Legislative and regulatory powers over lottery, gaming and betting in Nigeria

Introduction

Nigeria operates a federal system of government. Thus, legislative powers are devolved between the national law-making body (The National Assembly) and the Houses of Assembly of each 36 state that make up the country. Additionally, the National Assembly acts as the domestic law-making body for the Federal Capital Territory (FCT) with respect to matters which the State Houses of Assembly have powers to legislate on. These legislative powers are clearly delineated and enshrined in the Constitution of the Federal Republic of Nigeria. By section 4(1) of the Constitution,1 the legislative powers of Nigeria are vested in the National Assembly. Section 4(6) of the Constitution states that the legislative powers of a state of the Federation is vested in the House of Assembly of the state.

In 2005, the National Assembly enacted the National Lottery Act (the “Act”) which sought to regulate lottery and lottery related activities (Sports Betting, Pools Betting, etc.) throughout the federation. The Act also established the National Lottery Regulatory Commission (NLRC) as the federal regulatory body in charge of lottery and related activities. The NLRC issued national and regional licenses for the operation of lottery, sports betting, pools betting and related activities throughout the country or a section of the country.

Prior to the enactment of the National Lottery Act of 2005, some states in Nigeria had already enacted their domestic laws to regulate gaming in their respective states.2 These state laws also established regulatory bodies for gaming and lottery activities in their respective states. In 2008, Lagos State sued the Federal Government and the National Assembly at the Supreme Court in Suit No SC/1/2008 – The Attorney-General of Lagos State & Ors v The Attorney-General of the Federation & Ors,3 challenging the constitutionality of the National Lottery Act 2005. The contention of the plaintiffs in the suit was that lottery is not within the legislative competence of the National Assembly; rather it is within the residual legislative powers of the various State Houses of Assembly as provided in the Constitution of Nigeria. Thus, the National Lottery Act 2005 enacted by the National Assembly for the purpose of regulating lottery throughout the country is unconstitutional, null and void. On the 22nd of November 2024, the Supreme Court of Nigeria upheld the argument of the plaintiffs and nullified the National Lottery Act, 2005 on the grounds that it was enacted ultra vires the constitutional powers of the National Assembly.

Legislative power over lottery and gaming in Nigeria

Under the Constitution of Nigeria, the National Assembly has the sole legislative power over matters contained in the Exclusive Legislative List.4 The scope of the concurrent legislative powers of the National Assembly and Houses of Assembly of the various states are outlined in the Concurrent Legislative List.5 The Constitution went further to provide that the Houses of Assembly of the various states shall have the exclusive power to legislate on matters not contained in the Exclusive Legislative List and Concurrent Legislative List.6 Although those matters are not expressly listed in the Constitution, they are referred to as the Residual List.

It is pertinent to note that “lottery” is not expressly listed in either the Exclusive Legislative List or the Concurrent Legislative List under the Nigerian Constitution. Consequently, the plaintiffs in the Supreme Court decision under review argued that lottery, having not been listed in either the Exclusive Legislative List or the Concurrent Legislative list, falls under the Residual Legislative powers of the State Houses of Assembly. For their part, the defendants argued that the National Assembly has the sole authority to legislate on lottery matters, premised on the viewpoint that lottery is encapsulated under Item 62 of the Exclusive Legislative List which relates to trade and commerce. They also argued that the powers of the National Assembly extend to lottery matters pursuant to Items 67 and 68 of the Exclusive Legislative List. Items 62, 67 and 68 of the Exclusive Legislative List state as follows:

Item 62

Trade and commerce, and in particular:

a. Trade and commerce between Nigeria and other countries including import of into and export of commodities from Nigeria, and trade and commerce between states;

b. Establishment of a purchasing authority with power to acquire for export or sale in the world markets such agricultural produce as may be designated by the National Assembly;

c. Inspection of produce to be exported from Nigeria and the enforcement of grades and standard of quality in respect of produce so inspected;

d. Establishment of a body to prescribe and enforce standard of goods and commodities offered for sale;

e. Control of prices of goods and commodities designated by the National Assembly as essential goods or commodities; and

f. Registration of business names.

Item 67

Any other matter with respect to which the National Assembly has power to make laws in accordance with the provisions of this Constitution.

