Earlier this week, the Karnataka High Court delivered a landmark judgment striking down major portions of the Karnataka Police (Amendment) Act, 2021 banning online gaming and called it 'unconstitutional'. Last year, the Madras High Court and Kerala High Court invalidated similar orders passed by the state governments banning online gaming in the state. Another milestone ruling was delivered in July 2021 when the apex court dismissed a Special Leave Petition and held that the online fantasy game involves skill and is not gambling.
On different occasions over the last 70 years, multiple positive judgements by High Courts as well as the Supreme Courts established Games of Skill as legal and protected under Article 19(1)(g) of the Indian Constitution. Through these judgements, various courts have held that games of skill cannot be regulated under Entry 34, i.e., gambling and betting.
While multiple states have banned online games in the past supposedly to protect consumers what is concerning is the efficacy of these bans. Instead of ensuring player protection, such restrictions favor unscrupulous fly-by-night operators and help illicit and underground gaming activities leading to detrimental impacts on the very population the government seeks to protect. A case in point is the Rs 1100 crore online gaming scam in Telangana which surfaced after it chose to ban skill gaming in 2017.
Because online gaming is a state subject, blanket bans simply serve to encourage uncontrolled illegal online gaming, inadvertently compounding the problem that state governments are attempting to address. Therefore, if states choose to regulate the sector, there must be a clear licensing regime and regulations that allow skill-based games, ensure that legal operators continue to operate while eliminating illegitimate operators.
A well-structured regulatory framework that addresses the needs of all stakeholders is essential. A gaming policy that protects players by enabling responsible gambling and ensuring safe and fair play, while also weeding out operators that break the law.
The online gaming industry is currently valued at about USD 1.8 billion. Although India forms just 1 percent of the global gaming market, it is growing at 38 percent, compared to 10 percent in the United States of America. Mobile gaming alone forms 86 percent of the gaming market in India and is expected to cross USD 5 billion by 2025. Home to three gaming unicorns among 400+ gaming companies, 15,000+ gaming developers, and around 420 million gamers, the Indian gaming industry shows massive potential.
While these numbers seem progressive, legal clarity under a central legislative system will provide compelling benefits to the sunrise sector in terms of job creation, revenue generation, and propelling India to the forefront of this sector. A well-crafted regulation will enable the government to impose KYC, SSL level encryption, RNG certification, risk-flagging mechanisms, daily and monthly restrictions, self-exclusion, and other measures to reduce the negative consequences of online gaming on consumers.
The time is opportune to look at global best practices and create a progressive law to ensure a sustainable and predictable operating environment for online gaming. The right support and regulatory clarity will help the promising industry thrive and prove advantageous for all stakeholders government, gamers as well the industry.
The article is authored by Sameer Barde, CEO of E-Gaming Federation. Views expressed are personal.
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