As the Success Of Online Gambling And Gaming Gains More Ground In India, Government Releases New Rules For The Rising Industry.

The government has done what has been long pending; it has taken the step to regulate the online gambling and gaming industry which involves big money. So while much was being spoken about – rules and regulations that the government mulled over for some time, it has now finally done what was in the cards for a while.

It released new rules for online gaming under which it prohibits any game that involves betting and wagering and will entail a framework of multiple self-regulatory organizations (SROs).

India is not new to gambling or wagering, it is part of our history (Mahabharata), and it is also a known fact that around specific festivities, especially Diwali when it is actually considered auspicious to gamble, families and friends come together to play mostly card games; thus it is a known that almost 80% Indians bet at least once a year!

Over the years, especially during the Covid -19 pandemic, the popularity of online games/betting gained colossal traction. Games like IPL and legal online betting on these are increasingly getting popular and have made these games the most famous such events ever! 

Just look at the figures – online betting in India in 2019 was close to INR 60 billion, which by 2024 it is anticipated could go five times high to INR 300 billion!

Hence, it comes as no surprise that the Indian government now wants a stake of the pie that promises lucrative money in terms of taxes collected. 

The New Rule!

The Indian government has proposed to bring online real money gaming platforms under the ambit of IT (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021, which also regulates social media platforms. 

But let us understand what online gaming is as per the rule – It defines the term “online game” as “a game that is delivered on the Internet and can be accessed by a user through a computer resource and if a person makes a deposit with the expectation of earning winnings”.

Under this, only “games of skill” can legally operate in India. Games of skill have been defined through various court rulings in India and include games like rummy and the Dream11 model of online fantasy sports.

According to experts, the new rules could be detrimental to international betting firms while boosting the business of Indian fantasy sports and other gaming companies.

As quoted by Rajeev Chandrasekhar, Minister of State for IT, to reporters after the outing of the new rules, said online games that involve wagering or betting will be prohibited as per the new online gaming rules.

There will be multiple self-regulatory organizations, and these SROs will see participation from all stakeholders, including but not limited to the industry.

The Minister of State for IT clarified that the government is looking at a framework which will allow for all online gaming to be determined if they are permissible or not; an SRO would do this, and there will be multiple SROs to determine such. 

As far as Permissibility is concerned, it will be decided with the simple principle of whether wagering is involved. If wagering is involved, the SRO will be in a standing to say that those online games are not permissible.

What’s in the new rules? 

The government will appoint multiple self-regulatory organizations (SROs) per the final rules. These would comprise industry representatives, educationists and other experts such as psychology experts, child experts etc.  

The government, to begin with, will appoint three SROs. 

SRO role: SROs will be accountable for declaring online games permissible based on whether games allow wagers. The SRO can declare online real money games as permissible if satisfied that – the online real money game does not involve wagering on any outcome. 

Asunder from the SRO, the IT ministry has also declared a mandatory KYC verification of online gamers.

Rajeev Chandrasekhar said that the government is only regulating real money games that involve wagering; hence, going by this norm, all other kinds of games will be permissible.

In January this year, the Minister made a statement that it would not allow firms to ‘hijack the narrative of self-regulatory body’, and the government shall not allow companies and intermediaries operating in the gaming sector to dictate or control the narrative at self-regulatory organizations and that all stakeholders would adequately represent the SROs.

However, was the intent of the government to regulate the online gaming and betting industry the need of the hour? 

We will explore a bit on this – 

• Compulsive gamblers – There are those among the players who have indeed become compulsive gamblers, and this has led to many unfortunate incidents. Irrespective of the fact that we have tons of references that speak of Kings and Commoners alike gambling away all they had, we are not in that era anymore. Perhaps today, it becomes necessary to regulate this industry. 

• Risk-takers and Skill Games – Again, card games and other forms of betting games have been around for centuries in India, and these games are also a household phenomenon, pointing to the fact that it may be in our very psyche to take risks. 

• Higher disposable incomes – are another factor that has largely contributed to the success and popularity of online gaming and betting. More so, as India set itself on the path of liberalization, disposable incomes have been on the rise. Technology has also played its role by bringing the opportunity to everyone with a mobile phone, laptop and internet. This itself has increased people’s penchant for gambling as a form of entertainment in India. With the coming of online gambling and entertainment sites in India, this has only grown, and the trend is not likely to go down anytime soon.

• Time on hand – The Covid-19 pandemic-led lockdown pushed people behind closed doors for 6 to 9 months. With only boredom beyond a point, online gambling and entertainment were the one source that kept people sane. It also gave them an extra source of income, but in most cases, it helped people keep their mental faculties intact instead of staring at depression and everything negative. 

Conclusion: While there is little doubt that the online gaming and betting industry has seen a tremendous upward trend in the last few years, it was just a matter of time before this industry would also be put under the gambit of rules and regulations. 

Putting legalities in place may prove to be a double whammy for the economy and the state and central governments, as it would be a lucrative verticle that would fetch huge monies collected in the form of significant taxes for the government.