As companies continue to push their businesses to be taken online in these recent times, it is increasingly common to see marketing promotions such as lucky draws, contests and competitions being organised on social media (for convenience, we will refer to them as ‘Promotions’). However, what is not known to many companies is the fact that these Promotions could potentially infringe the gaming and lotteries laws and regulations in Malaysia.

In this article, we look into some of the gaming laws and regulations that may be applicable to such Promotions in Malaysia, which apply equally to Promotions that are conducted both online and offline.

 

The Law

In Malaysia, games which involve an element of chance are generally governed by the Malaysian Common Gaming Houses Act 1953 (“CGHA”) and the Malaysian Lotteries Act 1952 (“MLA”). Both provide similar definitions for “gaming” and “lottery”, but the former carries a broader definition for lottery. Such games are prohibited in Malaysia unless they are organised in compliance with the above Acts and have the relevant licences issued by the Ministry of Finance.

Section 2 of the CGHA defines “gaming” to be the playing of any game of chance, or of mixed chance and skill, for money or money’s worth. A Promotion that involves some degree of skill but mixed with an element of chance could potentially be regarded as “gaming”.  “Lottery” however has been broadly defined as including any game, method or device whereby money or money’s worth is distributed or allotted in any manner depending upon or to be determined by chance or lot, whether the same be held, drawn, exercised, or managed within or without the [Malaysian] Federation.

Applying the above definitions, any Promotion would fall within the definition of “gaming” and “lottery” under the CGHA and MLA if the participation of the Promotions is selected based fully or even partly on an element of chance and there is the opportunity for the successful participant to recover money or the money’s worth.

As a general rule of thumb, any Promotions organised by companies should ideally not involve any element of chance (either purely or mixed), especially in selecting the winner of such Promotions. However, Promotions that are organised purely based on skill and knowledge are allowed and will not be caught under the CGHA and MLA.

For illustration; comparing a Promotion that awards prizes to only the first 10 quickest participants to answer questions correctly versus a Promotion that awards prizes to randomly selected participants to answer the same questions correctly – the latter Promotion could amount to gaming where the former will not.

In the past, companies intending to organise Promotions were required to obtain approval from the Ministry of Finance. However, it now appears that the requirement to seek for approval has been abolished and companies are now responsible to ensure that the Promotions do not contravene the CGHA and MLA.

In the event such Promotions are in contravention with the provisions of the CGHA and MLA, the offences for holding or promoting games without the necessary licences or permits are a fine of not less than RM 5,000 and not more than RM 50,000 and shall also be punished with imprisonment for a term not exceeding 3 years. As for promoting a lottery without a permit or in contravention of conditions of the permit, the MLA provides that the offences are an imprisonment for a term not exceeding 3 years or to a fine not exceeding RM 10,000, or both.

 

Commentary

Given the hefty penalty for breaching any of the provisions under the CGHA and MLA, and whether or not a particular Promotion amounts to gaming or lottery is not always clear cut nor easy to determine conclusively, it is advisable for companies to be extra cautious in re-looking and crafting the mechanisms of the Promotions, to ensure that it does not contravene gaming laws in Malaysia.

If in doubt as to whether the Promotions you intend to organise will be caught under the CGHA and the MLA, it is always advisable to seek legal advice from local lawyers who can advise you on the Promotions.

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This article was written by Shawn Ho (Partner) and Natalie Ng. Shawn leads the corporate practice group of Donovan & Ho, and has been recognised as a Notable Practitioner, whilst the firm has been recognised as a Notable Firm for Corporate and M&A by Asialaw Profiles 2020 and 2021.  We are also ranked as a Recommended Firm by IFLR1000 2020.

Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysian start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds.  Feel free to contact us if you have any queries.

 

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