The Enigma of Playing, Sports activities Betting, and Playing Legal guidelines: India and Brazil

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(This report was produced jointly by Jaya Suri Phalpher, Managing Partner at Phalpher & Co together with Victor Targino de Araujo, a Brazilian Gaming Law Specialist who has worked in major Brazilian football clubs such as Corinthians and Santos FC and has been a lecturer with experience in many institutions in Brazil and worldwide.

The focus of this report is on setting out the Indian scenario and current flood and going one step further, along with an insight into another country like Brazil, which may be a step ahead to its race in setting its own betting and expedite game rules.

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The subject of gambling and betting laws in India has always been a hotly debated topic. While each state enacts its laws on gambling and tightens or relaxes restrictions based on its own factors – political, social, economic, religious – there have been two schools of thought for decades (i) the conservative, denying the existence of gambling and betting activities Questioning reasons of religion, morality and defining them as addiction and harmful vices (ii) the other, which questions the restrictive disputes in the light of economic opportunities and opportunities for generating income, as well as freedom to spend free time and participate in sports . Globally, too, there is a dual point of view between the conservative and the proponents of regulating the betting and gambling industry. However, the ever-growing “gray” area needs to be addressed through updated laws and regulations.

Due to the lack of more sophisticated under-the-head regulations for gambling and wagering, particularly regarding technology and online user interface, there is an obvious and shiny overlap between the categories used under the concepts of wagering, gambling, online gaming, betting, gambling and game of skill jumbled up, esports, real money games, etc. that can be conveniently used as needed to pass as legitimate and benefit from exemptions from the restrictions under applicable law on a case-by-case and ad hoc basis.

As India is forecasting a market of over 1 billion US dollars for online games for the current year, which will be further driven by the pandemic and lockdown year 2020, the world, including India, is watching the international wave intensely dealing with the topic Regulation of betting and gaming deals with activities. On May 14, 2018, the US Supreme Court in a majority ruling in Murphy (New Jersey Governor) against the National Collegiate Athletic Association invalidated the 1992 PASPA, a federal law that allowed the protection of professional and amateur sports States prohibit, operate, license, authorize, or sponsor sports betting. While the federal system of the United States of America and the quasi-federal system of India are different in many ways, this landmark ruling has caused a lot of excitement in the industry around the world as well.

In this article, we look at India's gray gambling and betting scenario, as well as the movement in Brazil pushing to regulate betting laws this year 2021, and one possible way forward and solution to the gray.

I – SPORTS BETTING IN INDIA

The ancient Hindu civilization and literary works of this period point to the spread of gambling and betting activities, and the references, namely Ramayana and Mahabharata, indicate that the passion for gambling and betting activities has been passed down in India for centuries and generations.

Constitution of India

Under the Constitution of India, wagering and gambling is a government issue under Schedule 7, Schedule II, Item 34, meaning that the power to legislate on the subject rests with the state government, and lottery is a trade union subject under Schedule 7, Schedule I. , Item 40, ie the power to legislate on this subject, rests with the government of the Union.

Public Gambling Act, 1867 (PGA)

In general (PGA) is the core of gaming legislation in India. In India, gambling would generally include (i) wagering and wagering – but excluding games of "bare ability" – (ii) lotteries covered and regulated under the central government's Lotteries Regulation Act 1998, and (iii) horse racing under certain conditions Conditions.

Different betting laws

A total of 14 states / union territories have passed the PGA while other states including Delhi, Maharashtra, Gujarat, Andhra Pradesh, Jammu and Kashmir, Meghalaya have their own different and different laws.

In 2002, the Haryana Convention passed two public gambling bills (Haryana Amendment) and the Haryana Casino (licensing and control) bill, both of which were subject to the approval of the president and were not granted due to disagreement between state governments and ministries .

Since the PGA Act, most state ordinances came into effect before the advent of "online gambling," and while some states severely restrict betting activity, others have made exceptions, and some like Nagaland and Sikkim have even gone as far as that The enactment of online gambling regulations and the Nagaland law are even intended to be applied throughout India, as the areas fall under the “Game of Skill” exemption from the gambling sector. Even with regard to casinos, two states have H. Sikkim and Goa Daman & Diu, enacted laws allowing limited gaming under license in five star hotels and on offshore vessels in Goa.

