A recent KPMG report pegs the Indian online gaming market ₹136 billion with an estimated 433 million users in 2021 and is estimated to touch ₹290 billion by 2025.

But despite its potential, it is marred by regulatory uncertainty and outright bans in some States.

In November 2020, the Tamil Nadu government hurriedly passed an ordinance banning all online games played for stakes citing suicides by youngsters and heightened risk of fraud. While a seemingly well-intentioned move, it failed to appreciate the complexities of the issues, and also the heterogeneities within the online gaming sector — which now includes diverse formats such as eSports, casual games, fantasy sports, and card games.

In August 2021, the Madras High Court struck down the amendment. It reaffirmed the jurisprudence of the Supreme Court and other high courts over the past 60 years that have held that offering games of substantial skill are not gambling but legitimate business activity protected by the Indian Constitution.

However, the court also acknowledged the State’s concerns over online gaming and suggested the government to roll out a new legislation for regulating the sector while complying with the Constitutional safeguards. A day after the judgment, the new legislation was announced to accommodate public welfare concerns and interests of all stakeholders including eSports participants, industry and the fledgling game developer ecosystem.

There are two key concerns with online gaming: A gamer’s undesirable behaviour of spending too much time or money; and a gaming platform’s unfair conduct in rigging matches or manipulating algorithms. To mitigate this, it is necessary to limit the amount of time or money a user can spend on a game continuously. On the other hand, platform behaviour determines whether all games are fairly played. Some reputed platforms obtain random number generators, and no-bots certificates from internationally renowned firms, to verify that users are not maintaining fairness and transparency while competing. Companies are compelled to constantly innovate to ensure that their platforms are safe, secure, and fair. Industry bodies and gaming platforms too need to collaborate to assist the government in understanding the diversities of the sector and deliberating on existing best practices to minimise user risks.

Self regulation models

Various independent federations like the All India Gaming Federation, Federation of Indian Fantasy Sports and The Online Rummy Federation have developed self-regulatory frameworks responding to some of the concerns.

Some online gaming developers have made their apps or websites safe and fair, undergoing periodic assessments and audits to ensure compliance. However, a well-defined framework to ensure adherence and promote a predictable environment will go a long way towards clearing the haze around the current regulatory swamp.

A transparent consultative process while drafting legislation on these complex issues allows for effective regulation, whereas, blanket bans on all games, without distinguishing between skill and chance do little to offset public welfare concerns and also force legitimate players to exit the market.

Outright ban also creates a market for illegal gaming to fester, putting the young at greater risk.

With eSports becoming a medal sport at the Asian Games from 2022 and the establishment of the Olympic Virtual Series by the IOC, governments must support and promote eSports.

The Tamil Nadu government’s decision is likely to inspire other States and present not only an opportunity but also a responsibility to address complex issues of protecting both gamers and the gaming industry.

Suri is Research Associate and Varma is Consultant at ICRIER

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