Online Gaming Market in India

• 13 Oct 2022

For Prelims: Online Gaming, Gambling, Digital India, Game of Skill, Game of Chance, Betting

For Mains: Online Gaming and its Impact

Why in News?

A task force set up by the Ministry of Electronics and Information Technology (MeitY) has prepared a final report of its recommendations to regulate the online gaming industry in India.

What are the Recommendations of the Task Force?

• Central-Level Law for Online Gaming:
  • A central-level law for online gaming should apply to real money and free games of skill, including e-sports, online fantasy sports contests, and card games among others.
  • Casual games with no real money element in the form of stakes may be kept outside the scope of such rules, unless they have a high number of users in India.
• A Regulatory Body for the Online Gaming Industry:
  • It has also recommended creating a regulatory body for the online gaming industry.
  • The body will determine what qualifies as a game of skill or chance, and accordingly certify different gaming formats, seek compliance and enforcement.
    • A “game of skill” is based mainly on the mental or physical level of expertise of a player, rather than a chance.
    • A “game of chance” however is determined mainly by a random factor of any type. In games of chance, the usage of skill is present but a higher level of chance determines success.
• Three-Tier Dispute Resolution Mechanism:
  • A three-tier dispute resolution mechanism, similar to that prescribed under the Information Technology Rules, 2021 for online streaming services, consisting of:
    • A grievance redressal system at the gaming platform level,
    • Self-regulatory body of the industry, and
    • An oversight committee led by the government.
• Online Gaming Platform as a Legal Entity:
  • Any online gaming platform (domestic or foreign) offering real money online games to Indian users will need to be a legal entity incorporated under Indian law.
  • These platforms will also be treated as ‘reporting entities’ under the Prevention of Money Laundering Act, 2002.
  • These platforms will also be required to report suspicious transactions to the Financial Intelligence Unit-India.
• Regulation of the Sector:
  • By MeitY:
    • MeitY may act as the nodal ministry to regulate online gaming, except for the e-sports category on which the Department of Sports can take the lead.
    • The scope of the regulation by MeitY should only cover online gaming, that is, games of skill.
    • The issues of online betting and gambling being games of chance in nature should be excluded from its scope, the task force is learnt to have recommended.
  • By Information and Broadcasting Ministry:
    • Certain other aspects of online gaming such as advertisements, code of ethics relating to content classifications etc. could be regulated by the Information and Broadcasting Ministry.
  • Consumer Affairs Ministry:
    • The Consumer Affairs Ministry can regulate the sector for unfair trade practices.

What is the Purpose of a Law at the Central Level?

• Online Gaming being a State Subject:
  • Online gaming so far has been a state subject, but according to the state governments, they find it extremely difficult to enforce certain rules like geo-blocking certain apps or websites within the territory of their state.
  • Also, there is a concern that rules passed in one state are not applicable in another, which has caused inconsistency in how the online gaming industry is regulated in the country.
  • State governments also do not have enough blocking powers like the Centre to issue blocking orders for offshore betting sites.
• Societal Concerns:
  • A number of societal concerns that can arise from the proliferation of online games in the country has also been highlighted.
  • There have been a number of reported incidents of people losing large sums of money on online games, leading to suicides in various parts of the country.
• No Regulatory Framework:
  • Along with that, there is currently no regulatory framework to govern various aspects of online gaming companies such as having a grievance redressal mechanism, implementing player protection measures, protection of data and intellectual property rights, and prohibiting misleading advertisements.

What is the Size of India's Online Gaming Market?

• Revenue and Industry Growth:
  • The revenue of the Indian mobile gaming industry is expected to exceed USD1.5 billion in 2022, and is estimated to reach USD 5 billion in 2025.
  • The industry in the country grew at a CAGR of 38% between 2017-2020, as opposed to 8% in China and 10% in the US.
    • It is expected to grow at a CAGR of 15% to reach Rs 153 billion in revenue by 2024.
• Users Growth:
  • India’s percentage of New Paying Users (NPUs) in gaming has been the fastest growing in the world for two consecutive years, at 40% in 2020 and reaching 50% in 2021.
  • According to a report by EY FICCI (Federation of Indian Chambers of Commerce and Industry), transaction-based games’ revenues grew 26% in India, with the number of paying gamers increasing by 17% from 80 million in 2020 to 95 million in 2021.

Way Forward

• Robust Policy Framework:
  • India’s e-gaming industry needs robust policy frameworks and digital infrastructure to fulfill its potential, maximize revenue and foray toward being a global leader.
  • A government body that oversees operations, drafts progressive policies preventing societal issues, suitably classifies games of skill or chance, ensures consumer protection and combats illegality and crime is required.
• Cooperation between Government and Gaming Companies:
  • Gaming companies should also continue to work with the government to promote responsible gaming by educating gamers and establishing best practices like conducting KYC checks, user authentication, etc to prevent illegal activities and financial dealings on their platforms.

Source: IE