Can Meghalaya’s New Ordinance To Regulate Online Gaming Become A Model For Other States?

At a time when the online gaming industry is facing increasing regulatory heat with Tamil Nadu and Andhra Pradesh recently banning all forms of online gambling and betting, including online games played for stakes and other states like Madhya Pradesh, Rajasthan, Gujarat and Karnataka mulling a similar move, the Meghalaya government last month notified a new law to regulate and license all forms of gaming and gambling, rather than prohibiting the activity.

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

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Sangma’s brother and cabinet colleague James Sangma, while speaking to the press after the cabinet decision stated that gaming has emerged as one of the most popular pastimes globally and that the Ordinance was introduced to augment revenues for the exchequer and to have a regulatory mechanism to monitor and take action against unscrupulous operators.

Licensed Operation

The new law seeks to regulate games of skill and games of chance within the state by envisaging a licensing regime for all forms of gaming, i.e. both games of skill and chance. Gaming has been defined to include betting or staking money or money’s worth on both games of chance such as roulette, baccarat, slots etc. and games of skill such as poker, rummy, black jack, teen patti, virtual sports fantasy leagues, prediction on sports events etc.

The new law envisages games through non-restricted geo-fenced internet domain through which the licensee can conduct online gaming and five-year licenses are expected to be issued under the Ordinance. Various licensing conditions under the law are prescribed in the Ordinance and the licensee is expected to pay a percentage of its earning of ‘Gross Gaming Revenue’ as Gaming Royalty to the state government.

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Importantly, any person conducting gaming without obtaining a license can be punished for a period of up to two years imprisonment or fine up to INR 10 lakh.

Watchdog

In a first of its kind move, the law also creates an independent regulatory body called the Meghalaya Gaming Commission for monitoring all gaming activities in the state. The three-member Commission comprises of a retired High Court, a person having experience in the gaming industry and a person from the civil society.

The Gaming Commission is given the responsibility to issue policy directions for gaming activities, monitor the activities of the licensee and redress disputes between the players and licensees.

Further details about the royalty and license fees and other restrictions on advertising of gaming and providing credit facilities for such games are expected to be enumerated in the rules that will be issued under the new law.

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The Ordinance is also expected to be converted into an Act passed by the legislature, with or without modifications, in the upcoming assembly session of the state legislature is scheduled to commence from March5, 2021.

A Few Flaws

The Ordinance passed by the Meghalaya government is perhaps the first such law passed in India that recognises the revenue potential of all forms of physical and online gaming and takes a nuanced approach to monitoring, controlling and regulating with strict conditions gaming activities in the state, while providing for penalsing unscrupulous and rogue operators. However, there are few concerns with the provisions of the new law, which if addressed can result in a more robust and comprehensive legislation.

First, the law clubs both ‘games of skill’ and ‘games of chance’ within the ambit of gaming and offers license for both games of skill and chance. It would have been more useful if two different categories of licenses, i.e. for games of skill and chance would have been envisaged rather than clubbing both these activities into a single licensing framework.

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Secondly, the law states that online gaming websites are required to operate through a ‘restricted geo-fenced internet domain’. Whilst this may be possible for games of chance operating in the state, there are games of skill websites like rummy, fantasy sports and poker that are already operating in many states across the country, based on exemptions or permissions given under state law or court rulings approving them.

Restricting such websites to a geo-fenced internet domain if they chose to operate in Meghalaya would severely limit the feasibility of such companies taking licenses in the state.

Cut Money?

Further, the state government has envisaged to charge a Gaming Royalty as a percentage of the gross gaming revenue of operators providing licensed services 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.

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

However, 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, the new licensing regime proposed by the Meghalaya government has the potential to be a model legislation for other states to follow and adopt.

Meghalaya’s nuanced approach of viewing gaming activities as a form of entertainment with potential to aid the economy could be an alternative model that can be explored by states, looking at bringing in legislation for gaming and gambling. Of course, a lot will depend on the nitty-gritty of licensing rules and manner of implementation of the legislation.

(The writer is a lawyer and advises online gaming companies on legal, regulatory and policy issues. Views expressed are personal)