Online Gaming Apps Will Be Classified Under Skills Or Luck Based Games

A government panel suggested that India form a regulatory body which would classify online games as based on skill or chance.

Online Gaming Apps Will Be Classified Under Skills Or Luck Based Games

Aside from that, the body can introduce rules to block prohibited formats and take a stricter stance on gambling websites.

How these games work

For online games such as fantasy cricket on Dream11, paid contests remain a popular attraction.

Users can create their teams by spending as little as Rs 14 rupees, with a total prize pool of Rs 7 million ($88,000) up for grabs by winners.

The top-ranking performer can take home Rs 2,75,000 ($3,462).

The government panel said that online gaming companies should be required to report any “suspicious transactions” to the government’s Financial Intelligence Unit.

Lucrative industry

Foreign investors such as Tiger Global and Sequoia Capital have backed gaming startups Dream11 and Mobile Premier League, hugely popular for fantasy cricket.

The report is seen as shaping the future of the mobile gaming industry in India which is estimated to reach $5 billion by 2025, from $1.5 billion this year. 

A 2020 report by Indian trade group FICCI and consulting firm EY stated that of Rs 65 billion ($817 million) garnered by the online gaming industry last year, transaction-based gaming, including real money, contributed 71 percent, or Rs 46 billion.

However, gaming companies are now facing mounting concerns over games causing addiction and “inconsistent state laws” disrupting business.

Forming laws

In its confidential draft report the panel of government officials calls for the creation of a new regulatory body under India’s IT ministry.

They are responsible to determine which online games qualify as games of skill, then “seek compliances and enforcement.”

To streamline the legal framework, the 108-page report says India needs a new federal online gaming law.

The law would provide regulatory flexibility “with punishment provisions, along with blocking powers, for the government against prohibited gaming formats”.

Though the panel considered only online skill games, and not gambling it noted that many illegal offshore betting and gambling websites in India have become popular among Indian users.

Dark consequences

The government report noted that the proliferation of such games among the youth had led to an addiction that often caused financial losses, with some reported cases of suicides.

The report calls for laws and rules to include “de-addiction measures” such as periodic warnings and advisories and fixing deposit and withdrawal limits.

It also calls for “responsible advertising”.

Dream11 is valued at $8 billion, while Mobile Premier League is valued at $2.5 billion.

Lives are lost but valuations soar.

New legal framework

The new legal framework would apply to both free and pay-to-play skill games.

The report stated the proposed Digital India Act can include prohibiting games of chance (e.g. gambling websites or apps) being played online in the list of “prohibited user harms that will not be permitted.” 

The IT ministry will finalise the report after receiving further comments from panel members such as some of Modi’s top bureaucrats including the heads of the revenue and sports ministries.

The next step is sending it to the cabinet secretariat for approval.

However there is no timeline for finalisation.

Pros and cons

A senior gaming industry executive said the recommendation that a regulatory body evaluates different formats of online games could raise entry barriers for new companies.

It would also increase scrutiny of companies’ current offerings.

However the executive did say that new regulations will bring “regulatory clarity, certainty and investments for the sector.”

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