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The governor of Nagaland has given his assent to the “”The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill” Bill, 2015″, report Glaws, which broke the story, and Livemint. “Games of Skill” include card based games like Rummy and Poker, quizzes and strategy games, and virtual sports (including virtual Cricket, virtual racing games) and adventure, virtual stock trading, as well as fantasy leagues. These will be allowed in the state of Nagaland and applicable in territories in India where games of skill are permitted.

Implications of this development

Firstly, it could lead to other states also allowing betting and wagering with money in online games, as well as on games of skill. Remember that the Lodha Committee report on the BCCI recommends legalization of betting on sports.

Secondly, it will test the issue of state-specific jurisdiction with respect to the Internet in India. Can someone sitting in Delhi participate with money in a Rummy tournament via an application run by a company based in Nagaland? Is the game being played in Nagaland or in Delhi?

Thirdly, in a similar manner, how will taxation work? If state specific taxes applicable, and more than one state legalizes betting on virtual games, how will taxation work across state lines? Taxation might actually be the issue that pushes for clarity on jurisdiction.

While a copy of the final act isn’t available online, MediaNama has a copy of what is believed to be the bill, dated July 2015, when it was first introduced in the Nagaland assembly. The bill was sent to a committee for a report on the bill within three months, in July, according to a press release from the Nagaland government. The bill was apparently passed in March 2015.

While a copy of the actual bill is awaited, below is a lowdown of what appears to be the bill. Note that MediaNama cannot independently vouch for the authenticity of this bill, and things could have changed before the bill was passed in Assembly, hence this overview is merely for reference purposes:

The Lowdown

1. Prohibition of Gambling: “Gambling” means and includes wagering or betting on games of chance but does not include betting or wagering on games of skill.’ If a licensee is found to be running games of chance, a fine of Rs 20 lakhs will be applicable in the first instance, followed by an imprisonment of 6 months if not remedied further.

2. Allowing Games of Skill: “All such games where there is 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.”

Games of skill include for now, include: “Chess, Sudoku, Quizzes, Binary Options, Bridge, Poker, Rummy, Nap, Spades, Auction, Solitaire, virtual Golf, virtual racing games including virtual horse racing, virtual car racing etc.; virtual Sports including virtual Soccer, virtual Cricket, virtual Archery, virtual snooker/bridge/pool, virtual fighting, virtual wrestling, virtual boxing, virtual combat games, virtual adventure games, virtual mystery and detective games, virtual stock/monopoly games, virtual team selection games, virtual sport fantasy league games.”

Virtual “means games played online by means of computer automation and exercise of skill.”

Note that games which have been declared by courts (Indian or International) as games of skill, may apply to be included in this list. The Finance Commissioner or any Licensing Authority and will be permitted to add to this list, as long as it is in consonance with the definition of ‘Games of Skill’.

3. Territory: Any territory in India in which “games of skill” are permitted, and are recognized as being exempt from the ambit of “gambling”.

4. Licensing: In order to offer any “games of skill” on a website, mobile platform, TV channel or any other online media, and earn revenue via advertising or by taking a percentage of winnings or “charging fixed fee for membership or for downloading the game etc.”, it shall be necessary for the entity to obtain a valid license. The state government will specify license terms and rules separately, but the bill mentions the following:

– A license may be issued only to “a person or entity which is incorporated in India, and has a substantial holding and controlling stake in India”
– Executive decision making powers have to be performed from with the Indian territory
– Hosting, website management and placement of servers have to be in India
– The entity should not have any interest in any online or offline gambling activities in India or abroad

The decision on giving a license has to be taken within 6 months from the date of receipt of application, and communicate reasons for refusal, if any.

6. Monitoring: “The State Government, may, by notification, designate an authority or body to monitor and regulate the activities of all licensees to ensure compliance with the provisions of this Act, and to settle all disputes arising from the activities conducted under this Act.”

7. Termination: if there’s a breach of license conditions, the authority shall issue a notice, and the license holder has to make a written and oral representation. “Provided that the violation of the license terms may be compounded if the breach is remedied within 30 days of the breach having been established to the satisfaction of the Licensing Authority.” A delay in payment of license fee may be compounded by payment of penalty calculated at 12% per annum.

8. Jurisdiction issues: If the licensee operates in a state where the state government believes the company is violating the provisions of the act or its rules, or in violation of local laws, it may inform the licensing authority of Nagaland. The licensing authority shall then try and get the issues resolved.

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Important: As mentioned earlier, this lowdown is based on a copy of the bill we received from sources, and may not be the same as the final version. We’ll upload a final copy once it is available.

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