Prime Minister Narendra Modi’s panel of top officials has been working for months to regulate the country’s online gaming sector, where foreign investors such as Tiger Global and Sequoia Capital have backed gaming startups Dream11 and Mobile Premier League, wildly popular for fantasy cricket.
The much-anticipated report shapes the future of India’s mobile gaming industry, which is estimated to reach $5 billion by 2025, up from $1.5 billion this year. Concerns about addictive games and “inconsistent national laws” disrupting trade are rising.
Defining games is controversial. According to the Indian Supreme Court, the card game rummy and certain fantasy games are skill-based and legal, but at least one state court classified games like poker as games of chance or related to games of chance, which are prohibited in most states.
In its confidential draft report dated August 31, the panel of government officials calls for the creation of a new regulatory body under India’s IT ministry to determine which online games qualify as games of skill and then “work towards compliance and enforcement”.
To streamline the legal framework, India needs a new federal online gambling law, according to the 108-page report, which provides flexible rules “with penal provisions and government blocking powers against prohibited games”.
Although the panel looks only at online games of skill and not gambling, which falls under the jurisdiction of states, it notes that many foreign gambling and gambling websites that are illegal in India have become popular among Indian users. The new legal framework will apply to both free and paid games of skill.
“In terms of banning games of chance (eg gambling websites or apps) played online, the proposed Digital India Act may include it in the list of prohibited user harms which will not be allowed,” the report said.
A senior government source said that while the federal government could classify gambling as harmful, it would leave the final decision on whether to allow gambling or not.
The report notes that state governments already find it “difficult to implement and monitor geo-fencing measures” to ensure that no users in their region gain access to illegal forms of gambling or gambling.
The IT ministry will finalize the report after receiving further comments from the panelists, who are some of Modi’s top bureaucrats, including the heads of the finance and sports ministries. It is then sent to the Cabinet Secretariat for approval, but there is no timetable for completion.
The IT Ministry did not respond to questions from Reuters. Panel members did not immediately respond to requests for comment.
A senior gaming industry official said the recommendation that a regulatory agency evaluate different formats of online gaming could raise barriers to entry for new players and increase scrutiny of companies’ current offerings.
Still, he said the new rules will bring “regulatory clarity, certainty and investment to the sector.” The director declined to mention his name because of the sensitivity of the matter.
A 2020 report by Indian trade group FICCI and consulting firm EY states that of the 65 billion Indian rupees ($817 million) earned by the online gaming industry in the previous year, transactional gaming, including real money, accounted for 71% or 46 billion. rupees.
Endorsement from top Indian cricketers and other marketing efforts have increased investor appeal and interest in real money games. Dream11 is valued at $8 billion, while the Mobile Premier League is valued at $2.5 billion, according to data from PitchBook. By 2021, there will be 95 million paying players in India.
The government report notes that the prevalence of such games among young people has led to addiction, often causing financial loss, with some reported cases of suicide.
The report calls for laws and regulations with so-called “decongestion measures”, such as periodic warnings and advisories and setting deposit and withdrawal limits. It also calls for “responsible advertising”.
With online games such as fantasy cricket on Dream11 paid matches remain the popular attraction. Users can build their team by paying just 14 rupees (17 cents), with a total prize pool of 7 million rupees ($88,000) going to the winners. The top finisher can take home 275,000 rupees ($3,462).
After receiving suggestions from India’s tax authorities, the government panel said online gaming companies should be required to report all “suspicious transactions” to the government’s Financial Intelligence Unit.