Role of the judicial and committee reports

In general, any of these games / activities are at the mercy of your judgment as a game of skill or a game of predominantly skill based on pure luck or chance, which makes them clear and the restrictions of the gambling laws do not apply. The presentation of different laws from state to state and the non-development of existing laws have therefore left the judicial system with a great deal of room for interpretation from case to case.

  • Rummy – In the state of Andhra Pradesh v K. Satyanarayana & Ors, the game of rummy was considered "primarily and predominantly a game of skill" and the court expanded the scope of "game of sheer skill" to "mainly a game of skill "("Satyanarayana Case ”)
  • Horse racing – similar in 1996 in K.R. Lakshmanan vs. State of Tamil Nadu & Ors horse racing was seen as "mostly a game of skill". ("Lakshmanan Case")
  • Fantasy Sports – In a landmark 2017 judgment – Varun Gumber v Union Territory of Chandigarh and Ors. (Fall Dream 11) – The High Court of Punjab and Haryana declared fantasy sports a game of considerable skill and similarly the High Court of Bombay in Gurdeep Singh Sachar v Union of India (Gurdeep Singh Case) did not dissent. The appeal against the previous estates was dismissed by the Supreme Court in India and subsequently the Rajasthan Supreme Court in the Chandresh Sankhla v Rajasthan State relied on the Dream 11 and Gurdeep Singh cases and gave Fantasy Sports a clean sheet Skill game.
  • Twist in the Fantasy Story – However, in March 2020 in the state of Maharashtra & Ors. Against Gurdeep Singh Sachar & Ors. The Bombay Supreme Court's Gurdeep Singh case decision was suspended by the Supreme Court and the debate reopened.
  • In 2018, the Law Commission of India was appointed by the court during the proceedings in the case of the BCCI V. Cricket Association of Bihar under the direction of Dr. Justice B.S. Chauhan, a former judge on the Supreme Court of India, made a sweeping case for regulating betting with a three-pronged strategy: reform the existing market, regulate illegal gambling and introduce strict regulations. In addition, the Legal Commission issued a 21-point recommendation, which included amendments to the relevant provisions of the Indian Treaty Act of 1872, the Rules for Brokers of Information Technology 2011, the National Sports Development Code of India 2011, FEMA 1999 and the Foreign Direct Investment Policy, among other things etc.

1996 in K.R. Lakshmanan vs. State of Tamil Nadu & Ors horse racing was considered "predominantly a game of skill" (source: DNA)

Other Laws Affected

  • Indian Contract Act 1872, Section 30, which makes any wagering agreement void and unenforceable except in relation to wagering on horse racing.
  • Foreign Exchange Management Act 1999, its relevant regulations, and the FDI policy, which generally prohibits the transfer of income from lotteries, sweepstakes, races, and investments in lottery, gambling and betting businesses.
  • Payment & Settlement System Act 2007, according to which the Reserve Bank of India has sole power to regulate all forms of electronic payment frameworks, including the development of guidelines for these, which must be strictly observed by every payment processor operating in India.
  • Money Laundering Prevention Act of 2002, which specifically covers companies that offer cash gambling and casino compliance and compliance activities, including record keeping.
  • The Information Technology Act of 2000 which does not require Internet service providers and operators, etc., to be a platform for content promoting gambling under its provisions.
  • Cable Television Network Rules 1994 that prohibit advertising of gambling activities.
  • Income Tax Act 1961 which covers income and receipts from winnings from lotteries, races, betting, etc. as taxable under Section 115BB and 194B.

