Friday, September 30, 2022

A rum affair


Foreign investor interest in India’s online rummy companies has been growing, though a recent ordinance banning the game by the central state of Telangana has thrown the industry into turmoil and sparked fears of a domino effect across the country.

In India gambling on games of chance are banned in most states. However, a Supreme Court Act from 1996 made a distinction between games of skill and games of chance, allowing the former while outlawing the latter.

Up until now, the highly popular card game of rummy has fallen into the category of skill-based gaming. Telangana’s ordinance from June 17 changes that saying playing rummy online for monetary gains is a criminal offence. It claims rummy involves both skill and chance and the presence of the latter makes it an activity tantamount to gambling, and not sports. The state issued a further ordinance in July clarifying the definition of cyberspace to incorporate all online activities.  

“It has been considered necessary to arrest the social evils caused by online rummy by issue (of) certain modifications in the provisions of the Telangana Gaming Act, 1974 to realize the said objective,” the state government said.

Telangana is only the second state to legislate online gambling, with the Nagaland government in the far North of the country deciding to legalize the practice last year.

Under the Telangana ordinance the first offence carries a penalty of imprisonment up to one year with a fine of up to five thousand rupees. The ordinance will ultimately need to be ratified by the state legislature, but since the government enjoys a majority it’s likely they will succeed in passing it into law.

A well-placed source at Rummy Circle said the ordinance was detrimental to the rummy business all over the country, and not just in Telangana, since it could have a domino effect on other states.

Speaking to AGB, he argued that the Telangana ordinance was clearly contrary to the 1996 Supreme Court judgment of 1996. That ruling has been the foundation on which rummy games have been operating, with Rummy Circle and others referring to it on their website to convince patrons that what they are doing is legal.

The developments will be watched closely by foreign investors who have been seeking to enter into the rummy space as one of the few opportunities to tap the Indian market and be on relatively safe legal ground.

Earlier this year Canadian investment firm Clairvest bought a majority stake in Ace2Three for $74 million, providing a handsome return for original startup investor Matrix Partners. The venture capital firm is said to have made over $40 million on its seven-year investment in Hyderabad-headquartered Head InfoTech India, which operates Ace2Three.

While U.S. venture capital groups Tiger Global and Sequoia Capital have backed Rummy Circle.

Online sites offering rummy have sprung up across the country, with reports suggesting they make up 40 percent of the total digital gaming business in India at present. Sites such as Junglee Rummy, Rummy Circle and others boast millions of subscribers and are advertising prominently on and off line.

Jay Sayta, an expert on gambling laws, told AGB that almost 20 to 30 percent of total rummy business in India originates from Telangana; for Ace2Three, it is almost half of their total business. “Rummy is a popular game there. Playing rummy is a cultural thing in Telangana which explains its popularity. When online rummy sites started operating, a lot of players playing offline shifted online,” Sayta said.

The ordinance now also clears up any ambiguity over online gambling, making a clear effort to define and ban the practice on poker, rummy, matka and sports betting.

Sayta pointed out that this was likely to shake the confidence of foreign investors who were looking to enter Indian rummy market. “Already a consortium of foreign players invested 75 million dollars  in total in Ace2Three and it is very likely they are suffering losses.”

According to Sayta, the ordinance was also contrary to article 19 (1) (G) of the Indian Constitution which allows a citizen to carry on trade and commerce-related activities all over the country.

Junglee Rummy, Rummy Circle and Ace2Three have approached the state High Court for interim relief.  Ace2Three which is based in Telangana has been told it can continue to offer its games outside the state, but not to Telangana residents. The other two are still waiting for court orders.

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

3rd party / Cookies
Show settings
Contact us

PO Box 1139, Macau SAR
Tel: +853 2871 7267
Fax: +853 2871 7264

Asia Gaming Brief