Monthly Archives: November 2013

Is Use And Dealing In Bitcoins Legal Or Illegal In India?

Is Use And Dealing In Bitcoins Legal Or Illegal In IndiaBitcoins are gaining worldwide acceptance among the digital communities and netizens. They are also becoming an acceptable mode of payment among the e-commerce, online gaming and online gambling industry. Many enthusiastics in India has started accepting Bitcoins for various purposes without realising that use of such Bitcoins in India may be illegal and punishable.

The Central Government and Reserve Bank of India (RBI) have the powers to issue bank notes and coins respectively. Thus private individuals or companies cannot issue bank notes or coins unless authorised by the Central government or RBI. However, till now neither the Central Government nor the RBI has authorised any person or institution to issues, use, generate, mint or mine Bitcoins in India.

RBI has not yet formulated regulations to govern trading or profits generated from Bitcoins. RBI does not consider Bitcoin legal tender and, therefore trading in Bitcoin is not legal. Obviously, there cannot be regulations from RBI for an illegal activity. People who use it, do so at their own risk and responsibility. Regulators are studying the impact of online payment options and virtual currencies to determine potential risks associated with them.

Some guidance can be obtained from the Indian virtual currency schemed issued by RBI. However, Bitcoins, their functionality and legality of use in India is still a grey area. The Information Technology Act, 2000 (IT Act 2000) is the cyber law of India that governs the online acts or missions in the Indian cyberspace. The IT Act 2000 prescribes cyber law due diligence in India and the Internet intermediary liability in India.

RBI believes that the unregulated link between virtual currency (if permitted), and traditional currency with a legal tender status poses challenges as the complete control over the differently denominated virtual currency is given to its issuer, who governs the scheme and manages the supply of money at will.

Under some category of virtual currency schemes which provide for bidirectional flows, it acts like any other convertible currency, with two exchange rates (buy and sell). In such schemes, the virtual currency can be used to buy not only the virtual goods and services, but also to purchase real goods and services. Virtual currency schemes are different from electronic money schemes as the virtual currency being used as the unit of account has no physical counterpart with legal tender status.

A virtual currency scheme may also be designed to compete with traditional currencies used for international trade. The absence of a distinct legal framework implies that the traditional rules under financial sector regulation and supervision, including the institution of central banks, are not involved in the case of virtual currency.

RBI has also prescribed that only banks which have been permitted to provide Mobile Banking Transactions by it shall be permitted to launch mobile based prepaid payment instruments (mobile wallets and mobile accounts).

In short, the dealing in Bitcoins in India is still a “grey area” and it is not safe to consider it “strictly legal”. Till the time Indian government or other regulatory authorities of India make use and dealing of Bitcoins legal in India, the use of the same in India is at the own “legal risk” of concerned person or institution.

Anti Match Fixing Law Of India In Pipeline: But What About Online Gambling And Betting?

Anti Match Fixing Law Of India In Pipeline But What About Online Gambling And BettingGambling laws in India are outdated and colonial in nature. They have been drafted many decades before and they need urgent rejuvenation keeping in mind the growing use of information and communication technology (ICT).

For instance, when gambling laws of India were drafted, the lawmakers of India could not foresee the possible advent of online gambling in India. As on date we have no dedicated online gambling laws in India. The online gaming and betting laws and regulations in India are still in a nebulous state and in most cases it is illegal to indulge in online gaming and betting.

The recent match fixing scandal has opened the eyes of Indian government and it has decided to pass a law to curb such evil practices through a law. The same may be introduced in the monsoon session of the Indian parliament.

While doing so the Indian government must not miss the chance to regulate online gambling and betting in India as well. Presently many websites have been offering online gambling facilities in clear disregard of the Indian laws. There is an urgent need to clarify the legal position in this regard.

In fact, the law ministry has already started working on the proposed law and a dedicated team has been asked to look into every detail. As the head of these gambling rackets are located outside India, essential provisions in this regard must be incorporated in the proposed law.

There is also an urgent need to regulate e-commerce websites that are indulging in online gambling. In fact, the e-commerce websites in India must be regulated by Indian government whether they belong to online gambling or other e-commerce activities.

Only time would tell about the seriousness of the efforts of Indian government to curb the menace of gambling and betting in India.

