Context: An inter-ministerial task force, set up by the Ministry of Electronics and Information Technology (MeitY) to propose legislation to regulate online gaming, has proposed 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.
The online gaming market in India:
e-Sports: These are video games that were played privately or on consoles in video game stores in the 1990s, but are currently played online in a structured manner between professional players, either individually or in teams.
Fantasy sports: These are games in which the player selects a team of real sports players from several teams and earns points based on how well the players perform in real life. For example,
Online casual games:
These could be skill-based, where the outcome is heavily impacted by mental or physical skill or chance-based, where the outcome is heavily influenced by some randomized activity, such as rolling a die.
A game of chance may be considered as gambling if players bet money or anything of monetary value.
Size of online gaming market in India:
The Indian mobile gaming industry’s revenue is predicted to exceed $1.5 billion in 2022 and reach $5 billion by 2025.
Between 2017 and 2020, the industry in India increased at a compound annual growth rate (CAGR) of 38%, compared to 8% in China and 10% in the US.
According to a FICCI report, transaction-based games revenue increased by 26% in India, while the number of paying players increased from 80 million in 2020 to 95 million in 2021 (by 17%).
Need for a central law to regulate online gaming:
Lack of regulatory oversight:
Online gaming exists in a regulatory grey area and there is no comprehensive legislation with respect to its legality or its boundaries.
Also, there is currently no regulatory framework to govern various aspects of online gaming companies such as –
Having a grievance redressal mechanism, Protection of data and intellectual property rights, and prohibiting misleading advertisements.
Online gaming is a state subject (Under Entry 34, List II ‘Gambling’ and ‘Betting’):
However, state governments have stated that it is extremely difficult for them to implement some restrictions, such as geo-blocking specific apps or websites within their state’s borders.
Societal concerns: A number of reported incidences of persons losing big amounts of money on online games, resulting to suicides in various parts of the country.
Recommendations of the task force:
Nodal ministry to regulate online gaming:
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.
The Consumer Affairs Ministry can regulate the sector for unfair trade practices.
A central-level law for online gaming:
This should apply to both real money and free games of skill, such as e-sports, online fantasy sports contests, card games, etc.
Casual games with no real money element in the form of stakes may be exempt from such rules unless they have a large number of users in India.
Creating a regulatory body for the online gaming industry:
This body will establish what constitutes a game of skill or chance, and will certify various gaming forms, as well as pursue compliance and enforcement.
Establishing a three-tier dispute resolution mechanism:
This will be similar to that prescribed under the Information Technology (IT) Rules, 2021 for online streaming services.
Bringing online gaming platforms under the scope of the Prevention of Money Laundering Act, 2002:
These platforms will also be treated as ‘reporting entities’ under the Act of 2002, and will be required to report suspicious transactions to the Financial Intelligence Unit-India.
This means that any online gaming platform (domestic or foreign) offering real money online games to Indian users will need to be a legal entity incorporated under Indian law.
Betting apps can be included under the proposed Digital India Law:
Many offshore betting and gambling websites which are illegal in India have become popular among Indian users, as they allow users to transact in Indian rupees through internet banking, UPI, and popular wallets.
Despite being based outside India, some of these websites are widely advertised in Indian media.
On the aspect of prohibiting games of chance (gambling websites or apps), the proposed Digital India Act (which would replace the IT Act) can include it in the list of prohibited user harms that will not be permitted.
