The government has proposed lowering the threshold for foreign direct investment (FDI) in the casino sector and introducing regulatory reforms to better manage Nepal’s expanding gaming industry.

While these measures are intended to clarify the law and attract more global players, some operators warn that certain provisions in the proposed legislation could prove counter-productive.

In June 2018, the government drafted a stand-alone Casino Act for the first time to provide a clear legal framework for the sector and to facilitate the entry of international operators. This came in anticipation of a surge in demand, fuelled by a rapid increase in the construction of luxury hotels across the country.

However, this original plan has now been revised. Instead of a separate legislation, the proposed Casino Act is embedded in the newly tabled Integrated Tourism Bill in Parliament.

At present, the operation of casinos in Nepal is governed primarily by the Casino Regulation of 2013.

The past decade has seen a sharp increase in hotel infrastructure, with the number of five-star hotels rising from 10 to 26, including three five-star deluxe establishments. Four-star hotels have also grown significantly, with 41 in operation by the end of the last fiscal year. Until 2015, Nepal had only two four-star hotels—Hotel Himalaya and Hotel Shanker.

The proposed bill allows foreign investors to hold up to 49 percent equity in joint ventures, with the remainder reserved for domestic partners. This contrasts with the current regulation, which allows foreign investors to own up to 90 percent of a casino business.

While the existing regulation explicitly bars Nepali citizens from entering the casinos, the bill is silent on whether this restriction will continue, be modified, or removed altogether under the new legal framework.

This omission leaves a significant gap, raising questions over the government’s future stance on local people’s access to gambling establishments.

Meanwhile, the policy on the location of casinos has been inconsistent.

A Cabinet decision on June 27, 2019, amended the original Casino Regulations to allow casinos and electronic gaming houses to operate within 3 kilometres of Nepal’s international borders. This was a departure from the previous rule, which mandated a minimum distance of 5 kilometres from border points.

The new bill proposes reverting to the 5-kilometre restriction. However, it includes a grandfather clause allowing casinos already operating within a 3-kilometre radius to continue doing so if they were established before the new law comes into effect.

This inconsistency has frustrated hotel and casino operators.

Chandra Prakash Shrestha, president of the Siddhartha Hotel Association and owner of Nansc Hotel in Bhairahawa, described the shifting distance limits as senseless.

“The gaming industry is a major taxpayer and it should not be saddled with arbitrary location-based rules. Hotels near border areas were developed to cater to Indian and Bangladeshi tourists and there should not be restrictions in doing so,” Shrestha said.

Other operators allege that the frequent changes are driven by political agendas disguised as security concerns.

During the Visit Nepal Year 2020 campaign, the government had shown flexibility in allowing casinos to operate closer to the border to promote tourism. As multiple five-star hotels are under development at Nepal-India border points, investors have voiced concerns about the impact of shifting policies on their long-term plans.

The new bill has also eliminated two categories of gaming operations: electronic gaming houses in four-star hotels and light casinos in five-star properties.

Casinos are not licensed directly to hotels.

Potential casino operators must form a separate company and then come to an agreement with a hotel or resort. This company will then sign a lease with a four-star or five-star property to operate the casino. The Department of Tourism will grant a casino license only after reviewing the necessary documentation and hotel details.

In response to past financial defaults by casino operators, the bill introduces a provision requiring hotels and resorts to hold at least a 10 percent ownership stake in the casino.

According to Shrestha, this clause aims to ensure accountability from the host properties if the casino operators default on royalty payments or flee the country, a recurring problem in Nepal.

Data from the Office of the Auditor General reveals that the government collected Rs1.69 billion in royalties and Rs132.46 million from licence renewals in the last fiscal year. However, five casinos—three declared illegal—still owe the government Rs1.78 billion.

The bill prohibits the operation of casinos in areas with religious or cultural significance.

It also introduces a cap on the number of licences a single company can hold. Previously, one license allowed a company to run electronic gaming operations in up to 10 locations, but this was later reduced to four. Under the new rules, companies operating more than a casino under a single licence must scale down to one casino of their choice by mid-July 2025.

The legislation further stipulates that a casino licensed company may not transfer or lease the licence to another party. Licensed operators must maintain comprehensive records of all players.

Any individual or entity seeking to acquire more than 15 percent of shares in a licensed casino company, whether directly or indirectly, must get prior approval from the tourism authority.

If a licensed casino fails to meet specified infrastructure and security standards, it must comply within two years of the bill’s enactment. Failure to deposit customer taxes into the government revenue account will result in mandatory repayment. Unauthorised casino operation or law violations will lead to immediate closure and legal action.

All financial records, including player logs, share transactions, and operational data, must be maintained per regulatory standards to ensure transparency. Licences are valid until mid-July each fiscal year and must be renewed annually.

Under current regulations, to operate a casino business, an application with a fee of Rs1 million should be submitted to the Department of Tourism.

The company must pay Rs25 million for a casino licence and Rs10 million for a licence for electronic gaming (commonly known as mini casinos). The Financial Act for 2024-25 sets the annual royalty fee at Rs50 million for casinos and Rs15 million for electronic gaming.

The company must apply for renewal if a licence is not renewed within 60 days of its expiration. Failure to do so will result in automatic cancellation.

Moreover, if a hotel or resort intended for casino operations loses its four-star or higher classification, due to suspension, downgrade, or non-operation for over three consecutive months, its affiliated casino licence will not be renewed.

If a casino wishes to relocate to another eligible hotel, it must obtain approval from the tourism department.

Likewise, a licensed company may partner with a foreign investor for joint casino operations only with the department’s recommendation and Cabinet approval.

The proposed bill allows foreign investors to hold up to 49 percent equity in joint ventures. Companies already running casinos at the time of the law’s enactment must adjust their shareholding ratios within a year to comply with the new ownership limits.

Additionally, licensed casino operators must allocate at least 2 percent of their annual profits to social development initiatives, including tourism, education, health, sports, environmental protection, and worker welfare.

An equivalent amount must be deposited into the government treasury if this obligation is not met.