Rules of the game

Online gaming regulations need clarity

The newly notified online gaming rules and regulations appear to be headed in the right direction but fine-tuning and more careful definitions will be required to avoid ambiguity. The industry will be governed by self-regulatory organisations (SROs) — committees set up to determine if an online game is permissible or not, and these will include a mix of persons with different types of expertise. Games that have addictive or harmful characteristics will not be allowed. Any sort of gambling or “wagering” will be prohibited, but real money games that don’t involve wagering will be possible. Gamers will have the option to leave a game if they hit self-imposed limits in terms of money spent, or time.

In the initial stages, three SROs will be notified, and each will include an individual with online gaming industry experience, an individual with experience in promoting the interests of online gaming users, an educationist, a mental health expert, an individual with experience in information and communication technology, a current or former member of an organisation dealing with protection of child rights, a public policy, law enforcement or public finance expert, and any other individual who may be approved by the government. Issues could arise with a lack of clear definition of what would be considered “wagering”, or what constitutes “harmful” content, “addictive nature”, and other details such as the treatment and regulations for charging goods and services tax, and imposing capital gains or income tax.

Besides, the rules avoid dealing with the nuances of games of chance versus games of skill. Understanding the difference between a game of skill and a game of chance may be critically important. A clear definition of what is a wager is also necessary since this may be confused with prize money. For example, would it be reasonable for chess players to put money on the outcome of games they are themselves playing, or would this be wagering? Chess is unquestionably a game of skill and very popular online. It is common to hold chess tournaments where prizes are paid out of the entry fees collected from players. There are many other games, such as poker or backgammon (both games of skill, as defined by many courts) which follow a similar pattern: Entry fees are pooled and disbursed as prizes. Fantasy cricket may also come under scanner, though the Supreme Court classified it as a game of skill since it involves selecting teams of real players and the winnings are based on their real performances.

Regulatory clarity would be critical for the future health of India’s online gaming industry. The Indian online gaming industry has cumulatively attracted $2.5 billion in foreign direct investment and it is growing fast, with a current level of $2.6-billion revenue equivalent and an estimated compound annual growth rate of 27 per cent. There are several gaming unicorns including platforms such as Dream11, Games24x7, Mobile Premier League (MPL). A further complication for the industry could be the difference between central and state legislation on this front. Clarity on the taxation aspects is also critical. Self-regulation is a pragmatic concept but without clarity on definitions, there could be confusion which can affect businesses.