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Gambling Regulation in India Could Benefit US Poker Sites

Posted on by John Lathram

IndiaNext week, PokerStars will launch a ring-fenced .in platform in India and prevent Indian-registered online poker players from accessing its .com platform. As has been seen previously when ring-fenced markets are created, the outcome is often an exodus to sites not subject to national laws.

Like America, India is a country made up of different states. In total there are twenty-nine states and seven “union territories”. Also like America, each state has the right to create its own laws (to a degree) – a complex situation that has resulted in India being a “grey market” for online poker except in states where online gambling is explicitly prohibited.

Due to the uncertainty, publicly-listed operators such as Party Poker and 888Poker do not provide a service in India. PokerStars has always provided a service and allowed Indian-based players (with certain exceptions) to play on its worldwide .com platform. However, the world´s largest online poker site is now partnering with a Nagaland-registered licensee and ring-fencing its Indian players.

The Significance of Nagaland

In 2016, the state of Nagaland passed the “Prohibition of Gambling and Regulation of Online Games of Skill Act”. The Act allowed the state´s gambling regulator to issue licenses to providers of online games of skill. Nagaland was not the first state to pass such a law, but it was the first that allowed licensees to provide a service to all states or union territories where games of skill are permitted.

Several Indian-based online gambling operators took advantage of the legislation and started offering online poker throughout India where games of skill are permitted. This is why there has been an increase in the number of sites monitored by PokerScout and why so many of them are unfamiliar to online poker players located outside of India (i.e. Adda52, PokaBunga, PokerBaazi, etc.).

Why Has PokerStars “Gone Legal”?

A big problem Indian poker players have playing on PokerStars´ .com platform is getting money on and off the site. International financial transactions are governed by the federal Foreign Exchange Management Act, which is as restrictive as UIGEA for playing online poker. PokerStars will overcome this problem by partnering with a Nagaland-registered licensee and conducting games in rupees.

The move to “go legal” in India will also enhance PokerStars´ regulatory profile. With many different countries around the world considering the regulation of online gambling, PokerStars will not want to miss out on potentially lucrative opportunities by being considered a
grey market operator
. The Indian market is important to the site, but possibly not so much as other jurisdictions such as Brazil.

How Might This Benefit US Facing Poker Sites?

There are several reasons why PokerStars´ ring-fencing of its Indian players could benefit US poker sites. First of all, there is historical evidence. When France, Spain, Italy and Portugal created their own ring-fenced markets, hundreds of players abandoned the regulated environments to play at sites where there was better liquidity and more valuable promotions, and where they were paying less rake.

There is also the issue of taxation. Indian residents have to pay an effective tax rate of 30.9% on winnings from online gambling. I am not suggesting that online poker players in India will avoid their tax obligations and, if they play at an Indian-registered site, they will not be able to. Licensed poker sites will report players´ winnings to the tax authorities, just as they do in regulated European countries.

It is also worth noting that, when the regulated markets were created in Europe, many profitable players were able to move to the UK under the EU´s freedom of movement regulations. In the UK, they could play on the .com platform and winnings from gambling are tax-free. Indian players do not have that option. That does not necessarily imply there will be an exodus of Indian poker players to US poker sites, but don´t be surprised if it happens.

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