Online gaming

Why India’s Online Gambling Industry Desperately Needs Regulatory Architecture

India is one of the biggest markets in the world for online games. There are nearly 433 million online gaming app users and growing rapidly. Nearly half of them are in the 15-64 age group. During the pandemic, the use of these applications has increased by 65%. According to Sensor Tower Research, India had the highest number of game downloads in the world with 761 million. India’s tremendous boom is driven by a growing young population, exploding mobile and tablet volumes, cheap data and new genres of games offering never-before-seen thrills.

HYDERABAD, 20/07/2011: A view of the new range of high-end mobile phone games after it was unveiled on July 20, 2011 during a press conference in Hyderabad.  The phone game is developed by Hyderabad-based 7-seas Entertainment Limited, India's only independent IP game development company that focuses on the development of PC games, mobile games, console games and online games. line.  Mobile gaming is the fastest growing segment for gaming and with more smart phones flooding the market of 800 million mobile subscribers and expecting to reap Rs 17.1 billion in revenue by 2015 in the country.  Photo: Mohamed Youssouf

HYDERABAD, 20/07/2011: A view of the new range of high-end mobile phone games after it was unveiled on July 20, 2011 during a press conference in Hyderabad. The phone game is developed by Hyderabad-based 7-seas Entertainment Limited, India’s only independent IP game development company that focuses on the development of PC games, mobile games, console games and online games. line. Mobile gaming is the fastest growing segment for gaming and with more smart phones flooding the market of 800 million mobile subscribers and expecting to reap Rs 17.1 billion in revenue by 2015 in the country. Photo: Mohammed Yousuf | Photo credit: MOHAMMED YOUSUF

In the 2022 budget, the Minister of Finance announced the creation of a task force to promote the animation, visual effects, games and comics (AVGC) sector. Currently, India holds 10% of the global AVGC market and is expected to reach 25% by 2027. With India’s leadership in AVGC, 3D designs, AI, VR/AR, blockchain technology, cloud technology, etc. catapult the country into the top three in the world.

According to a report by KPMG, India’s online gaming industry was worth Rs 13,600 crore in FY 2020-21 and is expected to reach Rs 29,000 crore by FY 2025. According to another BCG-Sequoia report , it is expected to reach $5 billion by 2025. Microsoft’s acquisition of video game company Activision Blizzard for a whopping $69 billion reaffirms the enormous potential of the sector and opens up the prospect of a large bazaar for Indian developers.

Mobile games, flat style design vector illustration.  Hands holding smartphone with space video game ui design and game controller. Mobile game app concept.

Mobile games, flat style design vector illustration. Hands holding smartphone with space video game ui design and game controller. Mobile game app concept. | Photo credit: Siberian Art

Online games are often confused with gambling. Games of chance must be distinguished from games of skill and e-sports. Electronic sports, short for electronic sports, is a form of competition using video games, for which there are organized multi-layered video games and the International Electronic Sports Federation. The original Public Gambling Act 1867 expressly prohibited owning or operating a gambling house or even participating. However, purely skill-based games were not prohibited.

Several court decisions have confirmed the validity of games of skill. The Supreme Court of RMD Chamarbaugwala & Anr v Indian Union (1957 AIR 628, 1957 SCR 930),held that the offering of games of skill is a protected activity under Article 19 (1) (g) of the Constitution, i.e. the freedom to practice any profession or to practice any profession, trade or business. However, states have the power to legislate “betting and gambling”, therefore, there is diversity between states. While many North Eastern states and Goa have taken a liberal approach, Telangana, Andhra Pradesh, Kerala and Karnataka have sought to restrict even games of skill, although the High Courts of Karnataka, Tamil Nadu and Kerala have reversed these amendments to laws prohibiting online skills. Game.

In D Siluvai Venance vs Inspector of Police, the Madras High Court focused on a regulatory framework for online gambling. In the case of Dr. KR Lakshman v. State of Tamil Nadu, it was held that when: (a) the predominance of skill test is applied as stated in to validate the nature of the game; (b) where skill was the predominant factor, the activity would be protected by Section 19(1)(g) of the Constitution as a permitted commercial activity. In Avinash Mehrotra v. State of Rajasthan, the Supreme Court ruled in July 2021 that Dream11 is a game of skill. In Junglee Games India Private Limited v. Tamil Nadu State High Court ruled that the blanket ban on online gambling, both skill and non-skills, under the Tamil Nadu Gambling Act 2021 was ultra vires the Constitution. Some time ago, the High Court of Karnataka ( https://bit.ly/366p3Nz) struck down the state law banning online gambling, “calling it unconstitutional.”

The biggest problem is that the industry suffers from a lack of regulatory ecosystem, with blurred jurisdictions between the center and the states, leading to confusion and loss of revenue for both.

There is an urgent need to properly regulate this industry, in terms of court rulings and global practices. A private member’s bill, the Online Gambling (Regulation) Bill 2022, sought to resolve the legislative inconsistency in online gambling. The Bill, recently introduced in Parliament, aims to create a centralized quasi-judicial body to grant, suspend and revoke licenses to gambling operators. However, it is difficult to predict its outcome.

There is an opinion that gaming companies could adopt self-regulation and proactively educate users on how to avoid cheating and abuse. Each game can follow a well-established age rating mechanism and minors are not allowed or allowed only with parental consent, entry with KYC, OTP verification on Aadhaar. No in-game purchases are allowed without adult consent and the in-game chat option is disabled. Although self-regulation is undoubtedly a good idea, to enshrine greater regulatory acceptability, it would be advisable at this stage to entrust the regulation of online gambling to a nodal ministry, rather than to a self-regulatory body, otherwise it might not inspire trust and credibility. .

Online gaming and esports are a booming industry, in urgent need of regulatory architecture, and can contribute significantly to new job creation and export, increasing the quest for India for a $5 trillion economy.

The author is former Chairman of the Competition Commission of India and Executive Director for India at the World Bank.

Published on

July 05, 2022