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The Indian Online Gaming Market

Context

  • A cross-ministerial task force recently proposed the establishment of a central regulatory body for online gaming.
  • The Ministry of Electronics and Information Technology (MeitY) established the task force to propose the contours of national-level legislation to regulate online gaming.

Relevance

GS Paper 2 and 3: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources. Science and Technology- developments and their applications and effects in everyday life

Mains Question

“Internet gaming has become more dangerous than drugs.” Do you concur? Examine the statement critically in light of the World Health Organization’s (WHO) announcement to include “gaming disorder” as a mental health condition. (250 words)


Types of online gaming available in India:

  • e-Sports: These are video games that, in the 1990s, were played privately or on consoles in video game stores, but are now played online in a structured manner between professional players, either individually or in teams.
  • Fantasy sports: These are games in which the player chooses a team of real-life sports players from a variety of teams and earns points based on how well the players perform in real-life. As an example,
  • Casual online games:
    • These could be skill-based, with the outcome heavily influenced by mental or physical ability, or chance-based, with the outcome heavily influenced by some randomised activity, such as rolling a die.
    • Gambling is defined as a game of chance in which players bet money or anything of monetary value.

India’s online gaming market size

  • Revenue in the Indian mobile gaming industry is expected to exceed $1.5 billion in 2022 and reach $5 billion by 2025.
  • Between 2017 and 2020, the Indian industry grew at a compound annual growth rate (CAGR) of 38%, compared to 8% in China and 10% in the United States.
  • According to a FICCI report, revenue from transaction-based games increased by 26% in India, while the number of paying players increased by 17% from 80 million in 2020 to 95 million in 2021.

The requirement for a central law:

  • Absence of regulatory oversight: o Online gaming exists in a regulatory grey area, with no comprehensive legislation governing its legality or boundaries.
    • Furthermore, there is currently no regulatory framework in place to govern various aspects of online gaming companies, such as having a grievance redressal mechanism, protecting data and intellectual property rights, and prohibiting misleading advertisements.
  • Online gaming is a state subject (Under Entry 34, List II ‘Gambling’ and ‘Betting’): o However, state governments have stated that implementing some restrictions, such as geo-blocking, is extremely difficult.
    • Furthermore, unlike the Centre, state governments lack the necessary blocking authority to issue blocking orders for offshore betting sites.
    • There is also concern that legislation passed in one state may not be applicable in another, leading to inconsistency across the country.
  • Societal concerns: A number of reported incidents of people losing large sums of money on online games, resulting in suicides in various parts of the country.
  • The task force, established in May 2022, has presented a final report to the MeitY on its recommendations.

The task force’s recommendations

  •  
  • Nodal ministry to regulate online gaming:
    • o The task force has suggested that MeitY act as the nodal ministry to regulate online gaming, with the exception of the e-sports category, which can be led by the Department of Sports.
    • The MeitY regulation should only cover online gaming (games of skill), and issues involving games of chance (nature of online betting and gambling) should be excluded.
    • The Union Ministry of Information and Broadcasting may regulate certain other aspects of online gaming, such as advertisements and a code of ethics relating to content classifications.
    • The Consumer Affairs Ministry has the authority to regulate the industry for unfair trade practises.
  • A centralised law for online gaming:
    • o This should apply to both real money and free skill games, such as e-sports, online fantasy sports contests, card games, and so on.
    • Casual games with no real money element in the form of stakes may be exempt from such rules if they have a large number of Indian users.
  • Establishing an online gaming regulatory body:
    • o This body will define what constitutes a game of skill or chance, certify various gaming forms, and pursue compliance and enforcement.
  • Establishing a three-tier dispute resolution mechanism:
    • o This will be similar to that prescribed under the Information Technology (IT) Rules, 2021 for online streaming services, and will consist of a grievance redressal system at the gaming platform level, an industry self-regulatory body, and an oversight committee led by the government.
  • Bringing online gaming platforms under the purview of the Money Laundering Prevention Act of 2002:
    • Under the Act of 2002, these platforms will also be considered “reporting entities,” and will be required to report suspicious transactions to the Financial Intelligence Unit-India.
    • This means that any online gaming platform (domestic or foreign) offering real money online games to Indian users must be incorporated under Indian law.
  • Betting apps may be covered by the proposed Digital India Law:
    • Many illegal offshore betting and gambling websites have gained popularity among Indian users because they allow users to transact in Indian rupees via internet banking, UPI, and popular wallets.
    • Despite being based outside of India, some of these websites receive extensive coverage in Indian media.
  • For example, during the recent Asia Cup and US Open, betting websites like 1xBet and FairPlay placed dummy advertisements on streaming networks.
  • In terms of prohibiting games of chance (gambling websites or apps), the proposed Digital India Act (which would replace the IT Act) could include it among the prohibited user harms that will not be permitted.

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December 2022
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