Online gaming is growing at great speed but regulatory uncertainty is hurting its prospects
By Sameer Barde
Thanks to the Internet, a number of our daily activities have increasingly become online. These include banking, education, grocery shopping and office work (especially in the context of work-from-home), amongst others. Gaming too has gone online.
Online gaming is a growing business. Consider this: The online gaming industry is expected to grow at a compound annual growth rate (CAGR) of 40 percent to $2.8 billion by 2022, up from $1.1 billion in 2019, according to a Deloitte India report. The industry employs over 70,000 highly qualified technologists, as well as design, and product development resources, with many more indirectly dependent on the industry. In the mobile gaming space, India is one of the top five markets in the world, with a 13% share of global game sessions. It is expected to add 40 million online gamers during this year alone.
Regulatory Headwinds; perception
Unfortunately a perception has crept in where online skill gaming is confused, at times, to be a sort of gambling. This resulted in legislation by a few states leading to banning online skill games, including chess, carrom, fantasy, poker, rummy etc. Recently the High Courts of Tamil Nadu and Kerala have taken a different view and overturned these bans reiterating that games of skill are legal and can be played for stakes and are protected under section 19 of the Constitution..
Online skill gaming has an estimated 200 million players, of whom 60-80 million play rummy. In India, the industry is generating over Rs 1,500 crores in Goods and Services Tax (GST) every year, and has the potential to generate over Rs 10,000 crores in GST by 2025. The sector’s rapid growth is expected to boost the total media and entertainment industry by four percent to five percent.
This potential for growth has seen several marquee investors investing in the gaming industry in India including Sequoia, Tiger Global, among others, leading to unicorns like Dream 11, MPL and PlayGames24x7.
However, for all this to become reality, it is necessary to address the perception and uncertainty surrounding the industry. Towards this end, I feel that there needs to be a common gaming regulation that will address concerns for all stakeholders. The player experience needs to be safe, fair and enable responsible gaming. The government must be in a place to ensure that operators follow the law of the land and fly by night operators do not operate and finally the industry itself can flourish and grow in a sustainable fashion.
The Supreme Court of India looks at distinguishing between games of skill (fantasy, rummy, carrom, chess, poker etc) and games on chance (teen patti, flush, dice etc.) on the basis of the preponderance of the players’ skill in the final outcome of the game. Gaming being a state subject, each state can allow only games of skill or both games of skill and chance. However, given multiple positive judgements both at the High Courts as well as in the Supreme Court it is clear that Games of Skill are legal and are protected under the constitution.
Globally, gaming is a fairly well-regulated space. Many countries including the UK, US, EU, have regulations in place to ensure that players can enjoy this form of entertainment responsibly. Given the size of the Indian gaming industry and the future potential, we believe that the best and only way ahead is to make clear and stringent regulations. Regulations will ensure player safety, disallow nefarious operators from taking undue advantage of players, provide the government with much needed revenues, provide employment and lead to India becoming one of the leaders in this space. Regulations would allow the government to mandate operators to have features like mandatory KYC, SSL level encryption, RNG certification, responsible gaming features like daily and monthly limits , self-exclusion as well as restrictions on the type of advertisements done, among others.
Given the complexity, it might make sense to set up a committee at the centre with stakeholders from all relevant departments (IT, IB, Sports, Home, Finance ), a few states and representatives from the industry and consumer bodies. The committee can then recommend the way forward for regulations leading to stability and growth.
The author is CEO of The Online Rummy Federation (TORF). Views expressed are personal.