Crackdown on betting apps: Experts remind the need for regulatory oversight

According to AIGF, around 350-400 mn gamers pay to play on gaming platforms in India

The Ministry of Electronics and Information Technology (MeitY) late on Sunday night swiftly issued a blocking order against some 22 'illegal' betting apps and websites upon a request by the Enforcement Directorate (ED). While the action aimed to bust an alleged money laundering syndicate, it once again brought the regulation of online games into focus.

According to a government press note, the list of apps in the blocking order includes Mahadev Book, which offered 'illegal' betting on a range of live games such as rummy, poker, cricket, football, badminton, tennis, and others. The development took a political turn after the ED claimed it recorded a statement from a 'cash courier' alleging that Chhattisgarh Chief Minister Bhupesh Baghel received Rs 508 crore from the app promoters based in the UAE. Experts say the incident underlines the need for a proper framework to define a 'legal' online game in India.

In April this year, MeitY notified new rules under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) to ensure only 'permissible' online real-money games could operate in India. The rules define a ‘permissible online real money game’ as one verified by a Self Regulatory Body (SRB) established as per the rules. However, the SRBs to certify permissible games and enforce the rules have not been notified so far.

“Uncertainty, especially about the legal status, is detrimental to the survival of any industry. The delay in getting self-regulatory bodies for the sector is creating issues for all of us in raising new funds, doing advertisement and marketing, and more importantly, fair taxation for skill-based online games,” an industry executive said, on condition of anonymity.

According to the All India Gaming Federation (AIGF), around 350-400 million gamers pay to play on gaming platforms in India. Around 18 per cent of the total online gamers are in the age group of 5-14 years. There are some 900 gaming companies, which will come under tighter regulatory oversight with the new policy. This includes unicorns such as MPL and Dream11, which have close to 100 million users each.

As per a recent study by the Think Change Forum, the illegal offshore betting market is estimated at Rs 8,20,000 crore ($100 billion) and after the recent changes to the Goods and Services Tax (GST) regime, it is likely to grow at an alarming rate of 30 per cent annually. There are approximately 75 betting and gambling sites targeting Indian citizens, many of which continue to operate despite bans.

“Despite the evident illegality of offshore betting and gambling websites, systematic actions against them have been limited, or ineffective. Such platforms operate from foreign jurisdictions, evading Indian authorities' enforcement actions. The government's inability to block access to these websites poses a threat to Indian citizens and national security,” the think tank says in its report.

Looking at the menace of offshore betting apps, including multiple cases of duping, financial fraud, and money laundering, the central government in May 2022 set up an inter-ministerial task force on regulations for the online gaming industry. The industry stakeholders expected a regulation that differentiates skill-based games from chance-based games, more similar to gambling.

The companies have debated that success in a game of skill depends on knowledge, training, attention, experience, and adroitness of the player, while a game of chance may be akin to gambling. The Supreme Court has upheld this distinction in multiple instances since 1957. However, the rules by MeitY do not define the types of skill-based versus chance-based games.

According to experts, another reason to enforce a legal framework on the issue is to bring uniformity in regulations on the real money gaming sector across the country. This may help stakeholders to have clarity in states like Tamil Nadu, which has formed a five-member body to regulate online games and issue certificates of registration to local online game providers.