Exclusive The Nagaland government has notified the Nagaland Prohibition of

Gambling and Promotion and Regulation of Online Games of Skill Rules, 2016
(“Online Games of Skill Rules”). As per information received by Glaws.in, the
Rules were notified and published in the official gazette on 12th May, 2016.
Further, sources have indicated that the government has initiated the process of
accepting applications and is slated to issue Letters of Intents (LOIs) to at least
four companies as per the Rules.  Following are the salient features of the Rules
and guidelines issued by the state government for obtaining the license:

Licensing process
 Any person, firm or company desirous of obtaining a license has to apply
to the Nagaland government in a prescribed format along with an application
fee of fifty thousand rupees.
 Only persons or companies who do not have a criminal record or those
that have not indulged in gambling are eligible to apply for the license.
 The controlling stake and executive decisions of the applicant have to be
made within India.
 The state government has to forward the application forms for the license
to empanelled firms, i.e. law firms, chartered accountants, financial experts
and IT firms of repute to scrutinise and certify the application and
simultaneously grant an LOI to the applicant.
 In case of refusal of the empanelled firm to give certification to the
applicant, he/she can approach an expert committee constituted by the
Nagaland government comprising of government officials and external
 persons to reconsider the decision.  An ad-hoc committee of 3 persons (one
government official, one online gaming professional and one person
associated with sports in Nagaland) is contemplated to perform the functions
of the expert committee, until it is notified and constituted.
 The Licensing Authority (i.e. the Finance Commissioner or any other
designated government authority) is not bound by the recommendations of the
empanelled firms or expert committee.
Licensing fees and taxes
 The fees for the license is Rs. 10 lakhs per game per annum or Rs. 25
lakhs per annum if a applicant wants to offer a bouquet or variety of games.
The license is valid for five years and a provision has been made to double the
license fee after the first three years, i.e. Rs. 20 lakhs per game per
annum or Rs. 50 lakhs per annum for a bouquet of games.
 In addition to the recurring license fee, the license-holder also 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.
Dispute resolution and other conditions
 The procedure for resolving any disputes between the expert committee
and licensing authority or any aggrieved applicant is through a single
arbitrator appointed in accordance with the Rules and Arbitration and
Conciliation Act, 1996.
 Certain guidelines such as non-acceptance of minor players, ensuring
compliance with Know Your Customer (KYC) and Anti-Money Laundering
Norms, non-acceptance of foreign deposits etc. have been inserted to ensure
protection of consumers.
 Additionally, the license holders have to deposit monies generated from
the online skill games website into a designated account mandated by the
Nagaland government. The license holder is also expected to provide a
statement of accounts to the government. It is unclear whether the state
government can access the accounts operated by the license holder.
Given the stringent conditions imposed by the Nagaland government, including
comparatively high rate of fees and taxes as well as some ambiguity
surrounding the process of awarding licenses, many in the gaming industry
remain sceptical of the desirability of obtaining the license.
The grey area legality of online poker in India
is now almost white
The khelo365.com website offers a general explanation of the legality of
poker in India:

“The games which our site offers have explicitly been declared to be legal by Statutes
governing gaming laws and by various judgments passed by the Honorable Supreme
Court and/or various High Courts in India.”

Now that it has been awarded its Nagaland license, K365 will be able to trumpet
its claims more loudly.
K365 Managing Director Vinod Manoharan made it clear that he sees the
license as transformational for online poker in India:

“We are happy that the Nagaland government has finally issued the license to regulate
online skill games. We are proud to be the first company to have procured the license
and to have submitted all our documents to a regulatory authority. The license issued
by the Nagaland government will end the debate on the legality of online poker once
and for all, and will enable this industry to boom.”

Poker not widely seen as gambling in India

The first online gaming license (paywall) awarded in India was issued by the
state of Sikkim, for online lottery, back in November 2014.
Since then, there have been several Indian court rulings pertaining to the status
of poker. The most important of these was a ruling by the Indian Supreme
Court in August of 2015.
The ruling was expected to provide a clear authority for the legality of online
Rummy, and by association, online poker. Instead, the court avoided the
issue (paywall), saying that the original case did not actually refer to playing
Rummy for money.
Despite the lack of precision regarding online poker, the arguments heard by
the court convinced the Indian poker industry that in any future case, the Court
would rule that online poker was a game of skill. And it
would therefore exempt from the legal definition of gambling.
The case was sufficient to give Nagaland the confidence that its Prohibition of
Gambling and Promotion and Regulation of Online Games of Skill Act,
2016 would stand up to any challenge under federal law.

