Govt plans regulator for skill gaming industry to curb money laundering

The government is considering a proposal to have a regulator for the so-called skill gaming industry, following concerns about money laundering. The industry is in support of any such move, claiming it would remove uncertainty around the sector and also boost investments, while safeguarding player interests.

While the government is exploring options for regulating such entities, it is of the view that the responsibility should not be given to any financial sector regulator because the job may not fit its core competency, according to people in the know.

Confirming such talks, Sameer Barde, chief executive officer, e-Gaming Federation, said: “We are talking to various ministries … We firmly believe that there is a need for central regulation.”

“An overarching central body that would regulate the e-gaming sector would have clearly defined rules and regulations. I think that is the need for the hour,” Barde told Business Standard.

The government is also reviewing the extant legal framework for the online skill gaming industry. Different states have different approaches to regulating this sector, sources said.

According to documents reviewed by Business Standard, the government has observed that there is no law preventing entities incorporated in foreign countries with no physical presence in India from launching gaming products, and thus a framework is needed to put certain conditions for these entities to operate in India. 

It is also noted that the online skill gaming industry is becoming highly popular in the country. India is among the top five mobile gaming markets, with venture capital funding for Indian online gaming start-ups valued at $350 million between 2014 and 2020. The sector is growing at a compound annual growth rate of 22 per cent.

“Investors are currently cagey because of uncertainty around the skill gaming sector. If there is uncertainty, how do they take decisions on innovation and expansion,” Barde said, emphasising the need for a regulator.

The E-Gaming Federation (EGF) -- which is an independent self-regulatory body for the online gaming industry -- has worked with global gaming regulatory experts in the US and Europe to design transparent, professional, and ethical operating standards for the online rummy industry, called the ‘Code of Conduct’.

EGF has mandated that apps that allow gaming with stakes follow Know Your Customer (KYC) norms while onboarding customers and ensure that players are 18-year-old or above.

“From the player protection point of view, a regulator will ensure players’ experience is safe, transparent, and that players should play responsibly. One way to regulate is to introduce KYC, so that minors cannot play,” Barde said.

For player protection, the EGF code mandates that their funds held by the operator should be kept separately in a bank account and shall be free from any encumbrance.  The Code also provides for strict timelines to process withdrawal requests.