The dawn of online gambling in India?

The Indian state of Sikkim last week handed its first remote gaming licence to local operator Future Gaming Solutions (FGS), despite the Indian federal government’s continued and long-established anti-gambling stance.

The Sikkim process began around seven years ago when the state handed out a number of provisional licences, however, activation of the permits was put on hold until it was determined whether or not the licences could be used to offer services across India.

The remaining six or seven licences are expected to be granted shortly with the likes of the Essel Group, Sugal and Damani and Delta Corps all thought to be waiting on their own permits.

Licence potential

Earlier this year the government ruled that online gambling regulation was limited to the regulating state and therefore could not be offered outside of the state’s borders.

The ruling cast doubt over the money-making potential of the new licences, with Sikkim the least populous state in India with little more than 600,000 inhabitants.

But speaking to eGaming Review, FGS chief executive Kapil Khanna said the licence award was a “very important milestone” for online gambling in India and FGS is preparing to launch a sports betting and casino site under its Best & Co. brand within the next few weeks.

Despite the recent government ruling, Khanna says it is still too premature to fully understand exactly what the licence does and doesn’t enable it to do and where can and can’t offer its products.

“We are still studying [what the limitations of the licence are] and it’s still too early to come to a definitive view,” Khanna said, adding that he hoped more states would soon follow Sikkim and open up to online gaming.

“We wish to see most states following Sikkim and looking forward to other firms joining us in the Indian gaming arena,” he said.

Overseas firms, however, remain blocked out of the potentially lucrative market – on a B2C basis anyway – with Indian law banning foreign direct investment into the country’s gambling sector. Striking B2B deals with local licence holders remains a possibility however.

Limited Scope

Stephen Ketteley, leading gaming lawyer at law firm DLA Piper, says he looked into the Sikkim licence issue around 2010 when a number of European operators had shown interest in entering the market via structured relationships but first sought clarity on what the licences would enable them to do.

“It is important to remember India is a federal state and, as such, if you want to offer remote gambling from within the territory, you need to assess federal and state laws. The Indian Constitution permits state governments to enact their own laws in relation to gambling. Sikkim has done just that,” Ketteley told eGR.

“However, there remains a debate as to the extent to which Sikkim can authorise transactions with players outside that state. There is a general principle flowing out of federal case law, on lotteries, that if one state prohibits gambling, then an operator from another state cannot offer products into the prohibiting state.

“There is jurisprudence that suggests the flip side is true, in that if a state permits a type of gambling then that state may have no grounds to prohibit an operator located in another state from effecting an inward supply. However, as the case law relates to lotteries – there is a question mark over the ability to extrapolate it to cover online casino.”

According to Ketteley, there were some “fairly substantial operators that looked at it in the past but they didn’t really get the answers they wanted at the time”.

“It was because of the restrictions of dealing with local operators and, given the uncertainty about the legality of pan-India supply, it appeared to be a fairly limited application for a small state – it simply wasn’t commercially appealing,” he added.

Bending the rules

However, as one egaming expert in India told eGR, there could be ways and means of circumnavigating such a limitation with some attempting to sell their licences on such a basis.

“They [provisional licence holders] say that whilst the licences will only be operable in Sikkim, there will be methods of taking bets throughout India,” he says. “My fear is that if they are successful in taking bets throughout India then the central government will close it down quickly and the whole discussion around regulation will get pushed back a few years.

“However, if they do it quietly, as the rummy market has successfully done then it could be very successful for the domestic players,” he adds.

In the short-term, the Sikkim licences appear to be a very small but important step towards a larger regulated Indian market. Whether the attitude of the Sikkim decision makers is indicative of other states and we can expect a further opening up of online gaming remains to be seen.

“If you look back 10-15 years it was very difficult to buy a beer in India but gradually the laws and regulations around alcohol softened and now it’s fairly common place,” another market expert notes.

“Betting is extremely popular in India so whether you can in anyway extrapolate alcohol to gaming perhaps you can draw an analogy there. If there is a softening in one state and it is a success it may well be that other states follow suit,” he adds.