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Can Pan-India Regulation Put an End to Policy Liquidity for Online Gaming Startups? 2022

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Can pan-India regulation put an end to the policy trajectory for online gaming start-ups?

Online gaming was once considered a small part of India’s media and entertainment market. However, things are changing as the country’s online gamer population is expected to surpass 390 million in 2021, generating nearly $1.3 billion in revenue. Games are no longer just for children in India. Instead, it has grown into one of the industry’s brightest examples.

In India, the Covid-19 pandemic has seen a significant increase in the last few years in the online gaming business that has been growing in the country for the past 5-6 years. In 2019, the industry spawned its first unicorn, Dream11, and in 2021 and 2022 respectively spawned his two businesses, MPL and Games 247, joining exclusive clubs. Gaming startup Nazara Technologies went public last year on the stock exchange.

The government has identified gaming, hailed as India’s ‘sunrise industry’, as one of the potential job-creating sectors. The Animation, Visual Effects, Games and Comics (AVGC) Promotion Task Force was established by the Ministry of Information and Broadcasting earlier this year to make recommendations on the development of domestic capacity to meet both Indian and international demands.

Nevertheless, despite these promising improvements, business has been plagued by regulatory uncertainty over the past two years. Over the past few years, India has made multiple announcements banning internet gaming by many governments including Telangana, Andhra Pradesh, Tamil Nadu, Karnataka and Kerala.

Most high courts have dismissed these notices when legally challenged, but the proposed ban initially caused a great deal of backlash and confusion in business.

Kerala wanted to ban playing rummy for stakes, while some states wanted to ban all real money games. With consumers having to invest their money in both fantasy sports and real money games, the line between gambling and gaming often blurs.

Fantasy games are virtual games in which players create a fictional team of real athletes in a particular sport, as opposed to skill-based games such as Ludo or Poker, where users can play for real money.

The complexity of regulations strains the gaming ecosystem as a whole, as the nature of the rules varies from state to state. As a result, companies are now asking the federal government for uniform regulation.

Confusion Over Game of Skills and Game of Chance

List II of Schedule 7 of the Constitution of India provides the power to enact laws governing ‘sports’ and ‘betting and gambling’. Despite various states adopting different regulations on gambling and sports, the line between “games of skill” and “games of chance” is not often drawn.

Despite recommendations and judicial observations to exclude skill-based games from the definition of gambling, states have frequently changed existing laws or issued new guidelines restricting all types of Internet gaming. I was.

“The debate over whether Internet games are games of skill or games of chance has been going on for a long time. Whether the game uses real money or not is another matter. Final Considerations is whether the game involves betting on contingencies that have not yet occurred or may occur in the future.Those are the three main issues,” said the legal expert, who requested anonymity. I’m here.

Gambling law provisions do not apply to “mere games of skill”. However, “mere skill” is not defined in law. This lack of definition of the game of skill is a big problem, said Ketan Godkhindi, chief strategy officer at Witzeal Technologies.

He added that there is a widespread belief among the public that all online games are nothing more than betting and gambling.

According to industry experts, the immediate need is to have a clear definition of skill-based games and standard parameters on how to distinguish them from games of chance.


Conflict within the online gaming industry

Regulatory uncertainty is also exacerbating the problem by causing fragmentation in the Indian online gambling business. Stakeholders in the gaming industry are divided over legal issues, according to sources in the sector. Many industry insiders believe that if an online game contains no wagering elements at all, it is getting into unnecessary controversy with real money games.

Creators of the esports business are eyeing with many organizations including E-Gaming Federation (EGF), Federation Of Fantasy Sports (FIFS) and All India Gaming Federation (AIGF) working in different directions claims to be the only Select some famous players.India
Online Gaming Industry Facing Regulatory Destabilization

The gaming startup’s business has also been hampered by unexpected bans implemented by various governments.

PlayerzPot co-founder and director Mitesh Gangar argued that whenever a state imposes a ban, gambling operators lose their user base in that state, directly or indirectly affecting revenue. I’m here. PlayerzPot, for example, quickly lost about 15% of its user base when the government of Tamil Nadu banned wagering-based online games last year.

Such catastrophes also affect a company’s growth prospects, according to Ganga. It will require new long-term strategies and budget allocations.

Yash Pariani, Founder and CEO of House of Gaming, echoed similar sentiments when he said: PubG was once India’s most popular esports. After the hiatus, the popularity of both BGMI and Freefire skyrocketed. However, the abundance of brands makes it difficult for entrepreneurs to plan both entry and survival strategies. ”

Witzeal’s Godkhindi argues that the unexpected prohibition puts pressure on the technical team as the system has to be reconfigured overnight. Priorities change overnight to take swift action, execute commands, and ultimately disrupt the entire strategy. According to him, these events also affect the trust of young business owners, partners, advisors, direct and indirect employees.

The founder of a real-money gaming company stressed that regulatory volatility is making it harder for gaming startups to attract investors. Despite recognizing the potential of the gaming industry, investors are becoming more cautious when choosing to invest.

Way forward

According to FanClash co-founder Richa Singh, there is an immediate need to create a gaming ecosystem with a uniform national regulatory structure that can survive under acceptable laws and oversight.

“The industry expects a precise definition of online gaming that distinguishes between skill-based and chance-based games, and taxation that will be assessed based on platform fees rather than entry fees,” said a participant in the esports market. Longer-term self-regulation could help provide clearer information with a greater awareness of the complexities between different companies in this sector,” Singh added.

Amid the upheaval, there have been some recent developments at the central government level, bringing optimism to the struggling sector. An inter-ministerial commission to regulate the country’s gambling sector was established in his June. This group creates the rules for the Indian online gambling market and selects the nodal ministries to oversee it.

The industry feels it can rely on self-regulation before specific rules from the Indian government come into force, even if the whole process takes time.

Prakriti AlolaEdit