Online Gaming Will Be Regulated Under A New Law

At a time when the online gaming industry is facing increased regulatory pressure, with Tamil Nadu and Andhra Pradesh recently banning all forms of online gambling and betting, including online games played for stakes, and other states such as Madhya Pradesh, Rajasthan, Gujarat, and Karnataka considering similar moves, the Meghalaya government last month notified a new law to regulate and licence all forms of online gaming.

While Chief Minister Conrad Sangma announced the cabinet decision to promulgate the Meghalaya Regulation of Gaming Ordinance, 2021 on January 14, 2021, the Ordinance was only published in the Official Gazette on February 17 after Governor Satya Pal Malik approved it.

While speaking to the press after the cabinet decision, Sangma’s brother and cabinet colleague James Sangma claimed that gaming has become one of the most common pastimes globally, and that the Ordinance was implemented to increase revenue for the exchequer and to provide a regulatory framework to track and take action against unscrupulous operators.

Licensed Business

The new legislation aims to govern both skill and chance games within the state by establishing a licencing system for all types of gaming, including both skill and chance games. Gaming has been described as betting or staking money or money’s worth on both games of chance and games of ability, such as poker, rummy, black jack, teen patti, virtual sports fantasy leagues, and sports event prediction, among others.

The new legislation envisions games being played on a non-restricted geo-fenced internet domain that the licensee will use to perform online gaming, with five-year licences expected to be given. The Ordinance prescribes various licencing provisions under the statute, and the licensee is required to pay the state government a portion of its ‘Gross Gaming Revenue’ as Gaming Royalty.

Importantly, someone who conducts gaming without a licence faces a sentence of up to two years in jail or a fine of up to INR ten lakh.

Keep an eye on things.

In a first-of-its-kind move, the law also establishes the Meghalaya Gaming Commission as an autonomous regulatory body to oversee all gaming activities in the state. A former High Court judge, someone with gaming industry expertise, and someone from civil society make up the three-member Commission.

The Gaming Commission is in charge of issuing policy directives for gaming operations, monitoring licensee activities, and resolving conflicts between players and licensees.

The regulations that will be published under the new law are likely to provide more information on royalty and licencing fees, as well as other limitations on advertising gaming and offering credit facilities for such games.

A Few Errors

The Meghalaya government’s Ordinance is possibly the first in India to recognise the revenue potential of all types of physical and online gaming, and to take a nuanced approach to tracking, overseeing, and regulating gaming activities in the state under strict conditions, while also penalising unscrupulous and rogue operators. However, there are a few issues with the new law’s requirements that, if resolved, may result in a more stringent and inclusive law.

First, the legislation includes both “games of skill” and “games of chance” in the definition of gaming and grants licences to both types of games. Instead of lumping all of these activities into a single licencing system, two separate types of licences, i.e. for games of skill and chance, would have been more useful.

Second, online gaming websites must operate within a “limited geo-fenced internet domain,” according to the statute. Although this may be true for games of chance that operate in the state, games of skill websites such as rummy, fantasy sports, and poker are also legal in many states throughout the country, thanks to exemptions or licences granted by state law or court rulings.

If such websites chose to operate in Meghalaya, limiting them to a geo-fenced internet domain would significantly restrict their ability to obtain licences in the state.

Do you want to save money?

Furthermore, the state government intends to levy a Gaming Royalty based on a percentage of gross gaming revenue generated by licenced operators in the state. However, with the introduction of the Goods and Services Tax (GST), since most taxes, including taxes on gambling and betting are subsumed within the ambit of a unified GST regime, it is unclear if the state government has power to impose such a royalty.

Meghalaya may have a small market for cricket betting and other card games like rummy and poker, given its size and population, and because the archery game ‘teer’ played for stakes is very popular (it is regulated under a separate law, the Meghalaya Regulation of the Game of Arrow Shooting and the Sale of Teer Tickets Act, 2018).

The new licencing regime proposed by the Meghalaya government has the potential to be a model legislation for other states to follow and adopt if concerns about geo-fencing of domains and gaming royalty are addressed or clarified in the Bill to be tabled in the assembly or rules to be framed under the law.

Meghalaya’s complex approach to understanding gaming activities as a means of entertainment with the potential to boost the economy may be an alternate model for states considering gaming and gambling legislation. Of course, the nitty-gritty of licencing laws and the manner in which the law is implemented will determine a lot.