The Nagaland license allows operators to offer

online poker in most of India
A Nagaland license does not restrict operators to the local population of 2.3
million. The law allows licensed operators to provide their services to all “states
or union territories where games of skill are permitted.”
The jurisdictions from which operators cannot accept players must have a
specific law against allowing games of skill, since the Supreme Court position
means that no federal gambling law would apply.
The current Indian gambling law dates back to 1867. A state commission is
currently reviewing how it can be amended to bring it up to date.
Nagaland operators can not only provide services throughout India, but also
market them in any territories where games of skill have been exempted from
the definition of gambling.
The extra-territorial nature of the license should make it attractive to some
foreign operators. The decision is not straightforward, because operators such
as PokerStars are active in the Indian market on the basis that its business
is legal under the current law and definitions.

Gauging India’s potential impact on online

poker
In Amaya’s Q3 conference call last month, CEO Rafi Ashkenazi told investors
that the company was looking for a local partner to help it expand its business
in the region. He said:

“I don’t have a specific update at this time in terms of timing, but we believe that we
would be able to operate in India hopefully soon, and maybe as soon as Q1 or Q2 next
year.”

He quoted a wide range of possible revenue forecasts, suggesting that in time

India could produce between $80 million and $150 million per year.
That would account for perhaps 10 percent of all Amaya revenues. Full year
Amaya earnings for 2016 were estimated to be
between $1,137 million to $1,157 million.
Adda52 bills itself as the most popular poker room in India. It signed a
deal with the World Poker Tour (WPT) in April this year as part of its expanded
marketing strategy.
Founder and CEO, Anuj Gupta said at the time:

“There is a poker boom and the Indian poker community is looking for a better
tournament experience. With this tie-up, we want the poker community to be exposed
to international standards of poker with better structures, well-defined tournaments,
and the knowledge the WPT brings to the table.”
India an economic growth center
India is a nation of 1.3 billion people. And although on average its population is
extremely poor with annual GDP/capita of just $1,820, the country’s economy is
growing extremely strongly.
Since 1951, annual GDP growth has averaged 6.08 percent and continues to
converge with more developed countries. In Q3 2016 GDP growth came in at an
annualized rate of 7.3 percent.
There is a wealthy, highly educated middle class, larger than the population of
most OECD countries–a valuable target market for now, and for the future.
Nagaland’s new laws have not quite opened up the market for online poker, but
they are leading the way in what will be a very important market.
DIMAPUR, DECEMBER 16 (AGENCIES): Nagaland State has become the first
gambling jurisdiction in the country to award a license to an online poker operator.

According to several reports, the Nagaland State Lotteries office awarded an online skill
games license to M/s K365 Web Assets Pvt Ltd, which operates online poker and
rummy portal Khelo365.com. For the moment, K365’s license only covers its poker
operations, which include No Limit Texas Hold’em and Pot Limit Omaha games.

It may be recalled that the Nagaland State Governor had signed the Prohibition of
Gambling and Promotion and Regulation of Online Games of Skill Act 2016 in April
this year, becoming the first Indian state to formally authorize online games of skill for
stakes.

A report in calvinayre.com informed that Nagaland began issuing Letters of Intent to

would-be skill game licensees in August, with the first LOI going to Club Empire Tech
Pvt Ltd. Nagaland has since issued a further 10 LOIs to different companies but K365
was first to get its paperwork past the government inspectors.

K365 Managing Director, Vinod Manoharan, was quoted by the report as stating that
Nagaland’s licensing regime “will end the debate on the legality of online poker once
and for all, and will enable this industry to boom.”

It added that the Nagaland license permits K365 to accept customers from all states or
union territories that have exempted games of skill from their list of prohibited
gambling activities. Nagaland licensees are required to declare that they don’t “have
any interest whatsoever, directly or indirectly, with any company or activity, whether in
India or not, which engages in or operates ‘games of chance’ or ‘gambling’.”

Another report by Josh Wood from onlinepokerreport.com quoted Manoharan as

stating he sees the license as transformational for online poker in India.
 