Source: E-Retailing Laws And Regulations In India

Internet Gambling Laws In India

Internet Gambling Laws In IndiaRunning online businesses in India require compliance with e-commerce laws and regulations of India. There are many techno legal issues of online business in India that must be complied with before an online store or platform is opened. The exact nature of such legal compliances depends upon the nature of online business.

Surprisingly, the e-commerce compliances in India are really bad and Indian government and various regulatory bodies have not taken any action in this regard so far. For example, cyber law due diligence, Internet intermediary liability and cyber due diligence for Indian companies are some of the compulsory legal issues that have been ignored by almost all e-commerce players of India.

According to India’s leading e-commerce law firm Perry4Law, the most vulnerable categories that have opened their online shops pertain to online pharmacies, online gambling and gaming, electronics, etc. These e-commerce portals are not at all complying with the respective laws of these segments.

Even the Indian government is lax in implementing the regulatory and compliance requirements against these illegal online pharmacies, gambling portals and other similar e-commerce platforms.

In this entire mess a question that requires urgent answer is whether online gambling and betting is legal in India? According to Perry4Law, the golden rule for deciding whether online gambling in India is legal or not has to be judged by many factors that depends upon the facts and circumstances of each case and upon state to state. There are many states in India where gambling is legal and few where even online gambling and betting is legal. However, there are some states like Mumbai where online gambling is expressly prohibited and made a punishable offense. So it depends upon the state where you wish to carry the online gambling and betting business.

Then there is the rule of skills versus chance as laid down by the courts of India. As a general rule, where the game involves application of skill on the part of the player and the element of chance is minimal, the activity would be considered to be a game and not an act of gambling. However, the applicability of this test of skill versus chance may not be applicable to online or Internet games, betting and gambling as various judicial decisions pertaining to different sets of facts and circumstances and can be distinguished easily in subsequent litigations.

Finally, economic and taxation legislations like tax laws of India, anti money laundering laws, etc are also involved while operating online casinos, online gambling and betting and online gamming platforms.  The provisions of these economic legislations are very stringent in nature and can cause great detriment to the owner or operator of the online casino, gambling and betting website.

Perry4Law recommends that to be on a safer side, it is better to comply with various techno legal laws of India while opening an online gambling, gaming and betting platform rather than facing the punitive provisions of Indian laws.

Source: Techno Legal Thoughts.

Provisional And Regular Licence Under The Sikkim Online Gaming (Regulation) Act, 2008

Provisional And Regular Licence Under The Sikkim Online Gaming (Regulation) Act, 2008Sikkim is the most liberal State for allowing online gaming and betting in India. As per the Constitution of India, gambling and betting is a State Subject and States are free to enact laws as per their own requirements.

The Sikkim Online Gaming (Regulation) Act, 2008 has provided a legal framework for online gaming in India. This is a revolutionary piece of legislations as it has tried that no other State has been able to achieve. The 2008 Act has been notified (PDF) and it is now operational in the State of Sikkim. Even an authorised officer (PDF) has been appointed under the 2008 Act by the Sikkim Government.

In order to make the provisions of 2008 Act operational, the Sikkim Online Gaming (Regulation) Rules, 2009 (PDF) were formulated. Perry4Law and Perry4Law’s Techno Legal Base (PTLB) have discussed these Rules 2009, along with necessary 2009 amendments, for the larger interest of all stakeholders.

Under the Sikkim Online Gaming (Regulation) Act, 2008 there are provisions regarding granting of provisional and regular licences.

A provisional licence is first issued by the Government of Sikkim if it is satisfied that the application made by the applicant complies with all the requirements prescribed in this regard. A fee of Rs. 1 lakh must be given by the applicant and he/she/it must set up the necessary infrastructure and other requirements so as to be in a position to commence operation of online games and the sports games.

If the Government is satisfied that the applicant is fully ready to commence operations of online gaming and sports gaming activity and has complied with the stipulations prescribed in the said provisional licence and such other terms and conditions prescribed in the Act and Rules, the Government may grant a regular licence for operation of online games and sports games in Form-2A for five years on payment of a fee of five lakh rupees.