Item 68

Any matter incidental or supplementary to any matter mentioned elsewhere in this list.

Is lottery a form of trade or commerce?

As we stated earlier, central to the determination of the issues canvassed by the parties was whether lottery can be categorized as a form of trade or commerce. In an attempt to resolve the issue, the Supreme Court embarked on a definition of the term ‘lottery’ thus:

“So, what then is lottery? In the Oxford Advanced Learner’s Dictionary, 7th Edition, lottery is defined as:

1. A way of raising money for a government, charity, etc., in which many tickets are sold and some of the tickets are chosen by chance to win prizes.
2. A situation in which what happens depends entirely on chance.

Lottery is also defined by the Black’s Law Dictionary 10th Edition as:

1. A system of deciding who will get something; choosing of people’s name by chance.
2. A method of raising revenues, esp. State Government revenues, by selling tickets and giving prizes (usu. Cash prize) to those who holds tickets with winning numbers that are drawn at random. Also termed lotto.

From the foregoing definition, lottery is a scheme or a game in which participants must give something of value and a winner is selected by chance or luck or random drawing, not by skill, and the winner receives a benefit as a result of the chance- based selection.”

Lottery is a system of selling numbered tickets and giving prizes to those people whose numbers are chosen by chance.7 Lottery is an activity of chance with no definite assurance that there will be an exchange of value.

After it had defined lottery, the Court went further to define the term “Trade and Commerce” in the following words:

“Trade and Commerce can be described as the activities involved in buying, selling and exchange of goods and services. According to the Black’s Law Dictionary, 10th Edition, the terms “trade” and “commerce” are defined similarly with slight variations in wording.

Trade: The exchange of goods, services, or both, for money or other goods and services. It also refers to the business or occupation in which one engages.

Commerce: The buying and selling of goods or services, especially on a large scale, and the activities involved in the production, distribution, and consumption of those goods and services. It encompasses all activities related to the movement and exchange of goods and services across markets.”

The Court further relied on the definition of Trade and Commerce stated in its previous decision in A. G Ogun State v Aberuagba & Ors,8 where the Supreme Court held as follows:

“…trade and commerce in Item 62 of the Exclusive Legislative List are to be taken together and they both must mean commercial intercourse. It means therefore that commercial intercourse, as defined whether to or from foreign countries, whether they move inter-state or intra state. But it must be commercial intercourse and they must move’’

Trade is the activity of buying and selling or exchanging goods and services between people or countries.9 It is the exchange of goods, services or both, for money or other goods and services.

Commerce is the exchange or buying and selling of commodities on a large scale involving transportation from place to place.10It is the buying and selling of goods or services, especially in large amounts.11 It is the buying and selling of goods and services, especially on a large scale, and the activities involved in the production, distribution and consumption of those goods and services.12

Flowing from the above, trade and commerce concerns a definite exchange of goods or services. In contrast, lottery is a venture of chance without a definite guarantee that any form of value will be exchanged. In lottery, purchase of tickets simpliciter does not make every purchaser entitled to an exchange of value (prize money) or any other form of consideration. Whereas, goods and services move from one person to another and from place to place in relation to trade and commerce, no goods or services move from one person to another or from place to place in relation to lottery. Lottery is an activity of probability, without influencing the definite utility of goods and services.

For purchasers of tickets who do not win the prize money in lottery, they part with the value given to secure the ticket but do not receive anything in exchange for such value. Consequently, such an act cannot be classified under trade and commerce which pertains to exchange of goods and services for a consideration. Where there is no agreement to a definite exchange, such activity is not transactional in nature and thus cannot be modified to be trade or commerce. To those whose tickets do not qualify for the prize money, no goods or services move to them and as a result, there is no form of exchange.

It is therefore apparent that lottery is entirely distinct from trade and commerce. Engrafting lottery into trade and commerce is an intricate act that is tantamount to misinterpretation of the provisions of the Constitution. To infer the inclusion of lottery under Item 62, 67 and 68 of the Exclusive Legislative List is an attempt to clothe the National Assembly with powers that it does not have.

