Consulting firm APCO Worldwide recently released a report titled ‘Regulation of Online Gaming in India’ urging both central and state governments to refrain from bans and implement a policy that will give a fillip to the online gaming sector in India.

Online Gaming in India: A sunrise sector

Packing around 400 odd gaming start-ups, out of which many are unicorns, India’s gaming scenario has bourgeoned at a tremendous rate over the past few years. The sector which is growing at a whopping 40 per cent has been dubbed as a pillar of growth for the Indian economy by the Government of India with enormous potential for wealth and job creation.

According to industry estimates, within the gaming sector, 80% of the investment, job creation, taxes and growth come from skill-based games. Having attracted overseas investments to the tune of USD 575 million between 2014 and 2020, this sunrise sector also drew praise from Prime Minister Narendra Modi, who in his Mann Ki Baat radio broadcast in August 2020 talked about the potential of the Indian gaming industry and lauded the contribution of Indian innovators.

Online Gaming in India: Need For Regulatory Framework

India’s richest man Mukesh Ambani has predicted that the gaming industry will soon be bigger than the music, movie, and television industries put together.

APCO Worldwide carried out a comprehensive research by speaking to industry stalwarts, assessing various studies and curating reports on the sector. According to the report, the potential for this industry has also been recognized by the Law Commission of India in its 276th report and NITI Aayog, which have suggested measures to develop a regulatory framework for the gaming industry in conjunction with global best practices to promote growth and innovation while securing consumer interest.

Game of skill or game of chance?

There are critical festering issues that could be detrimental to the industry’s growth. For one, state governments are struggling to understand and appreciate the difference between Games of Skills and Games of Chance, succumbing to populism to control and ban this sunrise industry.

According to Indian statutes, the determining factor of whether a game amounts to “gambling” (which is prohibited by law), is whether it is a “Game of Skill” as opposed to a “Game of Chance”. The “Games of Chance” are those where the winner is predominantly determined by luck; the result of the game is entirely uncertain, and a person is unable to influence such result by his mental or physical skill. “Games of Skill” by comparison, have their outcome determined by the expertise, knowledge, and training of the player.

As early as 1957, the Supreme Court of India ruled that activities of gambling nature and skill fall under two distinct classes and that Games of Skill are protected under article 19(1)(g) of the constitution of India. Furthermore, the apex court held that activities that are based on skill deserve protection under the fundamental right to do business and profession.

The Western Model

The banning approach has not worked in anyone’s favor in the past. It has only drawn flak from organizations and users alike. Moreover, prohibitive measures and over regulation have given rise to a large underground gambling economy.

With no common law in the country, state governments have taken their own measures which has caused a great deal of  confusion and ambiguity. To bring unity among the states, the federal government should develop an overarching regulatory framework or guidelines which states can either adopt or treat as a foundation on which to build their own localized regulations.

Globally, enabling regulatory framework has led to the creation of gaming giants in other nations such as FanDuel, DraftKings among others. According to a recent list compiled by Credit Suisse, there are more than 100 unicorns in India with three of them being gaming companies. Significant investments have been made in India’s burgeoning gaming segment by global financial majors, including marquee private equity and venture capital funds. It is pertinent to mention that these investors have not merely put money in the gaming sector but have also invested in several other upcoming sectors. This foreign capital is critical to expand India’s GDP to USD 5 trillion.

Online gaming indeed is a rapidly changing business with high demand from consumers which is only likely to grow in the years to come. There is no doubt that this sector is being watched closely by users, developers, financiers, regulators and technocrats alike. We hope the recommendations advanced by APCO are taken into consideration in the due course of time.