By Avik Sarkar
In an interesting turn of events, an illegal online gambling and betting platform has become the centerpiece of a state election campaign. According to a Lumikai report, 507 million Indian citizens are exposed to online gaming platforms as of 2022, and maybe a higher number to illegal online gambling/ betting platforms.
However, there is no mechanism to inform Indians about the difference between the two and enforcement is often lacking in the absence of a dedicated regulatory body. More often than not legitimate gaming platforms are confused with illegal gambling/ betting platforms. 100’s of illegal platforms operate in India and have become a threat to national security due to the opaque financial transactions involved.
At the same time, the legitimate online gaming industry is making great strides in contributing to India’s digital economy. India’s digital economy is growing rapidly, and the online gaming sector with an expected growth at a 30% CAGR, has been a key contributor towards the Digital India Initiative. The Indian gaming market size is expected to grow from USD 2.6 billion in 2022 to USD 8.6 billion by 2027. The growth of the online gaming industry has led to the emergence of numerous gaming startups, developers and service providers. This has created new employment opportunities for over 50,000 individuals in the field of game development, design, marketing and customer support, etc. It is anticipated that the sector will create an additional 1.6 to 4 lakh job opportunities over the next two to three years.
Taking due cognizance of the potential of the industry, the Indian government appointed the Ministry of Electronics and Information Technology (MeitY) as the nodal ministry to regulate the online gaming industry. It also introduced rules to ensure that the industry continues to grow in a responsible and sustainable manner. MeitY’s IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 aimed to bolster user safety while also providing the required impetus to the online gaming industry through light-touch regulations. The rules proposed the creation of self-regulatory bodies (SRBs) to differentiate gaming from betting and gambling. However, the Government is yet to notify SRBs.
Due to a lack of comprehensive regulatory oversight, the gaming industry and its users have been exposed to a slew of threats. Since there are no SRBs to verify a particular platform as a “permissible online game” there are multiple illegal betting and gambling apps/websites masquerading as legitimate gaming platforms. Scammers have been setting up fake gaming websites to deceive players into believing they are accessing legitimate platforms. These fraudulent websites may mimic the design, interface, and even the URL of popular gaming sites and gamers unknowingly end up providing their personal and financial information, allowing fraudsters to exploit them. The nexus caused by these applications has caught many vulnerable players while making a significant dent in the state coffers.According to a Think Change Forum report, India is losing Rs 2,29,600 crore per annum due to such apps.
Interestingly, the Mahadev app is just one of the applications in the ecosystem, there are many others still operating in the garb of legal platforms duping vulnerable players every day. In May this year, the Enforcement Directorate carried out raids across 5 states in relation to violations of the Foreign Exchange Management Act (FEMA). It was found that offshore platforms registered out of countries like Cyprus, Malta and Curacao were pretending to be legitimate online gaming operators. In another instance, in August, the Gujarat police unearthed a major scam in which 1200 people were duped of nearly Rs. 1,400 crores. In this case, an illegitimate gaming platform “Dani Data”, had lured users with high returns and after the users deposited the money, the app became non-functional after a nine-day period.
As India charts its course to be a digital powerhouse, it’s crucial to formulate a digital framework that builds a safe ecosystem for users. The Indian government has spoken about creating an Open, Safe & Trusted and Accountable (OSTA) internet for the digital nagriks. The pillar has also been enshrined in the much-awaited Digital India Act. But the need of the hour is to build a Safe Gaming ecosystem, where players understand the legitimacy of entities while engaging with them. The recent IT amendments empowered the SRBs to create a user safe ecosystem but since the government has not finalised the SRBs the issue remains in limbo.
The immediate imperative for the government is the implementation of the IT rules for online gaming by establishing the SRBs with regulatory oversight, which is crucial for creating a safe gaming environment and eliminating illegal platforms. The regulations will help create a safer and more transparent gaming environment and ensure the industry’s contribution to the digital economy.
The author is visiting faculty at Indian School of Business (ISB)