Online gaming: India needs innovative approach to regulation

online gaming regulation
India must strike a balance between innovation, integrity, and responsible gaming to regulate its online gaming industry.

India finds itself at a critical juncture in the evolution of online gaming regulation. To emerge as a dominant player in this sunrise industry, the nation must set a clear and forward-looking course for governance. What is imperative is the formulation of a comprehensive strategy and a lucid vision for the industry’s future. India is witnessing an extraordinary shift from basic mobiles to smart devices. It has around 750 million smartphone users and the number is growing at an exponential rate with huge implications for the online gaming industry.

India is currently enjoying demographic dividend with a fourth of its population under the age of 15 and a substantial 65% under the age of 60. The young population presents a tremendous market opportunity for the gaming industry. The country has a tech savvy population and its policy environment is conducive to startups and innovation, particularly in the field of information technology.

India has already witnessed a transition from console gaming to mobile gaming which expanded the reach of gaming and fostered innovation by providing easy access to gaming platforms. It is worth noting that online gaming in India is currently regulated under the archaic Public Gambling Act of 1857, primarily when wagering or betting is involved.

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Global practices in online gaming regulation

India can draw from the regulatory trajectory of fantasy sports regulation in the United States. However, India’s unique demographic and legal context necessitates a tailored approach. In the US, the regulation of fantasy sports and sports betting was done by states. However, India’s unique legal and regulatory environment requires oversight by the Union government to ensure uniformity and consistency across the country.

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Denmark serves as an excellent model where a licence is mandated for all activities involving wagering on future outcomes. This approach brings much-needed transparency and accountability to the industry.

In the Indian context, this licensing regime should not only focus on revenue generation but also on maintaining the integrity of gaming activities. By introducing stringent licensing requirements, India can filter out illegitimate operators while fostering an environment conducive to innovation and competition.

Games of skill vs games of chance

India is experiencing a digital revolution, presenting huge growth opportunities to the gaming industry. By providing creators and developers with a well-regulated space to operate, India can tap into the growing global gaming market. This move aligns with the broader vision of economic growth and technological advancement.

The regulation of online gaming in India has been affected by the confusion between fantasy sports and sports betting. Despite both activities involve wagering on future outcomes, they differ significantly in terms of skill and chance.

India has imposed the 28% GST band on online gaming. This makes the differentiation of games of skill and games of chance imperative. In India, states have been entrusted with the regulation of online gaming, under the ambit of the Public Gambling Act of 1867. The evolving landscape of online gaming, technological advancements, internet accessibility, and smartphone penetration has necessitated an overhaul in the legal and regulatory framework.

The gaming industry in India is on the cusp of exponential growth, and regulatory clarity is the key to fostering a thriving ecosystem. Rather than resorting to prohibition, adopting a balanced and forward-looking approach is imperative.

India finds itself standing on the precipice of a transformative era for the online gaming industry. With its young population, tech-savvy youth, and ever-expanding smartphone user base, the country possesses the essential ingredients to become a global gaming powerhouse. However, to harness this potential fully, the country must embark on a regulatory journey that balances innovation, integrity, and responsible gaming.

By differentiating between games of skill and games of chance, and implementing a well-defined regulatory framework, India can not only propel its gaming industry to new heights but also establish itself as a beacon of innovation and responsible gaming on the global stage. The time has come for India to seize this opportunity and craft a vibrant future for its gaming ecosystem, one that resonates with its dynamic spirit and entrepreneurial zeal.

(This article is based on the findings of a policy paper, Untangling India’s Gaming Regulatory Web authored by Dr Sharma and Vidushpat Singhania.)

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Dr Aruna Sharma is a New Delhi-based development economist. She is a 1982-batch Indian Administrative Service officer. She retired as steel secretary in 2018.