“We are happy that the Nagaland government has finally issued the license to regulate
online skill games. We are proud to be the first company to have procured the license
and to have submitted all our documents to a regulatory authority. The license issued
by the Nagaland government will end the debate on the legality of online poker once
and for all, and will enable this industry to boom,” he was quoted as saying.

The first online gaming license (paywall) awarded in India was issued by the state of
Sikkim, for online lottery, back in November 2014.

Since then, there have been several Indian court rulings pertaining to the status of
poker. The most important of these was a ruling by the Indian Supreme Court in
August of 2015.

The ruling was expected to provide a clear authority for the legality of online Rummy,
and by association, online poker. Instead, the court avoided the issue (paywall), saying
that the original case did not actually refer to playing Rummy for money.

Despite the lack of precision regarding online poker, the arguments heard by the court
convinced the Indian poker industry that in any future case, the Court would rule that
online poker was a game of skill. And it would therefore exempt from the legal
definition of gambling.

The case was sufficient to give Nagaland the confidence that its Prohibition of Gambling
and Promotion and Regulation of Online Games of Skill Act, 2016 would stand up to
any challenge under federal law.

The Nagaland license allows operators to offer online poker in most of India

 
A Nagaland license does not restrict operators to the local population of 2.3 million. The
law allows licensed operators to provide their services to all “states or union territories
where games of skill are permitted.”

The jurisdictions from which operators cannot accept players must have a specific law
against allowing games of skill, since the Supreme Court position means that no federal
gambling law would apply.

The current Indian gambling law dates back to 1867. A state commission is currently
reviewing how it can be amended to bring it up to date.

Nagaland operators can not only provide services throughout India, but also market
them in any territories where games of skill have been exempted from the definition of
gambling.
There are a number of states in India that are currently debating the possibility of legalizing the online
gaming industry and approving sports betting and games such as poker which will fall under the category
of skill-games. While states like Maharashtra, Kerala and Hyderabad consider the pros and cons of
legalizing these online skill games, Nagaland has already issued its first skill based gaming license.
Earlier this year, the Nagaland government had passed the Nagaland Prohibition of Gambling and
Promotion and Regulation of Online Games of Skill Act 2016 legalizing skill based games and was in the
process of developing regulation to govern the industry. The government recently confirmed that it had
approved the first online skill based gaming license to M/s K365 Web Assets Pvt. Ltd which runs
khelo365.com, an online poker website. The license is currently only valid for online poker games whicN

are categorized as a skill-based game.