For enabling the conduct of Online Games and Sports Games specified under Rule 3 of the Sikkim Online Gaming (Regulation) Rules, 2009 the following terms and conditions shall apply:

(1) The provisional licence is issued for the specific purpose of enabling the applicant company to set up and establish the entire requisite infrastructure and other components necessary for actual commencement of online gaming and sports gaming activity.

(2) The provisional licence does not confer any right to the licensee to commence its online gaming and sports gaming unless and until all the requirements stipulated by the State Government are fulfilled and the regular licence is issued by the Government.

(3) The Licensee shall operate Online Games and Sports Games from Sikkim only.

(4) The Licensee shall commence actual online gaming and sports gaming operations, i.e., “go live” within 120 days.

(5) The licensee should make available only the games specified under rule 3 of the Sikkim Online Gaming (Regulation) Rules, 2009. If the licensee intends to include new games, prior approval of the Government must be obtained.

(6) The Licensee shall allow any Officer authorized by the Government to inspect the setup process or inspect premises from where the online games are to be operated.

(7) The Provisional licence is valid for 120 days from the date of issue and immediately on the licensee intimating in writing to the Government that it is ready to commence actual online gaming and sports gaming operations, i.e., “go live” and on such determination by the State Government that the applicant licensee has complied with the stipulations prescribed hereinabove and such other terms and conditions prescribed in the Act and Rules, the licensee may be granted a regular license for a period of five years on payment of fees of five Lakhs rupees as provided under the Rules.

(8) The Licensee shall pay to the Government a sum of one lakh rupees as Provisional License fee through a Bank Draft in favour of the Director, Sikkim State Lotteries, and submit the same before issue of the said licence.

(9) The provisional license is liable to be cancelled if the licensee violates any of the above terms and conditions and the provisions of the Sikkim Online Gaming (Regulation) Act, 2008 and the rules made thereunder.

Source: IIPS.

Is It Legal To Play Online Poker In India?

Is It Legal To Play Online Poker In IndiaThere are no dedicated laws and regulations for online poker in India as on date. Further, there are no specific judicial decisions pertaining to playing of online poker in India. Both players of pokers and websites hosting the poker games are in a fix to decide whether to play and host the poker game on a website in India. Till date the position of playing online poker in India is a grey area.

Since the area is developing there are very few cyber law firms in India and cyber lawyers who can provide effective legal support and services in this regard. The Information Technology Act, 2000 is the sole cyber law of India and very few law firms and lawyers are practicing in this novel field. Even among those practicing the cyber law field, there are only handful of lawyers who can take up the matter pertaining to online gaming and gambling in India.

Online gambling laws in India are different that online gaming laws of India. Further, online gambling and gaming laws and regulations in India and conflict principles must also be kept in mind by online poker websites of India.

According to Perry4Law, the exclusive techno legal ICT law firm of India, to start with, any online poker website of India that wishes to engage in legal business must comply with Indian laws like Indian Penal Code, 1860, Code of Criminal Procedure, 1973, Indian Information Technology Act, 2000, the Public Gambling Act, 1867, Foreign Exchange Management Act (FEMA) 1999, etc.

Taxation, money laundering and payment gateways issues must also be taken care of by those proposing to open online poker websites in India. Further, various guidelines and rules issued from time to time must also be complied with by online poker websites of India opines Perry4Law.

The crux of the legal position seems to be that if an online poker website is following the laws of India while operating in India, it is legal to play online poker in India. However, if the laws of India are breached during such online presence both the cyber law of India and other applicable state laws may be attracted.

Online gaming industry is booming in India and it is going to be a multi billion dollar industry in India.  In order to capture this market the online poker entrepreneurs must comply with all the applicable laws of India and consult some good techno legal firm before launching their websites.

Source: Techno Legal Thoughts.

E-Sports Entertainment LLC (ESEA) Consent Judgment For Creating ESEA Botnet And Violation Of CFA And CROA

E-Sports Entertainment LLC (ESEA) Consent Judgment For Creating ESEA Botnet And Violation Of CFA And CROAE-Sports Entertainment Association (ESEA) has been facing the Bitcoin fiasco for some time. Bitcoin is a secured digital currency that is in great demand these days. There is also a wider acceptance of Bitcoins as a digital currency for various purposed and for numerous goods and services.

