Child Rights Body Flags KYC Non-Compliance For Gambling Apps, Sites

The National Commission for Protection of Child Rights (NCPCR) has written to the Ministry of Electronics and IT (MeitY) flagging the lack of KYC norms for gambling apps and websites, which it claims has led to unlawful participation of children on these platforms.

As per ET’s report, NCPCR in its letter claimed to have received a complaint from the New Delhi-based trust ‘Society against gambling’ which said “presence of numerous illegal online gambling websites and applications operating within the country, posing a significant threat to the future well-being of children”. 

NCPCR chairperson Priyank Kanoongo, in the letter, urged the IT ministry to develop a detailed report of all such gambling apps and websites operating in India within 10 days.

Moreover, the letter contains details of over a hundred gambling websites and applications that purportedly use social media messaging platforms such as Telegram to lure minors into using these gambling apps and websites.

NCPCR is an independent statutory government body tasked with protecting child and minor rights along with other matters in the country.

The MeitY on April 2023 notified various checks and balances through relevant amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules. 

The regulations even restricted the intermediaries from hosting or displaying any advertisement, surrogate advertisement, or promotion of an online game that is not permissible. 

This was intended to address the growing menace of online ads for illegal betting and gambling operations targeting Indian users.

While “gaming” and “gambling” are frequently used interchangeably in the gaming sector, there is a difference between them. Gaming typically involves a level of skill, such as in poker, whereas gambling relies solely on chance, like roulette and other casino games.

Betting and gambling activities are banned under various state laws, while a few games of skill have been held to be constitutionally valid by the Supreme Court in various judgments. 

The Supreme Court has laid out that the preponderance of skill over chance makes a game, a game of skill.

It is pertinent to note that, last year, the 28% GST for online gaming at face value disrupted real money gaming (fantasy and card games) startups, regardless of whether it involves games of skill or chance.

And while the government has clarified that this is not a retrospective tax, it also stated that these liabilities have always existed. This opens up RMG startups to millions in taxes for the past few years, which were not taxed at 28%.

Making matters worse has been a slew of show cause notices sent to online gaming companies for alleged tax evasion to the tune of INR 1.2 Lakh Cr. Previously, the Directorate General of Goods and Services Tax Intelligence (DGGI), Mumbai Zone, issued a notice totalling INR 28,000 Cr to gaming giant Dream11.

Before this, the parent entity of Games24x7 also received a notice amounting to INR 21,000 Cr from tax authorities.

This has resulted in a downward projection for the Indian gaming sector. The gaming-focused venture capital firm Lumikai revised the revenue projections for the homegrown online gaming industry to $7.5 Bn from $8.6 Bn previously due to recent tax changes in the sector.