Year 2020: Development of a movement for a regulatory authority and a unified gaming and betting code

In 2020, when a pandemic, emergencies and lockdowns occurred, public and live sporting events were canceled, the gambling industry saved the limited populations and online gambling was ranked as one of the five booming sectors during Covid 19 and announced the move and shot in the arm to draw attention to the gambling and betting laws, as can be seen from one of the following excerpts and reports:

  • According to the SensorTower research group, the mobile games market grew 26% last year to $ 79.6 billion. "A huge increase, partly due to the global pandemic and lockdown," said Craig Chapple, mobile intelligence strategist at the company.
  • Thanks to the Covid-19 pandemic, Asus and MSI saw sales growth in gaming laptops in 2020
  • As the pandemic has progressed, gaming time has increased and more and more users are switching from freemium to paid gaming apps. " Real money gaming apps, which players can use to compete for cash prizes, also showed similar trends. During the IPL 2020, the number of fantasy players in the Mobile Premier League (MPL) increased more than seven times.
  • In the Madras High Court in D. Siluvai Venance in July 2020, the court stressed that “a comprehensive legal framework of a regulatory authority is required to regulate online sports and also curb illegal activities. Indeed, regulating online sport in this way would encourage investment in the sector, which could lead to technological advances and the creation of income and jobs "…" and continued that "This court is not against the virtual games, but the concern of this court is that there should be a regulator that oversees and regulates the legal gaming activities, be it in the real world or in the virtual world … "
  • In July 2020, the government of the state of Karnataka granted the Bangalore Turf Club (BTC) basic approval to conduct online betting. And the club intended to develop a mobile application that would allow players to place bets on races and receive dividends through a digital wallet. However, the same has been challenged by the State Supreme Court in C Gopal v Karnataka State and Ors State
  • In September 2020, the state of Andhra Pradesh passed a law amending state law, and the Andhra Pradesh cabinet approved a proposal to amend the Andhra Pradesh Gaming Act 1974 to ban online games such as rummy and poker with monetary transactions. Shortly thereafter, in November 2020, the state of Tamil Nadu banned online gaming by adopting the 2020 Tamil Nadu Games and Police Laws Ordinance (amendment), which included Section 3A, which states, “Nobody is allowed in cyberspace with computers or computers wagering or wagering on the system, computer network, computer resource, any communication device or other gaming instrument by playing rummy, poker or any other game. "
  • In December 2020, Niti (National Institution for the Transformation of India) became Aayog – The main policy of the Indian government's think tank has milestone strengthened the fantasy gaming industry by issuing a draft regulation called Guiding Principles for Uniform National Regulation of Online Fantasy Sports Platforms in India ("Draft Regulation"). ) and recommended the establishment of a self-regulatory authority. The draft regulation focuses on competency-based fantasy sports in close imitation or in the context of an officially approved sporting event and not accidentally and provides, among other things, the following:
    • A self-regulatory body recognized by the Indian government.
    • The operators would have to comply with the applicable laws and advertising standards.
    • Operators are not allowed to offer services to minors (under the age of 18) or announce promised / guaranteed profits.
    • States to decriminalize / immunize compliant fantasy sports competitions.
    • An independent oversight body to monitor compliance, an independent mechanism to resolve complaints, and an independent assessment committee to grant approvals and set rules.

The center has yet to comment on the recommendations, and industry experts have also moved on, providing their comments on Niti Aayog's guidelines and efforts, recommending that the draft regulation address not just subsets of fantasy games but the wider range of Online covers skill game industry.

  • Effective December 15, 2020, on the recommendation of the Ministry of Information and Broadcasting, the Advertising Standards Council of India issued guidelines for all broadcasters regarding the advertising of online games, fantasy sports, etc., to reduce the risks of such activities in accordance with correctly convey the advertising codes according to the Cable TV Network Act and the Consumer Protection Act 2019 and no advertising for legally prohibited activities.
  • At the same time in December 2020, the General Assembly of the Olympic Council of Asia and Sport was approved for inclusion in the Hangzhou 2022 Asian Games, adding uniform guidelines for esports to the case.

