India Could Get a ‘Skill Gaming’ Regulator To Check Addiction, Money Laundering

The moniker of 'game of skill' applies to pay-to-play online games including fantasy sports and card games.

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Following concerns about money laundering and addiction, the government is considering setting up a regulatory body for watching over the 'skill gaming' industry in India, a Business Standard report suggests.

The moniker of 'game of skill' applies to pay-to-play online games including fantasy sports, like Dream 11 and MPL fantasy cricket, casual games, and card games like rummy or poker, which require some use of skill.

The industry appears to be optimistic about such a move since it could legitimise the sector, remove uncertainty and boost investments, all while safeguarding the interests of players.

“We firmly believe that there is a need for central regulation. An overarching central body that would regulate the e-gaming sector would have clearly defined rules and regulations."

Sameer Barde, CEO of E-Gaming Federation, to Business Standard

Barde also told the publication that his organisation is in talks with various ministries about the proposed regulator.

Concerns Around 'Skill Gaming'

To potentially set up a regulatory framework, the government is reportedly looking into existing legislation and court judgments.

The Public Gambling Act of 1867 is the ancient law that governs the online gaming industry at the central level. There is also varying legislation in different states which supersede this Act, since gambling falls in the state list.

In general, according to Indian laws, betting on games of chance is illegal whereas betting on games of skill is legal. It can be tricky to determine whether a game falls under the chance or skill category.

Several states including Kerala, Tamil Nadu and Karnataka have attempted to impose bans on online gaming with monetary stakes, before being struck down by the judiciary.

Madhya Pradesh is also planning a law to regulate online gaming, while Karnataka has now moved the Supreme Court to get its ban reinstated.

The main concerns surrounding such games are:

Money Laundering

In online games, the main factor that enables money laundering is that in-game items or currencies often hold value in the real world. Illicit funds can be used to buy in-game items which can then be exchanged for cash on marketplaces, obscuring the money trail.

Such transactions can also allow relatively easy movement of funds across international borders and potentially be used for terror financing.

Another Business Standard report suggests that the government is likely to bring online games within the purview of the Prevention of Money Laundering Act (PMLA). This would require companies to comply with KYC (know your customer) norms.

Addiction

Due to the low barrier of entry and access to mobile phones, online games are witnessing widespread adoption across the country. Many get addicted and end up pouring money into games that they can't afford to.

Many Indians don’t see the problem with spending on fantasy games until they become suicidal due to losses, or suffer from depression, Dr Rachana Bharghava, professor of clinical psychology at AIIMS told Rest of World.

The publication found several cases of people going into debt due to their addiction to fantasy sports and online skill based games.

The Karnataka government told the Madras HC last year that such games caused addiction and have even led to suicide. Since the consequences of risking money in a game of chance and game of skill are similar, there was no need to treat them differently, it said.

Other governments that tried to ban online skill gaming had similar rationales.

No Law Checking Foreign Entities

The government has observed that there is no law which prevents entities which have no physical presence in India and were incorporated in foreign countries from launching gaming products in the country, according to documents reviewed by Business Standard.

This means that, should Indians be affected by illegal practices, it would be difficult to hold the platform accountable and subject it to India's judicial process. A regulator could prevent such companies from entering the Indian market.

'Regulator Will Protect Players, Boost Investment'

India is among the world's fastest growing gaming markets.

Gaming here is growing faster than social media and is estimated to cross 500 million users within 2022, a FICCI-EY report suggests. By 2025, it is expected to be be a 5 billion dollar industry by revenue.

Most of this growth is coming through mobile phones. The average user in India spends an average of over four hours a day on gaming, according to a Deloitte-CII report.

“Investors are currently cagey because of uncertainty around the skill gaming sector. If there is uncertainty, how do they take decisions on innovation and expansion,” Barde told Business Standard.

He said that a regulator would instill confidence in investors and help make the experience safer for players.

“From the player protection point of view, a regulator will ensure players’ experience is safe, transparent, and that players should play responsibly. One way to regulate is to introduce KYC, so that minors cannot play," he said.

(With inputs from Business Standard, Rest of World)