In a statement, Vinod Manoharan, Managing Director of K365 Web Assets said, “We are happy that the
Nagaland government has finally issued the license to regulate online skill games. We are proud to be the
first company to have procured the license and to have submitted all our documents to a regulatory
authority. The license issued by the Nagaland government will end the debate on the legality of online
poker once and for all, and will enable this industry to boom.”
The government had also issued a letter of intent or a provisional license back in August 2016 to Club
Empire Tech Pvt. Ltd, an online rummy company. This license is a full online games of skill license. A
similar letter of intent has been issued to an additional 10 gaming companies. The government conducted
a detailed review into different regulations that government the online gambling industry and became the
first state in India to approve online games of skill.
The director of the Nagaland State Lotteries looked at Random Number Generation (RNG) certification,
tax related documents, company incorporation and software certification. The Nagaland skill based
license authorizes gaming operators to provide services in all states and union territories where games of
skill have been approved. The license also authorizes gaming operators to advertise their services in
states and territories where games of skill are not classified under the category of gambling.
The success of skill based online gaming in Nagaland could pave the way for more states to adopt a
similar stance.
While the world is fast moving in the direction of online gaming and gambling yet online gaming and online
gambling laws in India are still evolving. We have no dedicated laws for online gaming, online
gambling, online fantasy sports, online poker, etc in India. In fact, we have no laws that can effectively deal
with legal issues of online gaming, online gambling, online fantasy sports, e-sports, etc in India. As a result we
have prohibitions and restrictions that have been imposed by central laws and laws of different states making
the entire gaming and gambling activities very murky. This position has become more complicated since the
Supreme Court of India has refused to decide about legality of online poker, online rummy and online card
games in India.
As gambling is a state subject, different states have reacted differently in this regard. While states
like Nagaland (pdf) have adopted a very liberal approach yet other have taken a very conservative approach.
Some states have expressly allowed games of skills and gambling while other have specifically prohibited
them in all forms. This has given rise to an inter-state conflict that the central government is required to
resolve.
For instance, recently a PIL was filed in the state of Maharashtra to ban sale of online lotteries from other
states into the state of Maharashtra. The Maharashtra government faced a loss of Rs. 933 crore due to these
illegal activities and it has decided to transfer the case to the Central Bureau of Investigation (CBI) very soon.
Till now the case was being investigated by the economic offences wing. In the past, Kerala refused
permission to Future Gaming Solutions India Private Ltd to sell Nagaland lotteries in the state. Even the Crime
Investigation Department (CID) of the Andhra Pradesh police had sought a ban on the website of “Playwin”
which had allegedly been selling online lotteries banned in the state. As the legal framework for  website
blocking in India is still evolving, blocking may not be a good and long term solution.
Indian gaming and gambling industry is presently suffering from lack of a techno legal framework that can
manage online gaming and online gambling related issues. For instance, the  cyber law due diligence (pdf)
and Internet intermediary liability law in India are two such techno legal requirements that the central
government has failed to enforce in India so far. This also applies to online gaming and online gambling
industry of India as well.
Recently the Indian government has clarified about the Foreign Direct Investment (FDI) in E-Commerce
Sector of India. As per the “Consolidated FDI Policy Circular 2015” (pdf) (FDI Policy), FDI is prohibited in
lottery business including Government/private lottery, online lotteries, etc and gambling and betting including
casinos etc. As far as the intentions of central government are concerned, it is not in favour of allowing FDI in
lotteries, gambling and betting. Further, central government also refused to give its opinion on the legality or
illegality of online games and online gambling in India. As a result the online gaming and online gambling
entrepreneurs of India are now required to comply with multiple laws of India, both central as well as state
wise. For reasons unknown, most of the gaming and gambling entrepreneurs of India are not complying with
techno legal requirements of different laws of India.

Take the example of geo location feature of an online gaming or online gambling website of India or foreign
jurisdiction. While the website in question may claim in its terms and conditions that users from a particular
territory in India or from foreign jurisdiction are not allowed to access or play on the website yet the website is
actually doing little to achieve this task. This practically means that if users of state A are prohibited from
accessing websites/servers located in state B due to the laws of State A, still users of state A can access the
website. This applies to international websites and its features as well that are not available and accessible in
India. For instance, although online game “Pokemon Go” has not been launched officially in India yet users
and gamers are using virtual private networks (VPNs) to change their locations and catch Pokemons in New
York and London while sitting in their Indian homes. Similarly, geo location restrictions can be bypassed in
India using proxies and VPNs thereby violating the sovereignty and legislative powers of various states.

This is just a single example how techno legal requirements are ignored in India. There are many more techno
legal issues that are simply ignored by online gaming and online gaming industry and stakeholders in India. As
the Indian government itself is not aware of these issues, these websites and business are still untouched.
However, the moment Indian government would be aware of the illegalities and contraventions committed by
online gaming and online gambling websites of India and foreign jurisdictions, a prosecution spree would be
inevitable.

We at Perry4Law Organisation (P4LO) strongly recommend that the central government must urgently
formulate techno legal laws for online gaming and online gambling industry of India. This is required as the
situation is becoming ugly day by day due to inaction on the part of various states and central government. We
hope the central government would do the needful in this regard very soon.
This entry was posted in Uncategorized on July 27, 2016 by Praveen Dalal.