II – SPORTS BETTING IN BRAZIL

Timeline

  • 1934: The presidential decree was passed allowing sports betting on horse races (only within racecourses) to promote horse breeding in the country.
  • 1941: Unauthorized exploitation of games, including sports betting, is considered a minor offense (misdemeanor).
  • 1946: General ban on gambling by Presidential Decree No. 9.215 of April 30th. Religious and moral purposes that were used to justify the prohibition. The new constitution was passed in September.
  • 1956: Bill to Congress regulating sports betting on horse racing.
  • 1969: Foundation of the "sports lottery" by presidential decree. Exploration granted exclusively to the Bundesbank Caixa Economica.
  • 1984: New sports betting law regulating sports betting on horse races. (Only on racecourses or branches associated with horse racing governing bodies.)
  • 1993: Bingo Houses (a regional type of game house, with bingo being the most popular game) reopened. Part of the income went to sports clubs and associations. New regulation introduced in 1998 (Law No. 9.615 of March).
  • 2000: Congress bans again bingo houses (Law No. 9.981 of July).
  • 2018: Law No. 13,756, passed in Congress December. Articles 29 to 35 permit the exploitation of Fixed odds sports bettingincluding online, subject to a legal framework presented by government decree.
  • 2021: the government The regulatory framework for fixed odds betting is expected to be published in June. Online sports betting companies based outside of Brazil operate and advertise at major sporting events, clubs and broadcasters without hesitation.

Bingo Houses - a regional type of game house, with bingo being the most popular game. Bingo Houses - a regional type of game house, with bingo being the most popular game. Bingo Houses – a regional type of game house, with bingo being the most popular game. (Source: Games Magazine Brasil)

Brazilian Law No. 13,756 sets guidelines for fixed odds betting regulations

Law No. 13.756 (“Brazilian Law”) of December 2018 contained binding guidelines (Articles 29-35) to be respected and complied with by the Ministry of Economic Affairs (Government) in order to develop the legal framework for sports betting with fixed odds for betting ("Regulations") to be adopted by the Ministry of Economic Affairs. Accordingly, an overview of the Brazilian legal guidelines would project the following

  • The rules governing fixed odds betting would only be applicable to sporting events.
  • The Brazilian law has fictitiously equated sports betting with fixed odds, despite the conceptual distinction, with lotteries and made them a public service that the federal government is supposed to delegate to private operators
    • Concession or
    • Approval.
  • The concession model will be the most likely option, as there is the possibility of filling the gaps not dealt with in Brazilian law and ultimately in the upcoming regulations with adjustments in the concession contracts that are (also) to be closed between the federal government and the operator. To issue penal clauses for those operators who have violated the law, the regulations and the clauses set out in the contract).
  • The requirements for the concession or approval (e.g. minimum capital; restrictions on foreign shareholders, etc.) are expected to be set out in the upcoming government regulation.
  • Online or not, the sporting event to be exploited must be "real", which prohibits sports betting on events from machines or fictional software.
  • Brazilian law does not make it clear whether or not betting exchanges (e.g. Betfair) or skin gambling are allowed, so the discussion remains open depending on the upcoming regulations.
  • With regard to esports, it is reasonable to argue that organized esports competitions should be treated equally as sport and therefore should be subject to the use of fixed odds sports betting as a real sporting event.
  • Taxes and profit margins are specified in the Brazilian law, which is provided in the regulations as set out in the law (see Table 1 below, which distinguishes taxation between local and online operators) and are often criticized by experts for at least two reasons for this:
  1. Winning Client Excessive Taxation (Taxed at 30% of Prize Won in Federal IRS) – The ordinance details whether the tax will be applied to the total amount returned from the bet or just to the "profit" (profit) won. The latter is the most sensible choice. In addition, the timing of the tax revenue is questionable: should the online operator deduct the tax from the amount to be deposited in the player's virtual wallet? Or only if the player wants to withdraw the amount in their virtual wallet?

(ii) Taxation of sports betting houses based on turnover instead of gross gaming revenue.

