Online gaming in India has reached its peak in recent years, more so in the last year as a result of the pandemic induced lockdowns.
Last week, the Karnataka government tabled a bill in the assembly that proposes to ban online gaming, including the games of skill. The bill is expected to be discussed in the Karnataka legislative assembly this week. Experts however believe a blanket ban on online gaming is not a solution as the sector can bring a lot of opportunities to drive the economy and create more jobs.
The comprehensive nature of ban on online games being proposed by the state of Karnataka through the amendment of the Karnataka Police Act of 1963 may fall short in a Court of Law opine experts. The proposed amendment states “games means and includes online games, involving all forms of wagering or betting, including in the form of tokens valued in terms of the money paid before or after the issue of it, or electronic means and virtual currency, electronic transfer of funds in connection with any game of chance.” However, experts believe that such a blanket ban will not hold in a Court of Law.
In the event that the bill is passed, impacted parties including Gaming companies, associations, investors, employees may move court seeking relief. Rahul Narayanan, a senior advocate practicing at the Supreme Court said, “An all pervasive ban usually does not stand the test of law. Further there are certain precedents and judicial orders in this particular instance where an appellate may have a compelling case.”
Confederation of All India Traders ( CAIT), the powerful trade body, that represents 8 crore traders and over 40,000 trade associations, said that a proposed bill in the Karnataka assembly to ban online gaming, will hurt the Indian startup sector, the Indian gaming and animation industry and millions of Indian gamers and e-sports players, such as Dream11, Nazara, MPL, Games24x7 and Paytm First Games. According to the data platform Tracxn, there are 623 gaming startups in India.
In a letter addressed to Basavaraj Bommai, the Chief Minister of Karnataka, the National Secretary General of CAIT, Praveen Khandelwal said: “Unfortunately, the Karnataka bill does not distinguish between a game of skill and a game of chance. Game of chance is pure gambling and should be rightfully banned. However, by including games of skill in the ambit of the bill, it has not only gone against established jurisprudence but threatens the thriving Indian gaming startup sector.
Khandelwal asserted, “Once the bill bans online skill gaming, law abiding Indian companies will exit the market and users will turn to harmful offshore and betting apps.”
CAIT also batted for a “strong and stable regulatory mechanism for online skill games” and requested the Karnataka government to relook at the bill, keeping in mind the interests of Indian companies and developers.
“The ban in Karnataka is disconcerting for this sunrise sector in India, particularly at a time when the higher judiciary has reiterated the difference between games of skill and games of chance. That Karnataka, which is a tech and start-up capital of India, should take such a step is all the more distressing because a lot of other states realize gaming’s potential and working on policies to attract investment from gaming companies- in view of the sector’s immense multiplier benefits”, said Dinker Vashisht, Vice President, Corporate Affairs, Games24x7, criticizing the Bill.
Earlier this year, the Government of Tamil Nadu had passed the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, amending the Tamil Nadu Gaming Act, 1930, prohibiting all forms of online gaming (games of skill and games of chance) in the state. This law removed the exemption usually accorded to games of skill from being penalized when played for wager, bet, money or other stakes. It was challenged in the Madras High Court on the grounds of being unconstitutional.
On August 3, 2021, the High Court struck down the amendment stating that by imposing a wide-ranging complete ban, the least intrusive test was violated, and the ban had thereby fallen foul of Article 19 (1) (g) of the Constitution.
“The Bill tabled in the Karnataka Assembly seeks to equate all games including online chess, online farming with the same brush as online gambling. The bill has made some exemptions including online betting on horse racing. I am not sure that application of a judicial mind will see any compelling rationale to this move,” said a senior corporate lawyer employed with a gaming company.
“The Government should consider regulation rather than legislation. The industry has submitted itself to the idea of regulation being brought in and already moved towards some steps of self-regulation. A comprehensive framework with active participation of the industry association is a prudent way forward,” added the lawyer.
Roland Landers, CEO, All India Gaming Federation states, “India is the fifth largest online gaming market globally and skill-based gaming, a sunrise sector, is giving birth to an increasing number of unicorns within the country, especially Karnataka. The sector has been a strong financial contributor to the Indian economy even during an unprecedented period of slowdown and is further expected to generate revenues in excess of $ 3 billion by 2025. The move by the Karnataka government is a setback to the state’s reputation of being a tech-hub and start-up capital.”
The Online Rummy Federation (TORF) also said, “There is an equal, if not a larger need, to regulate the broader skill gaming industry,” it said. The Supreme Court has consistently held that skill games are legitimate and constitutionally protected commercial activities that can be played or organized for gain and profit. India’s online skill gaming industry proposes standardized rules and regulations to attract foreign investments, create jobs, and eliminate unscrupulous operators to position India as the skill gaming hub of the world.
Online gaming is a budding industry in India that reached its peak in recent years, more so last year as a result of the pandemic induced lockdowns. Deloitte India, through its report released in January 2021 presented that the Indian gaming industry is expected to grow to $2.8 billion by 2022.
The global nature of online games and e-sports, alongside other online platforms in the post-pandemic world are here to stay. Hence, a blanket ban on online gaming is not an approach that can solve the problem, believe industry experts.
As Telangana declared it was among the states that banned online gaming but it is now working on a policy to allow players to operate in the state with safeguards. Needless to say then a greater clarity in regulation can only lead to a benefit and fair play for all including the players, developers and investors and one can hope that other states will follow suit.