ESEA also decided to experiment with Bitcoins in the past. However, the experiment actually resulted in violation of the laws of United States. So what exactly happened that has resulted in pressing of serious criminal charges against ESEA? The details of the case are available through the document titled E-Sports Entertainment LLC (ESEA) Consent Judgment for Creating ESEA Botnet and Violation of CFA and CROA (PDF).

According to this document,  the prosecution has argued that ESEA’s conduct constitutes deceptive and unconscionable commercial practices pursuant to the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. (“CFA”) and unauthorized access pursuant to the New Jersey Computer Related Offenses Act, N.J.S.A. 2A:384-1 et !gq. (“CROA”).

A details analysis of this case is beyond the scope of this article and we would cover the same in our subsequent article. Sufficient is to say that ESEA secretly updated its client software with Bitcoin-mining code that tapped players’ computers to mint more than $3,600 worth of the digital currency.

Acting Attorney General John J. Hoffman, the Division of Law and the Division of Consumer Affairs has recently announced that on-line video gaming company E-Sports Entertainment, LLC, has entered into a $1 million settlement that resolves allegations it infected thousands of personal computers with malicious software code enabling E-Sports to monitor what programs subscribers were running and illegally mine for Bitcoins.

The State alleges that E-Sports created and deployed malicious software code that infected the computers of thousands of customers who subscribed to its anti-cheat services for popular on-line video games.

According to the complaint, the malicious code enabled E-Sports to monitor users’ computers even when they were not signed onto or using E-Sports services. E-Sports also created a botnet – a network of computers running malicious software — using its customers’ computers. The botnet used the computing resources of users’ computers to mine for Bitcoins, a virtual form of currency. It is estimated that, during a single two-week period, E-Sports took control of approximately 14,000 computers in New Jersey and across the nation, and generated approximately $3,500 by mining for Bitcoins.

As part of its settlement with the State, E-Sports has agreed to refrain from deploying software code that downloads to consumers’ computers without their knowledge and authorization. The company also must submit itself to a 10-year compliance program and create a dedicated page on its Web site that specifies what type of data it collects, the manner in which the data is collected, and how the information is used. E-Sports must pay the State $325,000 of its $1 million settlement obligation. The remainder is suspended and will be vacated within 10 years, provided the company adheres to all settlement terms and avoids future violations of the law.

“Consumers who subscribed to E-Sports’ video game anti-cheat services paid for protection from cheaters – not to be cheated by the very services they’d purchased,” said Division of Law Director Christopher S. Porrino. “Companies that collect consumer information and access users’ computers have a duty to ensure that protocols and procedures are in place to protect the information they collect. Moreover, no company should obtain more access or information than is necessary to engage in the legitimate operation of its business.”

“Following our $1 million settlement with PulsePoint earlier this year, today’s settlement serves as another victory for consumer privacy for New Jersey consumers and consumers across the country,” said Division of Consumer Affairs Director Eric T. Kanefsky. “Whether through the circumvention of browser settings, unlawfully mining for Bitcoins or by failing to adequately protect customers’ personal data from breaches, our office will hold accountable those companies and individuals that violate consumers’ expectations of privacy.”

However, in an e-mail addressed to Ars Technica, Eric Thunberg, the head of ESEA, has given a statement that the company had “no further comments at this time”. That statement, in part, says “We want to make it clear to our community that we do not agree with the Attorney General’s account of the Bitcoin incident. The settlement that was signed makes explicitly clear that we do not agree, nor do we admit, to any of the State of New Jersey’s allegations. The press release issued by the Attorney General about our settlement represents a deep misunderstanding of the facts of the case, the nature of our business, and the technology in question”.

We would analyse the settlement in details and would cover more issues in this regard in our subsequent articles.

Kerala Refused Permission To Future Gaming Solutions India Private Ltd To Sell Nagaland Lotteries In The State

Kerala Refused Permission To Future Gaming Solutions India Private Ltd To Sell Nagaland Lotteries In The StateThe sale of and dealing in paper based and online lotteries in India is governed by the Lotteries (Regulation) Act, 1998 of India (PDF) and the accompanied Lotteries Regulation Rules 2010 of India (PDF). The provisions of the Act and Rules must be adhered to in order to engage in, sale and purchase of real world and online lotteries in India. If the provisions of the Act and Rules are violated, criminal prosecution and imprisonment can also be there.

