Regulation of the Online Gaming Market in India


    In Context

    • A task force set up by the Ministry of Electronics and Information Technology (MeitY) has prepared a final report of its recommendations to regulate the online gaming industry in India. 

    More about the news

    • The task force, set up by MeitY included: 
      • The CEO of government think tank Niti Aayog, and 
      • Secretaries of ministries including IT, Home, Finance, Information and Broadcasting, and Consumer Affairs, among others.
    • The task force has suggested:
      • The creation of a central regulatory body for the sector, clearly defining what games of skill and chance are, and 
      • Bringing online gaming under the purview of the Prevention of Money Laundering Act, 2002.

    Task force proposals:

    • A central-level law:
      • A central-level law for online gaming should apply to real money and free games of skill, including e-sports, online fantasy sports contests, and card games among others. 
      • Casual games with no real money element in the form of stakes may be kept outside the scope of such rules. 
        • Unless they have a high number of users in India, or permit the publication or transmission of information in the nature of any inappropriate content like violence, nudity, addictive content or misleading content.
    • Formation of a regulatory body:
      • It has also recommended creating a regulatory body for the online gaming industry.
      • This body will determine what qualifies as a game of skill or chance, and accordingly certify different gaming formats, seek compliance and enforcement.
    • Dispute resolution mechanism:
      • A three-tier dispute resolution mechanism, similar to that prescribed under the Information Technology Rules, 2021 for online streaming services, consisting of: 
        • A grievance redressal system at the gaming platform level, 
        • Self regulatory body of the industry, and 
        • An oversight committee led by the government.
    • Online gaming platform as a legal entity:
      • Any online gaming platform – domestic or foreignoffering real money online games to Indian users will need to be a legal entity incorporated under Indian law. 
      • These platforms will also be treated as ‘reporting entities’ under the Prevention of Money Laundering Act, 2002.
      • They will be required to report suspicious transactions to the Financial Intelligence Unit-India.
    • Ministries:
      • The task force has suggested that MeitY may act as the nodal ministry to regulate online gaming, except for the e-sports category on which the Department of Sports can take the lead
      • Certain other aspects of online gaming such as advertisements, code of ethics relating to content classifications etc. could be regulated by the Information and Broadcasting Ministry.
      • The Consumer Affairs Ministry can regulate the sector for unfair trade practices.

    Online Gaming in India 

    • The country is the biggest market for fantasy sports globally, with over 13 crore users playing across over 200 platforms.
    • The government noted that the number of people involved in playing online rummy are on rise.
    • India mainly puts the games into two broad categories to differentiate them. 
      • The two categories are that the game is either a Game of Chance or a Game of Skill.
      • Game of chance (Gambling): Games of chance are all those games that are played randomly. These games are based on luck. A person can play these games without prior knowledge or understanding. For instance, dice games, picking a number, etc. Such games are considered illegal in India.
      • Game of skill (Gaming): Games of skill are all those games that are played based on a person’s prior knowledge or experience of the game. A person will require skills such as analytical decision-making, logical thinking, capability, etc. Some games might also require some initial training to win. Such games are considered legal by most of the Indian states.

    How big is the online gaming market in India?

    • Revenue of the industry:
      • The revenue of the Indian mobile gaming industry is expected to exceed $1.5 billion in 2022, and is estimated to reach $5 billion in 2025. 
      • Transaction-based games:
        • According to a report by EY and FICCI, transaction-based games’ revenues grew 26% in India, with the number of paying gamers increasing by 17% from 80 million in 2020 to 95 million in 2021.
    • Growth potential:
      • The industry in the country grew at a CAGR of 38% between 2017-2020, as opposed to 8% in China and 10% in the US. 
      • It is expected to grow at a CAGR of 15% to reach Rs 153 billion in revenue by 2024. 
    • User growth:
      • India’s percentage of new paying users (NPUs) in gaming has been the fastest growing in the world for two consecutive years, at 40% in 2020 and reaching 50% in 2021.

    Significance of a central-level law

    • State subject:
      • Online gaming so far has been a state subject, but state governments have said they find it extremely difficult to enforce certain rules like geo-blocking certain apps or websites within the territory of their state. 
      • Also, there is a concern that rules passed in one state are not applicable in another, which has caused inconsistency in how the online gaming industry is regulated in the country. 
    • Blocking orders:
      • State governments also do not have enough blocking powers like the Centre to issue blocking orders for offshore betting sites.
    • Societal concerns:
      • Stakeholders have highlighted a number of societal concerns that can arise from the proliferation of online games in the country
      • There have been a number of reported incidents of people losing large sums of money on online games, leading to suicides in various parts of the country. 
    • Absence of framework:
      • There is currently no regulatory framework to govern various aspects of online gaming companies such as 
        • Having a grievance redressal mechanism, 
        • Implementing player protection measures, 
        • Protection of data and intellectual property rights, and 
        • Prohibiting misleading advertisements.

    Way Forward

    • Licensing and Regulation:
      • Regulation of online games may be a better and proportionate solution rather than an outright ban.
      • One could look at licensing and regulating the industry with various checks and balances such as,
        • diligent KYC and anti-money laundering processes
        • barring minors from accessing real money games, 
        • placing weekly or monthly limits on the money that can be staked or time that can be spent, 
        • counselling for addictive players and allowing self-exclusion of such players etc.
    • Realising the potential of the online gaming sector, the State and the Union Governments should work together in consultation with industry stakeholders to draw out detailed guidelines.

    Source: IE