The courts are only permitted to expound the meaning of legislative provisions but refrained from expanding them.13 The courts are not allowed to ferret for meanings of provisions beyond the law.14 A legislative authority that claims to legislate in accordance with what the Constitution has enacted must show how it derived its legislative authority to do so from the Constitution itself.15 An inference to words not contained in the Constitution can be said to be an extravagant interpretation of the Constitution. Also, party to a suit has no legal right to expand the wordings of a statute.16

The Court considered some decisions of the Indian Supreme Court as persuasive authorities on the subject matter when the court held thus:

“In the case of State Of Haryana Vs. Suman Enterprises & Ors (1994) 4 Scc 217 (1994) 4 SCC 217, the Supreme Court of India observed the following regarding lotteries:

“A lottery is not a trade or commerce in the conventional sense. It involves an element of chance and, therefore, cannot be classified as a commercial transaction or business activity. The sale of lottery tickets, unlike trade and commerce, does not involve an exchange of goods or services, but merely a game of chance, which is a form of gambling.”

Also, in BR Enterprises Vs. State Of Uttar Pradesh (1999) 9 SCC 700, the Supreme Court of India addressed the question of whether lotteries fall within the scope of “trade” and “commerce” as guaranteed under Article 301 of the Constitution which ensures the freedom of trade, commerce and intercourse throughout India. The Court held that lotteries do not constitute trade, commerce or intercourse within the meaning of Article 301. The Court reasoned that lotteries are fundamentally a form of gambling and thus do not qualify as trade or commerce.

Given that the decisions referenced above reflect a sound exposition of the law, I find them persuasive and shall accordingly adopt their reasoning.”

The Court then concluded in the following words:

“In the light of the foregoing, I hold that lottery does not constitute “trade and commerce” as envisaged under item 62(a) of the Exclusive Legislative List as lottery is fundamentally a game of chance lacking the certainty, mutual exchange and reciprocity typically associated with trade and commerce. Unlike traditional commercial transactions involving a defined exchange of goods and services between parties, lottery merely offers participants the prospect of winning without any assured return or specific value in exchange. Therefore, a lottery cannot be classified as ‘trade and commerce” under the relevant item in the Exclusive Legislative List, as it fails to meet the criteria of economic transaction involving the definite transfer of goods and services.”

Having found that Lottery is not a form of trade or commerce, the Defendants could not successfully justify the National Assembly’s enactment of a law to regulate lottery in Nigeria. Consequently, the Supreme Court declared the National Lottery Act, 2005 unconstitutional and proceeded to nullify the Act.

It is our considered view that this decision reflects the appropriate interpretation of the Constitution and the learned Justices of the Supreme Court must be commended for the sound decision.

Previous Nigerian judicial decisions on the subject matter

Before the recent Supreme Court decision under review, there have been a couple of decisions of other subordinate courts in Nigeria on the issue. In the case of Nigeria Employers’ Consultative Association (NECA) & Anor v A. G. Federation,17 the Court of Appeal (an intermediate court in Nigeria) held that the National Assembly has the legislative power to legislate on matters pertaining to lottery under Section 4 of the Constitution and under Item 62, 67 and 68 of the Exclusive Legislative List. In this case, the Court of Appeal held that there is no delimitation of the National Assembly’s power to enact laws on lottery matters neither is there a conferment of exclusive legislative powers on the House of Assembly of a state concerning lottery matters. The Court of Appeal further held that the National Assembly’s legislative power is vast enough to enact the National Lottery Act of 2005.

In Association of Bookmakers v The National Lottery Regulatory Commission & Ors,18 the Federal High Court (a court of first instance in Nigeria) held that lottery is within the Exclusive Legislative List in the Second Schedule to the Constitution. The Court further held that the Lagos State Lotteries Board, being the third defendant in the suit, cannot regulate betting business in Lagos state via section 9 of the Lagos State Lotteries (Amendment) Law, 2008. The Federal High Court, relying on the case of Agbakoba v A. G Federation & Ors19 held that the National Assembly can legislate on items set out in the Exclusive Legislative List to the exclusion of the House of Assembly of a state.

