Indiatech.org CEO Rameesh Kailasam on regulation, policy challenges and future of India’s online real money gaming industry
13th December 2021
As India’s booming online gaming market contemplates ways to exorcise the barrage of PILs, litigations, bans, complaints, and harsh regulations out of its billion-dollar path, many experts point towards the western regulatory models as the solution. However, Indiatech.org’s CEO Rameesh Kailasam opines it won’t be a tall order to say that India should take the lead and evolve international best practices instead.
IndiaTech.org is a think-tank and industry group set up by Indian startup founders and funds for supporting internet-based startups and is considered as the emerging voice of the Indian startups in the internet space. Having advised several businesses in the tech space including online gaming, fantasy sports, cryptocurrency, fit-tech, and ed-tech, Kailasam is regarded as the go-to expert in the ecosystem. With over 20 years of experience in government relations; working with the Andhra Pradesh state government, APCO worldwide, IBM and Oracle, Kailasam now makes life easier for the start-up world.
In G2G News’ flagship show ‘Game On With Jay Sayta’, he discussed the various initiatives his group has taken to alleviate the pressing issues that plague the online gaming sector.
In the journey from Mid-stage to Unicorn to Decacorn, companies encounter various roadblocks at many junctures which are most likely regulatory in nature. IndianTech has been dedicated to the cause of easing the companies’ path of getting listed over the past couple of years.
Kailasam informs, “We worked on what we call unlocking businesses where we say that a small policy change can unlock a market for a particular start-up; what we started two years back was to open up GEM for startups which is the government E-marketplace because many startup founders were of the opinion that we also want to add one large customer which is the government” India Tech worked with GEM and ministry of commerce recently, notifying them about the variety of products like fixed-rate, flexible and dynamic ones which subsequently resulted in API integration.
Speaking about IndiaTech’s various initiatives that he has been involved in and explaining the role the group plays in the larger sense, he shares, “We work very closely with the central government, state government, think tanks, founders, investors and so on to make this journey happen. Our intent is that what we call as follow the billion-dollar dream and therefore we want to create that dream and we want to help people achieve that dream in India and therefore we work on the policy space and all disruptive technologies as you know to come in this space.”
Disruptive technologies include gaming and cryptocurrency which are, as he calls, the most ‘newsy things’ these days. Breaking down the broad concept of online gaming, he shares that it can include plenty of things within its fold.
He adds, “Many categories of games exist and it is important that we don’t brush all online gaming under the same kind of carpet; you have to look at them individually and differently and don’t mistreat one on the basis of what you are interpreting about the other so therefore it’s very critical.”
According to him, the first one is esports which mainly operates on a subscription-based model. There are also models, he informs, where you play online by single-player or multiplayer. He adds, “These are also recognised in your ASEAN games and Olympics as a sport as a demonstration sport and there are medals that are given and India has also managed to win some medals in the previous edition. So that’s esports for you where you pay subscriptions where you might even buy, you actually even do e-commerce retail in that because you’re buying skins and capabilities.”
Online Fantasy Sports
Online fantasy sports is where you create your team based on a real-world game that is happening. He shares, “OFS cannot be played if a real-world game doesn’t happen because it’s their performances and your ability to create the team that makes you win or lose on that and therefore your knowledge of the game and your analysis of the players’ capability is of paramount importance.”
Online Skill-based Casual Games & Sports
The next category is OSCGS which he recalls was a tough one to name. He shares, “I realised that there are multiple games which are there which are played right from a Ludo to a Fruit Ninja. They actually needed a name so I had coined the name and had released it and I wrote to the government of India and also different state governments saying maybe we call them online skill-based casual games and sports.”
During his research, he discovered that there are real-world games that are recognised by federations and played in the online world today. “Games where you still need dexterity, strategic thinking, logic, attention, practice, and adroitness; whatever the legal jargons are there to make it through as a game of skill,” he shares.
There is another category where you have real-world sports which are not recognized by federations; likes of which include Darts, Ludo, Snakes and Ladders, Quizzes, Scrabble, and Sudoku. There are often questions that arise as to whether some of these games are chance-based or skill-based. He explains, “Somebody might argue that you’re rolling, dice so how is skill involved? Courts have always held that skill predominance should be there.’’
He suggests that reducing the dominance of the dice and adding elements like quizzes can give is a semblance of skill whereby, it is possible to reduce the dependency on chance; something many platforms have recently done to evade legal hassles.
Virtual World Games
The third sub-category is where you have games which only exist in the virtual world. He explains, “Games which don’t exist in the real world. It could be anything from a Candy Crush to a Bubble Shooter to a Fruit Ninja to a Temple Run and so on which also requires a lot of skill but they don’t exist in the real world.”
The fourth sub-category is the card-based games like spades and solitaire which are played in close circles. However, he makes a sharp distinction by separating rummy and poker from this category. When pressed on why the aforementioned games don’t qualify to be in this category, he answers that they are the most hotly debated subject.
