By Pooja Tidke
The online gaming industry has rapidly expanded, significantly contributing to India Inc’s growth. According to a report by Lumikai, the industry holds immense potential, with an estimated revenue of $3.10 billion in FY23 and a 19% growth rate in the past year. Projections indicate a continued upward trajectory, with a CAGR of 20% expected from 2023 to 2028. This consistent growth is fuelled by 568 million gamers engaging with various gaming formats in India.
As a next step, the industry awaits the implementation of the proposed regulatory framework with the appointment of a self-regulatory body (SRB) to differentiate permissible online real-money games from betting and gambling platforms. Having a robust regulatory system will benefit all key stakeholders in significant ways.
History is replete with examples of how regulation becomes crucial to curb predatory practices, prevent addiction, safeguard minors against inappropriate content, address false advertising, and establish effective grievance redressal mechanisms. Further, unregulated online gaming poses threats to national interests by allowing illegitimate entities to circumvent Indian laws, leading to tax leakage, potential money laundering, and the offering of illegal gambling services.
Regulation is essential to create a precise signalling mechanism and deter illicit activities under the guise of online gaming. It is also important to note that a regulated environment provides predictability in regulatory and taxation obligations, fostering investor confidence and encouraging potential investment.
Furthermore, recent developments, such as the Enforcement Directorate’s investigation into the ‘Mahadev’ online gaming application, underscore the urgency of regulatory oversight to tackle potential money laundering and illicit activities within the gaming sector, especially the illegal platforms, reinforcing the need to safeguard public interest through comprehensive regulations. Additionally, the issue of children’s addiction to video games and online games has also been raised by various public interest groups.
While the industry awaits a regulatory framework, a government oversight body or committee can play a crucial role in addition to the SRB proposed by MeitY. The committee, with representatives from key ministries and technical experts, can enhance the model’s effectiveness. This oversight committee could approve the SRBs’ frameworks for online real money games, ensuring uniformity in verification processes, publishing and modifying a standard code of conduct for online gaming SRBs, and setting ethical standards for the industry. The oversight committee can also review the SRBs’ decisions, offering a layer of scrutiny and transparency, approve, reject, or modify the SRBs’ decisions, imposing conditions or prescribing financial penalties against non-compliant gaming intermediaries. Further, it could be empowered to de-recognise SRBs and recommend blocking specific online real money games.
The success of self-regulatory models in diverse sectors across India, such as media, broadcasting, edtech, and finance, emphasises their effectiveness in ensuring responsible industry growth. Recent legal developments in the online gaming sector, exemplified by landmark cases, further highlight the significance of self-regulation. For instance, All India Gaming Federation. The Madras High Court struck down provisions of the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022, deeming the prohibition of rummy and poker as unconstitutional. The court emphasised that these games involve skill and should not be prohibited, aligning with the broader legal stance recognising the distinction between games of skill and chance.
Therefore, it would be appropriate to state that the legal landscape surrounding online gaming reflects a maturation of the industry, with courts acknowledging the importance of distinguishing between games of skill and games of chance. Inspired by successful self-regulation in other sectors, the proposed three-tier regulatory framework positions the online gaming industry for responsible and sustained growth. It resonates with the evolving digital dynamics and signifies a delicate equilibrium between economic growth, industry progress and societal interests.
The writer is senior partner, Parinam Law Associates
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