The government has proposed a framework aiming to ban games involving betting. Union minister of state for entrepreneurship, skill development, electronics, and technology Rajeev Chandrasekhar recently announced that the government is working to regulate online gaming in the country. The new rules have been added as an amendment to the IT Rules of 2021. Under these rules, games involving betting, those harmful to users, and those promoting addiction will be banned. Additionally, the rules prohibit online gaming intermediaries from hosting or allowing users to host unverified online games.
This is not the first attempt by the government to regulate this sunrise sector, recognising its significant potential. On April 6, the Ministry of Electronics and Information Technology (MeitY) released updated amendments to the IT rules, which included new guidelines and ethical standards for online gaming. These amendments mandated the establishment of Self-Regulation Organizations (SROs) to govern gaming applications and websites. The SROs are responsible for determining what forms of gaming, wagering, and gambling are permissible. With the rise of immersive games and gaming worlds on the internet, the opportunities for participating in wagering have become more prominent.
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Despite the new gaming rules announced by the Union government as well as the rulings of the Supreme Court and high courts, several states have enacted their own laws. For example, Tamil Nadu has banned legally permitted online skill gaming within the state, categorizing poker and rummy as games of chance. Andhra Pradesh, Odisha, and Telangana have also imposed restrictions in the past due to regulatory uncertainty surrounding online gaming.
Market size of Indian online gaming industry
The amendment has banned gaming companies that involve wagering and monetary rewards. However, this move has faced strong criticism from stakeholders who argue that it has a narrow focus on wagering games. Critics have also pointed out that an outright ban, under the pretext of user harm, will only encourage companies to exploit loopholes and continue providing access to games without altering their services or creating alternative forms of gambling that are currently unregulated.
The government should also consider platforms that involve gambling in addition to gaming apps. Platforms like Twitch, Discord, and others provide spaces for users of online gaming apps to discuss games, outcomes, and watch others stream their content. Since these platforms are used by different industries, such as podcasts, video content, and educational content, they cannot be classified solely as gaming apps. However, betting does occur on these platforms, and they currently operate outside the government’s oversight. These applications also fall outside the purview of the SROs, despite the more direct wagering on outcomes and the transfer of funds through direct wagering and online wallet gifting systems.
The regulation of online gaming is necessary due to the real risks of gambling associated with it. These games carry inherent risks of fraudulent transactions and user addiction. Another risk is the lack of user autonomy and agency, particularly in games of chance, where users cannot observe signs or decipher body language, which increases the likelihood of users losing. However, the current attempt by the government to regulate the sector is unlikely to succeed.
India is not the only country to ban gambling games, but a blanket ban has been proven ineffective, contrary to the expectations of countries that have previously banned them. It has been found that implementing taxation regulations on gambling earnings is more effective in reducing public participation, monetary investment, and fraudulent transfers.
India has also proposed a 30% tax on online gaming earnings. However, this focus is solely on regulating wagering games rather than all online gaming, leading analysts to believe that the government’s interest lies more in monetary growth in the gaming sector than in fulfilling its civil responsibility towards users.
Regulations should extend to aspects of gaming that are not solely based on monetary transactions and should include guidelines for ethical gameplay and consumer protection.
The online gaming industry is worried about the regulatory maze that makes it challenging for the sector to determine what is legal and what is not. Adding to the confusion created by the Union government’s laws, there are a series of state laws that further hinder the industry’s growth.
The online gaming market is a multi-billion-dollar industry worldwide, and in India, it experienced a significant boost during the coronavirus pandemic due to increased leisure time and improved internet accessibility. In the financial year (FY) 2021, the online gaming market in India generated revenue of $2 billion. It grew to approximately $2.6 billion in FY22, marking a 30% increase. The sector holds immense potential for Indian start-ups, provided they receive government support and regulation that guides them in the right direction.
In conclusion, the Indian government’s proposed framework to ban betting games and regulate online gaming reflects its recognition of the potential risks associated with such activities. However, the effectiveness of a blanket ban on certain games and the need for a comprehensive approach that encompasses ethical gameplay, consumer protection, and taxation regulations remain subjects of debate. Striking a balance between fostering growth in the online gaming industry and addressing concerns related to user harm and responsible gaming practices is crucial for ensuring a sustainable and thriving gaming ecosystem in India.