Further, as per Act and Rules one State is well within its right to deny the dealing and organisation of a lottery game/event by another organising State if the latter do not comply with the requirements of the Act and Rules.

In one such incidence reported by New Indian Express, Future Gaming Solutions India Private Ltd sought permission for sale of Nagaland lotteries in the State of Kerala. However, the State of Kerala refused to grant such permission citing the dubious history of violating Lottery Regulation Act and Rules in the sale of Sikkim State lotteries in Kerala by Future Gaming in the past. Besides, the Government of Nagaland has not informed the Government of Kerala about its intention to sell its lottery tickets in the State.

Santiago Martin, the prime accused in lottery fraud cases, is a director of Future Gaming Solutions. The Kerala State produced a notice before the Kerala High Court on Tuesday in this regard. The Kerala High Court disposed of a petition by Santiago Martin seeking a directive to the State Government to consider the application for the registration of promoter for the sale of Nagaland lotteries in the State.

As per the notice “It was revealed in an inquiry conducted on the sale of Sikkim lotteries that Future Gaming Solutions company had illegally printed Sikkim lotteries worth `60.65 crore in unauthorised printing presses and sold it in the State through Megha Distributors from April, 2010, to August 31, 2010,”.

“The present application for sale of Nagaland State lotteries is yet another attempt from the company to amass wealth illegally by cheating the public,” the notice said. It said the CBI had taken up 32 cases in connection with violation of the Lottery Regulation Act and investigation is going on.

The violation of the Act had wreaked havoc and led to public fury, which was felt in the State Assembly also. It is pointed out that the company did not furnish details of persons/firms involved in the sale of Nagaland lotteries. “This is a clear violation of the statutory directions issued by the Central Government,” the notice stated.

The agreement by the company with Nagaland Government was void. “If the agency sells lotteries based on the illegal and ambiguous agreement, it gives room for the distributor to play fraud as is evident in the case of Sikkim and Bhutan lotteries,” the notice stated.

Source: P4LO Blog.

Is Online Gambling And Betting Legal In India?

Is Online Gambling And Betting Legal In India

As a leading techno legal ICT law firm of India, Perry4Law is frequently approached for numerous techno legal issues. One of them pertains to e-commerce laws and regulations in India.

Recently many queries have been raised about the applicable online gambling laws and regulations in India.  We have also observed that e-commerce legal compliances in India are not followed in true letter and spirit. This may be due to lack of knowledge about applicable e-commerce laws but ignorance of laws is no excuse.

If e-commerce players do not follow the laws of the land, they may found themselves in uncomfortable situations. For instance, cyber law due diligence, Internet intermediary liability and cyber due diligence for Indian companies are some of the issues that have been ignored by almost all e-commerce players of India.

Coming back to the burning issue whether online gambling and online betting is legal in India or not? We have already covered the legality of online gambling and betting in India and other e-commerce compliance requirements in India but we would briefly cover the same once again.

The golden rule for deciding whether online gambling in India is legal or nor has to be judged by many factors that depends upon the facts and circumstances of each case and upon state to state. There are many states in India where gambling is legal and few where even online gambling and betting is legal. However, there are some states like Mumbai where online gambling is expressly prohibited and made a punishable offense. So it depends upon the state where you wish to carry the online gambling and betting business.

Then there is the rule of skills versus chance as laid down by the courts of India. As a general rule, where the game involves application of skill on the part of the player and the element of chance is minimal, the activity would be considered to be a game and not an act of gambling. However, the applicability of this test of skill versus chance may not be applicable to online or Internet games, betting and gambling as various judicial decisions pertaining to different sets of facts and circumstances and can be distinguished easily in subsequent litigations.

Finally, economic and taxation legislations like tax laws of India, anti money laundering laws, etc are also involved while operating online casinos, online gambling and betting and online gamming platforms.  The provisions of these economic legislations are very stringent in nature and can cause great detriment to the owner or operator of the online casino, gambling and betting website.

To be on a safer side, it is better to comply with various techno legal laws of India while opening an online gambling, gaming and betting platform rather than facing the punitive provisions of Indian laws.

Source: E-Commerce Laws and Regulations In India.