“If you see most of the state governments which are looking at it; they say online gaming; it is rummy and poker and that’s been the casual record. Now rummy has its own merits. Rummy has been declared as a game of skill. It has also got court rulings and poker is of a different category where again there can be huge games of chance and there can be a skill and so on. It’s a debatable area now.”
In a bid to ensure that other formats and games do not become casualties in the war against what is fairly or unfairly perceived as gambling, he maintains that the two games in question belong to a separate category.”I am trying to say to this world of regulation and regulators is ‘look you’re picking up one name, you’re not even analyzing whether it is game of skill or chance but now you are condemning the whole range. This is the universe that exists there; each of them is different start-ups vertically,” he explains.
He believes that clarity must emerge and clarifies that he is not against those games. He feels that each of them has to fight for their own merits and prove it. “All I’m saying is if this distinction doesn’t exist in your head, you will pick one and ban everybody. So India-tech is working for all these five categories,” he appends.
Educating The Regulators
IndiaTech has been endeavoring to educate the regulators about the myriad nuances and aspects of this new-age booming sector. He shares, “We feel that without informed regulators, we will have distorted regulations coming.”
Given the disruptive nature of these digital games, the regulation, he remarks, will always need to do a catch-up. According to him, the biggest challenge is perception due to a lack of understanding. He elaborates, “When regulators go out to understand these nuances, usually what happens is one tells less about their good things and tells more negative things about the others and that gives a consolidated perception. Suppose I met nine people and I got one-one each, then 9 out of 10 will say that okay it’s a bad industry; all of them are the same.”
To avoid that, he holds that it is important for people to speak out, say what they are good at and what differentiates them instead of commenting on others. Explaining what their fundamental aims entail, he shares, What we are trying to do is dissect this market and say understand that this is the universe. Be careful about how you regulate. Understand and regulate it because that applies even for taxation and that even applies for GST.” For him, so long as there is proven skill predominance and the game doesn’t become the source of livelihood and ruin and sufficient checks and balances are put in place, authorities have no reason to look at them from a banning perspective.
With the onset of a pandemic, entertainment-starved masses took to gaming to alleviate their lockdown blues. That meant the entry of traditional gambling and betting houses into the digital world, leading the government to start tweaking the regulations and go after the gambling and betting formats.
The ill-fated choice of words led to the unfavorable conflating of the actual games with the chance-based ones. He shares, “That is the unfortunate part now if you look at what Karnataka has done. Karnataka was looking at this for quite some time and there were some triggers. Many of the people who put PILS also need to be equally fully informed on the aspects.”
Flawed Arguments & Prohibitory Approach
Lack of awareness is termed as the biggest trigger for knee-jerk reactions like banning and litigations. He suggests that arguments that evoke the concern about children playing gambling games are spurious as these platforms mandate opening an account. “On these platforms, if you don’t have a bank account, you can’t even open an account and play which means that either you’re misusing your parents’ card and which is a domestic issue. It is not something where the platform is to blame. The platform has to do its due diligence on whether you are 18 plus and you have a bank account, if somebody misrepresents that’s a totally different thing but I think it’s also equally important that everyone in this ecosystem needs to understand what these platforms are and what their rules are.”
While he doesn’t deny the existence of bad apples or ‘fringe players’ that are problematic, he thinks that casualties should not be the major ones who are strictly following the rule and following the book.
More importantly, it is critical for governments and regulators to equally be able to understand these nuances. Speaking about how the state governments have responded to their IndiaTech’s submissions, recommendations, and attempts to educate about the sector, he shares, “This education process that we have initiated; state governments have been pretty receptive. They have come back and said we weren’t aware of some of these nuances. Some of them have actually come back and said that we are ready to look into these rules to define some of them out. They have asked us if we can you give them more literature on it so we have been supplementing literature to various state governments.”
Host Jay Sayta who also is a prominent lawyer brings up the discussion he heard between the advocate generate and Karnataka’s chief minister whereby the problem of not able being to have the time and patience to evaluate and painstakingly analyze each and every new format that claims to be skill-based and determine their legitimacy arises.
Kailasam shares, “If I wore my government hat, certainly administratively it is not possible to identify each game separately.” Laying out solutions to this problem, he shares, “So the ideal way out is for the industries to get together in some form of self-regulation where certain parameters are predefined and certain tests are there; you could have some mathematical algorithm or tests or something to prove that you made the bar.”
Citing examples like advertising standards council and OTT regulations, he shares that it is humanly impossible for the censor board and ASC to micro-manage and censor every content that comes in. Stating the standard practice, he shares, “There is a code where they prescribe the self-regulation code and they’ve left it to the industry to kind of comply with that now.”
Akin to the aforementioned examples, he shares that same applies here as it will be virtually impossible to micromanage the massive barrage of games that are springing up. Pointing towards self-regulatory bodies formed to oversee the market players and ensure that they adhere to the stipulated rules, he shares that this will ease the job of regulators and the government.
