Highlights
SUMMARY
The Indian real money gaming sector contributed $2.4 billion to the online gaming industry in FY24. The regulations that vary by state lead to inconsistencies in game classifications. The existing division of legislative authority between the Central and State Governments presents significant constitutional challenges for those legislating within the gaming sector.
The online gaming landscape in India is experiencing remarkable growth, fuelled by technological advancements, affordable internet access, and the rising popularity of real-money gaming. To illustrate, in FY24, the Indian real money gaming sector added $2.4 billion to the online gaming market. However, the regulatory framework overseeing this flourishing industry remains fragmented, inconsistent, and outdated, which creates considerable barriers to sustainable growth. This situation has sparked a debate about whether the online gaming sector should operate under a unified central legislation instead of state-specific laws.
To explore this question, it is essential to first examine the development of gaming legislation in India.
Evolution Of Gaming Legislation In India
Historically, betting and gambling in India were governed by the Public Gambling Act of 1867, which was a central statute. Over the years, the Government of India Act of 1935 transferred this responsibility to provincial legislatures, enabling them to enact their own laws on the subject. Following the implementation of the Indian Constitution, this power was conferred upon the states, allowing them to regulate betting and gambling activities within their jurisdictions. As a result, each state now establishes its own rules and regulations concerning these activities.
Challenges With The Current Regulation
The varying legal frameworks across states related to betting and gambling present significant challenges in comprehending and monitoring each state’s stance. For instance, states like Nagaland and Sikkim offer clear licensing frameworks that allow operators to provide online gaming for stakes, while other states place such activities in a grey area, permitting them only with the approval of the respective high court or state authority.
- States such as Assam and Odisha offer no exceptions for games of skill.
- Additionally, Andhra Pradesh, Arunachal Pradesh, and Telangana prohibit operators from offering games of skill for stakes.
Another issue with state-specific regulations is the inconsistency in the classification of games. A game classified as skill-based in one state may be viewed as gambling in another. For example, Sikkim permits any type of game—whether skill-based or chance-based—provided the operator has the necessary license. Conversely, Andhra Pradesh bans all games involving stakes, irrespective of their classification.
State-level regulations related to “betting and gambling” also result in numerous costs for online gaming companies. Gaming operators require appropriate licenses from state governments (if allowed) and incur additional administrative and regulatory fees to ensure compliance with the laws of other states. This includes:
- Implementing geo-blocking features.
- Maintaining updated platform policies in line with legal requirements.
Furthermore, frequent amendments to state-specific laws can lead to unintentional violations of these statutes by both operators and users. These challenges often make it difficult for gaming companies to operate effectively. As a result, many gaming startups find themselves operating in a grey area to evade complex legal structures and high, cascading taxes.
Need For Unified Regulation
The advent of the internet has made the world more interconnected, and online gaming, which has the capacity to connect individuals globally, should not be confined by state borders. Thus, central regulations can address the ambiguities surrounding game classifications and establish clear criteria distinguishing between games of skill and games of chance.
Consistent policies would also help reduce tax evasion and illegal participation in real money gaming. Moreover, unified gaming regulations could facilitate a significant improvement from an investment perspective.
While the concept of centralised regulation appears promising, numerous challenges must be addressed. As previously stated, the current division of legislative authority between the Central and State Governments presents substantial constitutional hurdles for legislators, particularly concerning the governance of the gaming sector.
It is important to note that ‘gaming’ is a distinct subject and is not explicitly defined in any legislative list. Thus, it typically defaults to the state-governed subject of “Betting and Gambling.” This explains the substantial opposition to appointing the Ministry of Electronics and Information Technology (MEITY), a central authority, as the nodal ministry for “online gaming” and its efforts to create a self-regulatory body (SRB) for online gaming. This situation underscores a regulatory gap and reveals a pressing need for clarification on the existing ambiguity.
In addition, a well-defined process and criteria are essential for local and international gaming companies to secure a licence to function as a ‘game of skill’ or ‘game of chance,’ providing clarity on the applicable laws for specific companies.