Online Gambling Laws And Regulations In India

Online Gambling Laws And Regulations In IndiaOnline gambling in India has aroused great interest among many e-commerce entrepreneurs of India. This is because online gambling is a very remunerative and profit oriented business. However, online gambling is also a complicated business filed as many laws and technical issues have to be resolved at the same time.

We have a central law on gambling called the Public Gambling Act of 1867. Similarly, we have many state laws on gambling that are mostly based upon the central law. Further, almost all the state laws are regulating real world or offline gambling in India. The exception in this regard can be found in the laws applicable in places like Goa and Sikkim.

Recently Goa has made its casino laws very stringent keep in mind the money laundering, black money and tax evasion issues in mind. Similarly, Sikkim is also in the process of harmonising its laws with the central laws.

As far as judiciary is concerned, the Supreme Court of India has made a distinction between skills based and chance based gaming activities. Of course, each case depends upon its own facts and circumstances and the respective state law and we cannot apply one decision uniformly in all cases of gambling and online gambling.

The e-commerce laws and regulations in India are still at the infancy stage. As a matter of fact, a majority of e-commerce portals and players in India are not following the laws of the land in true letter and spirit. Surprisingly, there is a general misconception among the e-commerce players of India that for running an e-commerce website in India they need not to follow much law. On the contrary, there are well recognised legal requirements to start an e-commerce website in India and the legal formalities required for starting e-commerce business in India.

The chief among these e-commerce players are online pharmacies, online gambling and gaming portals, electronics e-commerce websites, etc. They fail to understand that use of technology has brought additional legal issues that are primarily techno legal in nature. Their continued ignorance may bring civil, criminal and financial penalties. The recent spate of FDI crackdowns by India government proves this point.

At Perry4Law and Perry4Law’s Techno Legal Base (PTLB) we believe that cyber law due diligence, Internet intermediary liability and cyber due diligence for Indian companies must be kept in mind by various e-commerce websites and players. The skill and chance and state subject legal arguments are not sufficient to comply with complicated techno legal requirements of India as on date. So before launching an e-commerce portal, the concerned person or company must make it sure that techno legal requirements are duly complied with.

Source: E-Commerce Laws And Regulations In India.

Online Gambling Laws In India

Online Gambling Laws In IndiaThe online gambling laws and regulations in India is a tricky and complicated subject. We at Perry4Law receive numerous legal consultancy requests regarding legality of online gambling in India. The first question that owners of potential online gambling websites in India ask reads is online gambling and betting legal in India?

An online gambling website has to follow at least two different sets of laws. These include the gambling laws of India and the cyber law of India. Since the gambling activity is planned to be conducted through a website and in an online environment, the information technology act, 2000, which is the cyber law of India, has to be religiously followed.

There are well recognised legal requirements to start an e-commerce website in India and the legal formalities required for starting e-commerce business in India. However, in the zest of earning profit, e-commerce websites are not following the laws of India. In these circumstances, e-commerce websites frauds, offences and crimes in India have increased a lot. They are also not following the cyber law due diligence requirements of India and are liable for Internet intermediary liability in India.

E-commerce websites dealing with online pharmacies, online gamming and gambling, online selling of adult merchandise, etc are openly and continuously violating the laws of India, including the cyber law of India. However, India government has yet to take action against these offending e-commerce websites of India. The e-commerce websites in India must be regulated by Indian government as soon as possible.

As far as gambling in India is concerned, we have a central law on gambling known as Public Gambling Act of 1867. Similarly, we have many state laws on gambling that are mostly based upon the central law. Further, almost all the state laws are regulating real world or offline gambling in India. The exception in this regard can be found in the laws applicable in places like Goa and Sikkim.

Recently Goa has made its casino laws very stringent keep in mind the money laundering, black money and tax evasion issues in mind. Similarly, Sikkim is also in the process of harmonising its laws with the central laws.

As far as judiciary is concerned, the Supreme Court of India has made a distinction between skills based and chance based gaming activities. Of course, each case depends upon its own facts and circumstances and the respective state law and we cannot apply one decision uniformly in all cases of gambling and online gambling.

The skill and chance and state subject legal arguments are not sufficient to comply with complicated techno legal requirements of India as on date. So before launching an e-commerce portal, the concerned person or company must make it sure that techno legal requirements are duly complied with.

Source: CCICI.