounds on which MeiTy has ordered the blocking of these websites are not clear on which ground but non-compliance by the intermediary with MeiTy’s order would result in loss of immunity from liability for unlawful content 23 hosted by them. Previously, MeiTy has ordered the blocking of several Chinese apps in exercise of these powers, in the interest of the sovereignty and integrity of India, defence of India, security of State, and public order . The MeiTy order blocking Chinese apps was issued due to security concerns over Indian user data raised by Ministry of Home Affairs , at a time when there was conflict at the Indo-China border. News reports suggest that GST violations and raised by GST authorities and violations of exchange control regulations raised by the Enforcement Directorate (ED) of India, were factors contributing to MeiTy’s decision to issue the blocking order. STATE-LEVEL DEVELOPMENTS With several developments happening at the federal level in India, there have also been significant state-specific developments. State-specific nuances in law have created business uncertainties for the online gaming industry in India. It is hoped that in time, with the introduction of a Central law, there will be uniform regulations pan–India. a. Tamil Nadu In August, 2021, the High Court of Madras struck down 24 certain amendments introduced to the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, holding that the complete prohibitions on for-money games of skill under the Amendment Act as unconstitutional. While the State’s appeal

against the High Court’s order is pending 25 , the Governor of Tamil Nadu has provided his assent to the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games, Ordinance, 2022 (“Tamil Nadu Ordinance”) on October 1, 2022. Thereafter, on October 20, 2022, it was reported that the Tamil Nadu legislative assembly had passed a bill to ban online gambling and regulate online games to replace the Tamil Nadu Ordinance. A copy of the bill is not available in the public domain, However, it is likely to have the same or materially the same provisions as the Tamil Nadu Ordinance. The Tamil Nadu Ordinance seeks to (1) prohibit online gambling and (2) regulate online gaming. Games which (1) are preponderantly of chance, (2) which require superlative skill to dominate chance, (3) are ‘presented’ as involving an element of chance or (4) involve any element of random event generation such as cards, dice, wheel, are treated as ‘games of chance,’/‘gambling’ and are prohibited 26 . Poker and Rummy are specifically called out as games of chance 27 . This definition appears to contravene Supreme Court orders interpreting the meaning of skill as preponderantly of skill and holding Rummy as a game of skill. The Tamil Nadu Ordinance regulates online games (defined as any games except for games of chance) and has introduced a registration requirement for online games providers. Only local operators 28 (1) whose central management and control of the service is in Tamil Nadu, or (2) whose servers are hosted in the State, are eligible for registration. There is a provision 29 for the constitution of an online gaming authority, which may make recommendations to the Central Government (presumably, MeiTy), to block access to non-local websites. However, it is unclear whether MeiTy will act on the authority’s advice. Following Tamil Nadu, it was reported that Puducherry was also considering a ban on

20 Section 69 A, IT Act. 21 Section 2[(w) intermediary, with respect to any particular electronic records, means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes;]. 22 In the interest of the sovereignty and integrity of India, security of the State, friendly relations with foreign States, public order, or certain offences relating to these grounds. 23 Under Section 79 of the IT Act, an intermediary is accorded ‘safe harbour’ from liability for unlawful content made available or hosted by it, subject to com- pliance with certain conditions. One of these conditions is the intermediary take down content within certain timelines, upon being required to do so by certain authorities and courts. 24 Junglee Games India Pvt. Ltd. & Anr. v The State of Tamil Nadu & Ors WP Nos.18022, 18029, 18044, 19374, 19380 of 2020, 7354, 7356 and 13870 of 2021. 25 SLP (C) No. 19981-19988/2021 The State of Tamil Nadu & Ors v Junglee Games India Pvt. Ltd. & Anr. 26 Section 2(1): “online game of chance” includes any online game which,— i. involves both an element of chance and an element of skill and the element of chance dominates over the element of skill; or ii. involves an element of chance that can be eliminated only by superlative skill; or iii. is a game that is presented as involving an element of chance; or iv. involves cards, dice, wheel or such other device, which works on random or event generator. 27 Schedule to Tamil Nadu Ordinance. 28 “local online games provider” means an online games provider,— i. whose central management and control of the service is in this State; or ii. whose service that is available for access by the customers, is hosted in this State. 29 Section 15(2), Tamil Nadu Ordinance.

18 • IMGL Magazine • November 2022

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