Legality Of Online Poker In Kerala For Poker Players And Online

Poker Websites

A prominent question discussed among the poker community of

India/Kerala these days is will Kerala government make playing poker legal in the state? However, the
question itself is incomplete till we ask another more significant question. The question is it legal to play
online poker in the state of Kerala? Perry4Law Law Firm believes that to appreciate the legal position of poker
in the state of Kerala, we must first analyse whether playing poker is legal or illegal in Kerala. Further, we
must also understand whether running of a poker business in Kerala is legal or not. If the answer to both these
questions is in affirmative, then only we can proceed further to decide whether playing of online poker and
running of an online poker website are legal or illegal in Kerala.
Many online poker and online rummy websites have simply ignored this essential legal exercise and they are
already in legal tangles. It is obvious that offline and online poker are totally different fields and their legal
obligations, liabilities and rights are also different. Most of the rummy and poker websites and businesses are
violating Indian laws by simply applying the traditional and untested legal principles to modern days gaming
conditions. If this was the case there was nothing that could have prevented the central government or Supreme
Court of India from declaring online poker or online rummy legal in India. On the contrary, the central
government refused to give its opinion and the Supreme Court decided not to legally analysethe legality of
online rummy and online poker in India.
If this is the position, it is strange that some online poker and online rummy websites in India are claiming that
playing and running of such businesses are legal in India without any legal compliance. Just like any other
business, neither online poker nor online rummy are legal in India till these websites comply with techno legal
requirements as prescribed by Indian laws. Similar rules apply to online fantasy sports in India that are
required to comply with techno legal requirements of Indian laws.
Recently members of the All India Gambling Federation (AIGF) met the Kerala government seeking a revision
to existing norms on gambling. However, the Kerala government has not given any assurances regarding this
as the government had to first consider the issue in detail. This action of Kerala government is in line with the
communication/recommendations of Perry4Law Organisation (P4LO) that it had/gave to the Kerala
government recently. We discussed about the media reports that claimed that Kerala is considering declaring
games like poker, online games, etc as games of skills. However, when it comes to online poker, online
rummy, etc this becomes a tricky issue and we conveyed this fact to Kerala government very clearly and with a
good set of techno legal research works of Perry4Law Organisation (P4LO). We would update our readers in
this regard whenever we have any further information from Kerala government and if the same is not
detrimental to the interests of Kerala government and our own interests.

Perry4Law Organisation (P4LO) is presently working in the direction of providing a techno legal framework
for online gaming industry in general and online gambling industry in particular. Online gaming field requires
consolidation but the same is not possible till there is a common set of legal framework that all States of India
follow. Perry4Law Organisation (P4LO) is also in touch with other states in this regard and we have got
positive response from them so far. We are very optimistic that even the state of Kerala would cooperate with
us in this regard.

The Kerala Games Act 1960 is very stringent regarding gambling and gambling related activities. For instance,
Section 11 of the Act provides that it shall not be necessary, in order to convict any person of keeping a
common gaming house or of being concerned in the management of any common gaming house, to prove that
any person found playing at any game was playing for money, wager, bet or stake. However, Section 14 of the
Act provides that nothing in the foregoing provisions of this Act shall be held to apply to any game of mere
skill wherever played. The terms “wherever played” here means played within the territorial boundaries of the
state of Kerala alone and not outside the same. Section 14A of the Act provides that the Government may, if
they are satisfied that in any game the element of skills is more predominant than the element of chance, by
notification in the Gazette, exempt such game from all or any of the provisions of this Act, subject to such
restrictions and conditions as may be specified in the notification. Thus, it is possible for the state of Kerala to
exempt offline games like poker, rummy, etc from the applicability of this Act. However, when it comes to
online poker, online rummy, online fantasy sports, etc the state of Kerala cannot has its way so easily. Even if
offline poker is declared to be exempt in Kerala that would be subject to many terms and compliances that
offline poker businesses have to follow. These terms, conditions and compliance requirements can be
prescribed by the state of Kerala only once it analyses the legal situation in great detail. And this is exactly
what the state of Kerala has intimated to AIGF.
The offline and online poker, rummy and online fantasy sports stakeholders must also not take the Kerala Act
very lightly. Section 19 of the Act provides that any police officer not below the rank of a Sub Inspector of
Police may arrest without a warrant any person committing in his view any offence made punishable by this
Act. Online poker, online rummy and online fantasy sports websites can be easily prosecuted in Kerala if they
fail to comply with cyber law due diligence (pdf) and many more techno legal requirements as prescribed by
Indian laws. Kerala government is not very enthusiastic when it comes to online gambling and related
activities. For instance, the Kerala Gaming (Amendment) Act, 2005 has banned online lotteries in the state of
Kerala. It means that Kerala is moving in the direction of banning online gambling rather than promoting it
despite the contrary claims of media reports.

Perry4Law Organisation (P4LO) may provide its techno legal suggestions to Kerala government in this regard
if requested to do so by the Kerala government. As far as gaming and gambling stakeholders are concerned, we
would like to stress that they must ensure techno legal compliances to stay on the right side of the law.

This entry was posted in Uncategorized on July 24, 2016 by PTLB.