“Many states, including Telangana, put a blanket ban on online gaming as they were under tremendous pressure in early 2010s because of fraudulent illegal apps that exploited users. I remember being an administrator in those days where many suicides took place. The regulatory bodies, including the police, did not have the capability or the wherewithal to regulate online gaming effectively,” said Jayesh Ranjan, Principal Secretary for Information Technology, Government of Telangana at a panel discussion on regulating the online gaming sector organised by the All India Gaming Federation (AIGF).
“It seemed easier to ban everything involving money and gaming rather than educating the public on the risks and creating a regulatory mechanism for gaming at that point in time,” he explained.
Ranjan was joined by James Sangma, Cabinet Minister, Government of Meghalaya; PK Misra, a former IAS officer who is a member of the Skill Games Council; Sai Srinivas, Co Founder and CEO, Mobile Premier League (MPL); and Dr. Sutanu Behuria, a former IAS officer who is also a member of the Skill Games Council, in a discussion moderated by AIGF CEO Roland Landers.
He admitted that the ban has come with its set of consequences. “We have seen that people, who are seriously into gaming or are addicted to gaming, continue to play online using VPN. Fraudulent applications continue to mushroom; many people continue to be exploited eventually because there is no authorisation which assures them that the game is safe,” he elaborated.
“The ban has not prevented suicide. We have seen a spate of suicides happening thereafter as well,” Ranjan added.
The question of online gaming regulations has become pertinent as the sector has seen a dramatic rise in sign-ups during the pandemic. People have flocked to these sites in large numbers, necessitating a regulatory framework that puts checks and balances in place.
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Key takeaways from the discussion
Why does India need online gaming regulation?
- Regulatory framework instills confidence: “A regulatory system provides confidence to people to be playing these games online because they know that there is a regulator who’s watching it. Regulations could cover aspects which are important from the player’s viewpoint; it means there should be ethics in the system which will help people derive some comfort,” said PK Misra.
- Gaming will prevent people from turning to social evils: “The aspirational level of wages for youngsters is much higher than the productive levels so there will be unemployment because people are not qualified. This aspirational gap will lead to frustration. For instance, the standard wage people get in factories is Rs. 8,000 to Rs 10,000 in the industrial belt in Himachal Pradesh. The chief ministers may make an issue of giving 70 per cent employment to locals but no Himachali wants to go there and work but then he’s frustrated. He’s not earning anything. He is likely to turn to drugs and prostitution which will lead to thefts and burglaries,” said Dr. Sutanu Behuria. “Gaming will have significant social benefits in spite of the risk of addiction; if somebody is spending 60 per cent of his time on gaming, at least evils like drugs, prostituion are likely to be controlled,” Behuria said, suggesting that a concerted effort needs to be undertaken to ensure how people interact with gaming.
- Avoid regulatory uncertainty: “India is going to become a net exporter of games and gaming content in the world in the long term. It’s going to be pivotal in creating a lot of jobs, especially in areas like game design, graphic design, etc. We should avoid unclear regulatory setups. We should have as much clarity as possible. There’s been significant movements in the space where the difference between games of chance and skill has been reiterated,” said Sai Srinivas of MPL.
- Need for licensing: “There is a need to licence the industry. There is a need to create several safety checks. The industry has to be brought in as a self regulator instead of having a policing attitude. Telangana has worked out a draft law and I’m waiting for the opportune moment to introduce it to the cabinet. We have done lots of consultative exercises so it’s not that the new law was prepared keeping a top-down approach,” Ranjan said.
What should be kept in mind while coming up with a regulatory framework?
- States should ensure they collect taxes: “We have to recognize that gaming is inevitable. It will be extremely difficult to police it or regulate it in a serious way in fact. The states should be interested in ensuring that they are receiving their due share. It should list out modalities to ensure it knows the amount of taxation,” Behuria said.
- Provide clarity in taxation: “Having a rational tax slab will dramatically improve revenues for the exchequer and create a regime where businesses can actually do a good job in running their business as well,” Srinivas recommended.
