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 https://gstcouncil.gov.in/sites/default/files/committees-dynamic/OM-for-GoM-online_gaming24052021.pdf and https://gstcouncil.gov.in/sites/default/files/GoM-Dynamic/OM percent20dated percent2011.06.2021GoM percent20Casinos.pdf.
IMGL Magazine • November 2022 • 15
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