He cites, “If you look at the online fantasy space, they managed to create a body called FIFS where they are saying that we have a code. AIGF has a code. All of them are coming up with codes and signatories to that members are supposed to abide by that and basically, the association concerned has to also ensure that they are abiding by it.”
In the process then, he suggests, it is important to create a format of self-regulation which is backed by some legitimacy. He explains, “All we are saying as India-Tech is that whether a state government or a central government goes for it, it should say ‘okay you’ve got a self-regulatory body this is your code of conduct; people who abide by it and people who are signatories to it are fine. Others are open for us to go after which means that at least you are reducing the administrative nightmare for the government to go after and whip everybody on the street because you know that there is a particular group that is at least adhering to or seeming to adhere to some self-imposed code of conduct and regulation.”
He reiterates that the solution lies in a combination. While the governments can’t micromanage, the industry needs to ensure that they do not cross the line. “Unless government brings this clarity, you will always have a tendency that you and I are abiding by the rules but some newbie who has come is not abiding by the rules and his business is growing,” he remarks.
He identifies those who fail to comply with the prescribed rules of the regulatory body as fringe players. “Technically, the government has the freedom to go after them rather than imposing a complete ban where the self-regulated ones and the non-ones are seen in the same light,” he asserts.
Market Size: Stats & Figures
Citing a study that he worked on, he shares that online fantasy sports as a category have witnessed tremendous growth. He shares, “At the end of the day if you look at the numbers and the valuation of these companies engaged in that, it has run into billions of dollars.”
Laying out the facts and figures associated with the fantasy sports segment, he shares, “The market size is anywhere between 30000 to 35000 crores; that’s the range they are and apart from that, of course, if you see, strategic investments have come into that particular sector. You have got high-profile international investors who have invested in it.”
In his view, one of the fundamental factors that are driving the growth of this industry is the low cost of mobiles, smartphones penetration, and access to the internet. He notes, “So industry does have great potential. Currently, I think they have some 5000 plus already and they say there are some 7000 plus indirect jobs which have been created and overall I think what they are saying is in terms of growth if you look at it roughly they are expecting it to be 1 lakh 65 thousand crore market by 2025.”
The casual Games & Sports category or as he terms them “OSCGS’’ category is also growing at a phenomenal rate. Interestingly, he points, eighty percent of the market still plays for free. “It’s just ten to twenty percent which actually puts money; a large chunk of the market is still playing those freebies and free versions which are available and that is slightly changing ticket-sizes are as low as the cost of a samosa or a bread pakoda.”
IndiaTech’s Tax Recommendations
IndiaTech has also submitted its recommendations to the government with regards to the way taxes should be levied. He explains, “Suppose, I’m giving a platform I’m giving service and there are two people playing in it. Currently, it is at 18 percent as a service; technology as a service coming in. Ideally, it should have been 18 percent. Now the GOM has been formed where they’re looking at horse racing they’re looking at online gambling building and they’re also looking at online gaming here.”
In his recommendation, he had put across three conditions. Breaking down the pre-conditions, he shares, “Purely as a recommendation, if you see there are people who mix money; you’re money coming in, I put the whole thing, and then I am also taking my platform fee. I’m also giving winnings out of the account; that should not be allowed.”
He further shares, “Ideally people should either maintain an escrow or a clearly demarcated bank account or a clearly demarcated wallet or any instrument that allows you to demonstrate demarcation saying that this is how the pool money came in it was sitting thereafter the whole event got over; it was distributed from that account back to all the people and whatever was leftover as my platform fee.”
In this process, he opines, when that clear demarcation exists ideally G.S.T should be on the platform fee. “Whether it is 18 percent or 28 percent depends on a lot of debates because there are games of skill there are games of chance somebody might say it is entertainment,” he adds.
He informs that their recommendation technically has been 18 percent provided that there is a clear demarcation that is demonstrated that the platform fee is separate. He clarifies, “We are not for prescribing a slab for platform fee on who should do what business but whatever is the platform fee where the clear demarcation is available; apply GST on that. This is the fundamental thumb rule we have put in.”
Push For Central Regulatory Framework
Like many other industry leaders and experts, he believes that India should have a central overarching regulatory framework to oversee the online gaming market. “For example, I was working earlier in the direct selling space where I was trying to push for a nationally-prescribed guideline which is adopted by states because your consumer protection act didn’t have the capability or the flexibility (the earlier one) to actually prescribe something and that was again a challenging area for regulation so ideally, the center should prescribe and the state should adopt. That should have been the way to ensure that there is a uniform format.”
Explaining how the central law will work in accordance with the states, he further shares, “You can have all the all the states and UTs saying ‘okay this is a nationally prescribed format we will do our tweaks to accommodate whatever is required in our state-sensitivities,” he concludes.