Report Recommends Government Intervention in Online Gaming Sector

A new report drawn up by an inter-ministerial panel formed by Prime Minister Narendra Modi’s cabinet recommends an intervention by the Central Government in India’s online gaming sector providing extensive regulation and strict classification of games and gaming websites.

The report also suggests establishing a central regulatory authority mandated to monitor the functioning of the online gaming sector and classify games and gaming formats along the skill vs chance distinction. For the time until the new regulatory body and framework are ready, the panel proposes rules under the existing IT law to serve as an “interim measure”.

The recommendations issued by the inter-ministerial panel come as a follow-up to a meeting held by the Minister of State for Electronics and Information Technology Rajeev Chandrasekhar on the 7th of June this year.

Among the attendees in the meeting were more than 25 stakeholders such as founders of online gaming platforms, including some of the sector’s largest companies like Dream Sports, Mobile Premier League (MPL), and Nazara Technologies, as well as representatives of gaming federations, officials from various ministries and lawyers.

According to the panel’s proposal, the new legislation will not apply to playing online roulette in India and to other games of chance and gambling as these will remain a state matter, but will be applicable to online fantasy sports, esports, games of cards and other casual games and game formats that conform to the requirements for classification as games of skill which will be outlined by the new law.

All Indian gaming companies and all foreign platforms offering real money games to desi players will have to follow the new rules. Offshore operators will be required to register a legal entity under Indian law and the national government will be vested with powers to block access to gaming sites that have failed to register.

The proposal also includes a “Code of Ethics” to be followed by publishers of games requiring them to adhere strictly to the country’s KYC (Know-Your-Customer) norms and to provide a sturdy grievance redressal mechanism for customers. A three-tier system for the resolution of disputes and an oversight committee under an appropriate ministry will also be set up.

Stable and Predictable Business Climate, but Only Partial Player Protection

The proposed updates to Indian central legislation related to online gaming might be able to ensure a stable, predictable and healthy business climate for the burgeoning homegrown industry and any foreign game providers that decide to join and register, but will be far from solving the issue of player protection.

Instead of a full-scale regulation over all gaming, gambling and betting activities, the inter-ministerial panel has recommended a framework that covers only games of skill and leaves games of chance outside its scope in a grey, uncharted and unregulated area.

Blocking unregistered gambling and online cricket betting platforms could lower the competition faced by India’s gaming unicorns and smaller businesses in the sector, but instead of channelling gambling and betting activities and money flows away from the black market, the recommended approach is likely to increase the scale of illegal operations by cutting out online options.

Studies have shown an enormous gap between the size of India’s total gambling and betting market estimated at $130 billion (₹9.5 lakh crore) and the online gaming market assessed at $2.8 billion (₹22,500 crore), a gap predominantly filled by the black market.

The panel composed of some of PM Modi’s top officials was formed with the task to study the global best practices in gaming regulation and propose a uniform regulatory regime that would ensure ease of doing business and protection of gamers from harms such as addictions.

While modern-day gaming regulations around the world focus on player protection, responsible gaming and safety nets, Indian politicians have again directed their efforts at closing their eyes to reality and to the enormous existing gambling and betting black market in the country.

Protecting the homegrown online gaming business from the offshore competition and ensuring it thrives in a stable and predictable business climate, and at the same time requiring it to follow strict rules, would be a commendable achievement of the government, but stigmatizing crores of Indian gamblers and bettors and leaving them at the mercy of the illegal market and its dubious debt collection methods cannot be acclaimed.