It is important to note that while the former decision held that the National Assembly’s legislative power can be interpreted to include lottery, in the light of section 4 of the Constitution, the latter pronounced that lottery matters fall within the ambit of the Exclusive Legislative List, particularly Items 62, 67 and 68, which consequently makes the National Assembly the sole authority to legislate on lottery matters. Item 62 concerns trade and commerce while Items 67 and 68 are panoramic powers of the National Assembly. Further findings will be discussed as lottery being classified as part of trade and commerce.

Regulation of lottery and gaming in Nigeria prior to the supreme court decision

Prior to the recent Supreme Court decision, lottery and gaming companies were subjected to dual licensing and regulations. By this we mean that they had to obtain licenses from the National Lottery Regulatory Commission then obtain another license from the state lottery regulatory body of each state they seek to operate in. This multiplicity of licensing and regulations placed a heavy financial burden on lottery and gaming companies because the licenses did not come cheap and they were subject to periodic renewals. Beyond the issue of financial burden was the challenge of meeting multiple regulatory compliances required by both the federal and state regulators.

Implication of the Supreme Court decision Nullifying the National Lottery Act, 2005

1. Exclusive state regulation of lottery: State Houses of Assembly now have full and exclusive authority to legislate on lottery matters within their states. This means that, for states that already have their own state lottery regulations,20 the state regulator has full power and regulatory ambit over all lottery matters (including licensing, etc.) within such state.
2. Implied nullification of existing licenses issued by the NLRC: Although the Supreme Court did not explicitly address the status of existing licenses issued by the NLRC, it can be inferred that, with the invalidation of the National Lottery Act, these licenses are now null and void, as the power of the NLRC to issue those licenses stemmed from the National Lottery Act. Consequently, lottery/gaming operators who solely held NLRC licenses21 would need to obtain licenses from individual states with established regulatory frameworks, as they would likely now need separate licenses for each state where they operate, rather than relying on a single national license.
3. Uncertainty on the regulation of online gaming: The regulation of online gaming and the potential inter-state jurisdictional conflicts they may create remains unresolved. It is not currently clear whether a single state lottery license would permit an operator to offer online gaming/lottery markets to customers residing in other states outside the territory of the license issuing state.This area is likely to be subject to further regulatory or judicial pronouncements, as online gaming, accessible across state borders, is extremely prevalent and presents unique challenges that may lead to additional legal disputes and regulatory complexities.Additionally, it would be difficult for the other state regulators to restrict the online gaming operator from offering their markets to their residents, especially since individual states in Nigeria do not regulate access to the internet.
4. Current status of the NLRC: The status of the National Lottery RegulatoryCommission (the “NLRC”), in the light of the Court’s decision, remains unclear. A school of thought posits that it would now automatically operate as a domestic lottery regulator for the Federal Capital Territory(the “FCT”). This view is premised on the fact that the National Assembly serves as the domestic law making body for the FCT.22Thus, the National Lottery Act will now be deemed to be domestic legislation for theFCT. Another school of thought posits thatthe NLRC has been rendered defunct, as the nullification of the National Lottery Act(NLA) invalidates the NLRC, which was established under and derived its authority from the NLA. Consequently, the NLRC no longer has the legislative authority to issue national or domestic licenses to lottery operators or regulate lottery activities across the federation, including the FCT. This position is premised on the argument that the now-nullified NLA, enacted in 2005 by the National Assembly, was intended to function as a federal law across all states of the federation and did not contemplate any limitation only to the FCT. According to the proponents of this school of thought, following the decision of the apex court, until such a new law is enacted, lottery in the FCT is unregulated.
5. Status of states without domestic lottery law, regulation or regulator: While some states already have laws regulating lottery activities, the nullification of the NLA creates a legislative gap in other states. Lottery activities in states without established regulatory frameworks will lack oversight until relevant laws are enacted by their respective State Houses of Assembly.
   

   Conclusion

   The legality of any law is relational to its conformity to the provisions of the Constitution. There has been controversy over the issue of exclusive powers to legislate on lottery matters. This has been resolved by the Supreme Court’s decision. The Court’s decision is the current position of the law with regard to the regulation of lottery in Nigeria. This position of the law can only change through a constitutional amendment. This can be said to be the appropriate interpretation of the Constitution. It remains to be seen how lottery and gaming operators that operate in multiple states in Nigeria will adapt to the current regulatory framework. This may require some form of restructuring of their operations.