  • In addition to the taxes mentioned above, the operator is subject to a property tax determined for the federal government, which is to be applied gradually according to the price shared with the bettors (see table 2 below).
  • It is expected that forthcoming regulations will ban advertising to unauthorized operators, but the law only disciplines that advertising should be guided by “corporate social responsibility best practices”. Still, the advertising market in Brazil is governed by CONAR, a not-for-profit private organization that is expected to politicize and sanction abuse in propaganda, especially in a market promoting a potentially addictive product like betting.
  • Brazilian law lacks provisions for responsible gaming, such as preventing minors, taking measures to prevent or reduce the harm caused by gambling addiction, and preventing and sanctioning match-fixing. Nevertheless, Mariana Chamelette explains that match fixing is already a crime in Brazil and is also subject to sports penalties under the Brazilian Sports Justice Act.
  • Article 35 of the Brazilian law draws attention to criminal activities related to money laundering or terrorist financing and obliges the operator to provide information on the know-it-alls of Brazil to the Council for the Control of Financial Activities (COAF), a public body linked to the central bank. The scope of the information to be made available is uncertain depending on the pending regulations.
  • However, Brazilian law still lacks sanctions or measures such as fines or the revocation of licenses to prevent, for example, misconduct, tax fraud or abuse by the licensed operators, which would require the need for a specific decision in each concession agreement.
  • Under the law, it is not clear who will be responsible for overseeing the legal process of sports betting, presumably the Ministry of Economy (the successor to the now defunct Ministry of Public Finance mentioned in the law). The creation of a gambling focused and specialized agency that would (theoretically) be much more effective was suggested a long time ago by current co-author Victor Targino in scientific articles on future regulation of casinos and gambling in Brazil (which is still banned) , as an example for other countries and states (Portugal, Malta, Nevada – USA) but this does not seem to be on the actual government agenda.
  • It became known that the Brazilian government only intends to grant 30 (thirty) concessions to operators across the country. Such a restriction, if passed, will not only hurt the market, but opening up the space to clandestine operators in a continental country like Brazil should be a violation of the Brazilian Constitution from an antitrust standpoint.

Conclusion: KPMG Consulting presented a study that estimates gross annual sales of USD 2.1 billion in the fixed odds sports betting market under the upcoming regulations.

Tax and profit lists for future sports betting providers with fixed odds in Brazil

TABLE 1

In summary:

  • Local stand taxes to be levied on the stand: 6%.
  • Maximum gross gaming turnover of the local stand from turnover: 14%.
  • Total online tax on sales: 3%.
  • Online maximum gross gaming revenue from sales: 8%.

III – CONCLUSION

The long-awaited fixed-odds sports betting regulation in Brazil is expected to be in place by June 2021 (nearly three years after the bill was passed in Congress).

Despite the inaccuracy of Brazilian law – which the upcoming legal framework is expected to largely remedy – regulation of the sector is awaited with great anticipation and is a huge step towards banning other gambling products. Competition must not be ignored but encouraged, not only in defense of the consumer but also in favor of a better and well-developed product in the near future, which will boost the economy, especially after a year of unprecedented pandemic.

The sector's stakeholders and experts are also expected to make an important contribution to the development of the legal and regulatory framework with their global expertise in creating a profitable and successful product, taking into account that Brazil has largely ignored the gambling industry since the 1940s.

Nevertheless, sports betting (much more so than before with online operators overseas who invest money in sports clubs and competitions) will be an important source of income for the entire sports industry in Brazil, not just with the EU's controversial “Image Tax” law exclusively in favor of it football clubs, but income from sponsorship, advertising, events, license fees and, above all, job creation.

In Brazil, as the government ponders the proposed Fixed Odds Framework in India, the forces and waves created particularly during this pandemic calendar have crowded stakeholders, industry experts from government agencies, and legal experts in the fields of gambling and betting. Gambling based on the loud call for a unified legal framework and guidelines for betting laws, accelerated by Niti Aayog's proposed draft regulation for online fantasy sports, as a positive expression of consideration and recognition of an urgent and overlapping issue on the agenda of the Government stands.

Overall, it would be the order of the day for the central government to provide umbrella and basic guidelines to create a framework for:

  • Categorize & Define – Set basic standards for various activities such as gambling, betting, gaming, including real money gaming, esports, other skill games,
  • Regularize,
  • Authorize,
  • Punish.

The industry has gained momentum, positioning itself as a booming and precariously positioned sector with great potential for generating income, employment, investment, tourism, etc. She beckons to a regulatory framework to resolve the disputes between the two schools and address the horror and potential of the industry with check and balances and changed and current laws in the areas of contracts, taxes, service providers, payment operators, information technology, money laundering and investments among others capture.

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