- Draft standardised regulation: “It would be a huge advantage if states agreed to one standardised regulation with respect to their stances on skill and chance games while identifying the difference between skill and chance at the same time. It would easily multiply the valuations of some of the companies in the space significantly because some of our peers outside India enjoy clarity in regulation and hence their valuations are obviously much better,” Srinivas explained.
- Uniform setup will not cause complications: Behuria echoed Srinivas’s recommendations in his remarks. “We have to look at having a uniform regulatory setup eventually, with a national committee so India can be a unified market rather than having different sets of rules in different places where the operators will have to modify their approach and it becomes much more complicated,” Behuria reasoned.
- Draft legislation in consultation with stakeholders: “Getting everyone on board first will help draft good legislation and it will bring forth a lot of revenue to the state because it’ll (gaming sector) be acceptable (to the public). Grey operators will disappear gradually and therefore, existing companies will be able to reach out to many people with confidence. It will attract investment. Many countries have drafted and enacted legislations. They have become market leaders. We can become market leaders once we have a clear, stable environment,” Misra said
How does a ban affect the sector?
- Ban criminalises players: “One of the biggest lacunae of blanket bans is that players are deemed to be criminals which is very unfortunate because if you’re deeming players to be criminal then it creates a barrier as victims don’t report incidents to the police because they will be treated as criminals. They are happy to not report. I’m of the opinion that a ban is not the solution. We need to regulate it,” Ranjan said in his remarks.
- Gaming regulations should enable, not penalise: “This sector itself is evolving so you need to have an open mind. We tend to look at penalising people in India when we make regulations. This is something that should be avoided at all costs. I’m not saying there should be no penalty but the approach should not be: ‘How do we penalise these fellows?” The approach will kill them. It has to be an enabling environment to develop and we should get out of the mindset that people who are in this field should not make money.
Can other states take a leaf out of Meghalaya’s Gaming Regulation Act?
James Sangma said that the state has stuck its neck out and given clarity to gaming companies by identifying games of skill and chance in the Meghalaya Regulation of Gaming Act, 2021. He handles several ministries in Meghalaya’s state government such as information and public relations, law, taxation, and registration and stamps, among others.
Sangma explained that the state chose to come out with this regulation because COVID-19 led to a dip in the state’s coffers as the state is dependent on tourism for revenue. “We also saw that a lot of people were spending time on online gaming during COVID-19. This number is quite steady right now; we are hopeful that it will keep growing. We have already given three operators a temporary licence to start off,” he concluded.
“The government of Meghalaya started out with a lot of baby steps because we’ve just come to realise that there are areas which we have not covered under our regulatory framework yet. It’s a work in progress, we are not rigid about this whole matter.” — James Sangma
“The crux of the matter is to ensure that there is close cooperation between all players which is the industry, the operators, the AIGF and regulators like us. It is the key in order to meet the challenges,” Sangma said.
Telangana to set up an online gaming committee
“We see that the landscape of online gaming is extremely dynamic. It is extremely complex, and the government does not have the capability to be the regulator. We have proposed an online gaming committee. The government will be a part of it but we want the industry and its associations to participate along with retired judges and police officers. It is this committee which should be given complete responsibility. They will decide on legality and what will be permissible under games of skill,” Ranjan revealed during the course of the discussion,
He went on to add that the committee will reference three High Court judgements while drafting provisions. “The verdicts have made it clear that it is undemocratic to ban everything,” Ranjan informed Landers. “The government will not have any kind of vetoing power or a dominant say in the functioning of the committee. It will be very democratic.”
But he also warned the gaming industry that they should not forget the circumstances under which bans were introduced in multiple states.
“We must ensure that strong and potent safety checks are put in place which takes care of KYC, use of approved payment gateway, anti-addiction measures, anti-fraud, anti-money laundering, grievance redressal mechanism, data protection guidelines, prevention of mischieving advertising, etc.,” Ranjan recommended.
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