India: Operators undeterred by Commission's backtracking

The apparent backtracking of India’s Law Commission on its gambling legalisation recommendation has done little to deter those with an eye on the huge market, says Joanne Christie

When India’s Law Commission came out with what was widely interpreted as a recommendation that betting and gambling be legalised in the country on 5 July, the country’s press went into overdrive. Shares in India’s only listed casino operator, Delta Corp, rose and foreign operators the world over began salivating at the prospect of another enormous market opening up in the near future.

Rather confusingly, however, the Commission put out a press release the following day clarifying it had not, in fact, recommended legalisation or regulation but rather a complete ban on gambling. It reiterated a portion of the conclusion of its lengthy 145-page report, specifically: “The Commission reaches the inescapable conclusion that legalising betting and gambling is not desirable in India in the present scenario. "Therefore, the State authorities must ensure enforcement of a complete ban on unlawful betting and gambling.

“However, incapability to enforce a complete ban has resulted in rampant increase in illegal gambling, resulting in a boom in black-money generation and circulation.

"Since it is not possible to prevent these activities completely, effectively regulating them remains the only viable option.” But the clarification note did little to deter the industry’s enthusiasm, with many speculating the media had gone overboard and the commission had therefore taken a lot of heat from politicians on both sides and was simply seeking to emphasise that it was a political decision to make. Enthusiasm abounds Vaibhav Gaggar, managing partner at law firm Gaggar and Partners, was unperturbed by the Commission’s apparent backtracking.

“Despite the press note that came out the next day, there is a huge amount of expectation and excitement. “We expected a positive report coming out but this has actually gone way further because earlier they were looking at only betting as it was the sports betting markets they were mandated to look into.

"But they’ve spoken about legalising and regulating various other forms of gambling and they’ve made certain serious observations on why it needs to be regulated and legalised.

"Plus they have gone ahead and given recommendations in terms of what the structure should be like, so I think it is a huge step forward.” Roland Landers, CEO at the All India Gaming Federation (AIGF), which represents a range of local and foreign companies, says its members also view the report as a “good positive first step in the right direction”. Presumably PokerStars – the only licensed foreign poker site in India, with its Indian site operated by Sachiko Gaming Pvt Ltd — didn’t interpret the report as recommending a ban as when asked for comment, a spokesperson said:

“We always welcome conversation around smart, sensible regulation that protects consumers, operators and the industry, and which allows adults to play the games they love in the safety of their own home.”

However, not everyone is quite so positive. Jay Sayta, corporate lawyer and founder of GLaws.in, a website that covers developments in gambling laws in India, says he takes the clarification note at face value. “They recommended a ban in the first place and it was mistaken to mean regulation. In the next paragraph they said that if a ban didn’t work regulation could be considered at a later point in time.

“What the Law Commission actually meant by their clarification is that they want a stronger law to ban everything.”

Sayta concedes, however, that the report is “totally convoluted” and that the Commission was looking to have it “both ways” with its recommendations.

The sitting on the fence stance of the Commission is perhaps understandable given the country is less than a year away from an election and none of the main political parties are likely to make gambling a priority in the run-up to the election. But logically, it’s hard to see that the Commission would have bothered to outline such specific guidance for regulation if it wasn’t at least on the cards.

It even outlines various specific consumer protection measures in the report, though not all of these are seen as workable. Role of the courts It’s also worth pointing out it was the Supreme Court that asked the Law Commission to investigate the matter in the first place, rather than the government. While Sayta says this is “significant in the sense that it wasn’t a priority for the government”, Gaggar says it may mean the courts will play a big role in deciding how things move forward.

“I have a feeling it is not just going to be a political story. I foresee action in the court playing a sentinel role in this going forward.” Ranjana Adhikari, co-head of the media, entertainment and gaming practice at law firm Nishith Desai Associates, points out that there is a relevant Supreme Court case pending, that of Geeta Rani v Union of India.

“The question before the Supreme Court is whether or not sports betting is a game of skill and whether or not it is already legal in India, which is the entire debate.

"If the Supreme Court says it is a game of skill it doesn’t matter if you have legislation in place. It is above board and you can offer it. “It’s slightly unlikely for it to happen in the absence of legislation but it is the best case we have right now.”

The other salient point here is that as India’s individual states have the power to make their own laws, some may feel emboldened by the Commission’s report to legislate within their own borders long before it becomes a priority for the country’s central government. This is more likely to happen in this states that have already put in place some kind of gambling regulation, for example, Sikkim, Nagaland and Goa, says Adhikari.

“It could be possible that these states that are heavily dependent on gaming and tourism for their revenue might look at it as an opportunity.”

Two states in India — Sikkim and Nagaland — already have licensing regimes for online skill gaming and while thus far the only foreign operator to jump into the regulatory fray has been PokerStars via its partnership with Sachiko Gaming Pvt Ltd, experts say it’s likely others will shortly be joining it.

Positioning for change “All the operators who are looking at India are conscious that it is going to take them still a couple of years before sports betting could officially be a product that they could look at,” says Adhikari.

“In the meantime, some of them have adopted an approach of exploring other areas to capture the eyeballs of consumers.

"So they may be looking into entering into daily fantasy sports because it is looked at as a game of skill in India.” Gaggar says the report has provided further impetus.  “Since this report has come out I can share with you that I’ve had four different companies get in touch to say that they would like to obtain a licence so it is clearly going in that direction.

They are thinking that a licensing regime is going to happen at a central level, but in the meantime they want to get their act together at a state level.” While current foreign direct investment (FDI) laws make it tricky for foreign companies to operate in India, the Law Commission report recognises that there would need to be a change in the country’s FDI policy if a licensing regime was put in place as foreign investment and technology would be needed in the market. Overall, for foreign operators the Law Commission’s long-awaited report is being viewed as largely positive, although given the timing of its release so close to an election, those with an eye on India would be wise to temper their expectations. “It’s definitely going to be a slower process than most people anticipate so everybody just needs to be very patient,” concludes Adhikari.

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