Unified Gaming Regulation Vs State Wise Regulation For Indian Online Gaming Industry

Unified Gaming Regulation Vs State Wise Regulation For Indian Online Gaming Industry

SUMMARY

The Indian real money gaming industry contributed $ 2.4 Bn to the online gaming market in FY24

State-wise regulations bring inconsistency in how games are classified.

The present division of legislative powers between the Central and State Governments poses significant constitutional hurdles for legislators, particularly in the governance of the gaming industry.

The online gaming industry in India is witnessing an unprecedented boom driven by advancements in technology, affordable internet access, and the increasing popularity of real-money gaming. To give a perspective, in FY24, the Indian real money gaming industry contributed $ 2.4 Bn to the online gaming market. 

However, the regulatory landscape governing this booming industry remains fragmented, inconsistent and outdated, posing significant hurdles to its sustainable growth. This has resulted in the debate as to whether the online gaming industry ought to have a unified central legislation as opposed to state-wise legislation. 

In order to answer this question it is necessary to first unwrap the evolution of the gaming legislation in India. 

Evolution Of Gaming Legislation In India

Initially, betting and gambling in India were governed by the Public Gambling Act of 1867, a central law. Over time, the Government of India Act of 1935 shifted the responsibility to provincial legislatures, giving them the authority to make their own laws on the subject. When the Indian Constitution came into effect, this power was passed to the states, allowing them to regulate betting and gambling within their borders. Today, each state is responsible for setting its own rules and laws for these activities.

Challenges With The Current Regulation

The changing laws across states for betting and gambling create significant challenges in understanding and tracking each state’s stance. For example, states like Nagaland and Sikkim have clear licensing frameworks allowing operators to offer online gaming for stakes, whereas in other states, such activities exist in a grey area—permitted only if approved by the respective high court or state authority.

On the other hand, states such as Assam and Odisha provide no exceptions for games of skill. Similarly, Andhra Pradesh, Arunachal Pradesh, and Telangana do not permit operators to offer games of skill for stakes.

Another challenge with state-wise regulations is the inconsistency in how games are classified. What one state may deem a game of skill, another might categorise as gambling. For instance, Sikkim permits any type of game—whether based on skill or chance—if the operator has the required license. In contrast, Andhra Pradesh prohibits all games involving stakes, regardless of their nature.

State-wise legislations regulating “betting and gambling” also result in a multitude of costs for online gaming companies. Gaming operators need requisite licenses from state governments (if permitted) and also incur additional administrative and regulatory fees in order to ensure complete compliance with laws of other states.

This includes implementing geo-blocking features and having updated platform policies in keeping with legal requirements. Additionally, frequent changes in state-specific laws may also lead to inadvertent violations of the same by both operators, gaming operators and users alike. These challenges often make surviving in the gaming companies a difficult task. Many gaming startups are, thus, pushed in the grey area to avoid complex legal frameworks with high and cascading taxation. 

Need For Unified Regulation

The onset of the internet age has made the world smaller and online gaming, which has the potential of connecting individuals all over the world, ought not to be curbed by the borders of a state. Hence, a central regulation can help resolve these issues of ambiguity by providing a solution for the debated classification of games of skill and games of chance and by establishing a set criteria that distinguishes between the two.

Consistent policies can also facilitate a decrease in tax evasion practices and illegal participation in real money gaming. Apart from this, a unified gaming regulation can also prove to be a stroke of genius from an investment point of view. 

Although a centralised regulation seems to be a viable option, there are quite a few roadblocks along the way. As mentioned earlier, the present division of legislative powers between the Central and State Governments poses significant constitutional hurdles for legislators, particularly in the governance of the gaming industry. 

Notably, ‘gaming’ is a separate subject and is not explicitly mentioned in any list. Therefore, it generally defaults to the state governed subject of “Betting and Gambling”. Considering this, it is not without reason that there was a major uproar against the appointment of Ministry of Electronics and Information Technology (“MEITY”), a central body, as the nodal ministry for “online gaming” and its attempts at establishing a self-regulatory body (“SRB”) for online gaming. This clearly highlights a regulatory gap and exposes a dire need for clarity to be provided for such apparent lacuna. 

Furthermore, we need a defined process and parameters for gaming companies, both local and international, to obtain a license to operate as a ‘game of skill’ or ‘game of chance’. This will also allow clarity on which law should take precedence for a particular company.

Conclusion

The current state-wise framework not only perpetuates legal ambiguities but also increases operational inefficiencies. In this context, a unified central legislation, accompanied by the establishment of a central regulatory authority, emerges as the most viable solution. Such a framework would provide much-needed clarity, encourage compliance, attract investment, and ensure the sustainable growth of the industry. 

While constitutional challenges exist, they are not insurmountable and can be addressed through collaborative policymaking and legislative innovation. A unified regulatory framework is no longer just a matter of convenience but a necessity to unlock the true potential of India’s online gaming sector.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

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