An alcoholic gambler selling off his wife to friends in Bhagalpur, an accountant swindling crores from the Vanchiyoor treasury in Travancore, a 29-year-old contract worker at ISRO, Thiruvananthapuram, hanging himself in a rubber plantation over mounting debts running into several lakhs and a 13-year-old boy from Amalapuram in Andhra Pradesh siphoning off lakhs from his mother’s account are a few real-life stories that show how deadly online gaming is becoming. During the pandemic lockdown, online gaming was like manna from heaven. From ludo to PUBG, poker to rummy, the exponential growth in users—India recorded an estimated 365 million gamers in 2020—aided by a high penetration of smartphones and affordable internet data plans, made the gaming industry the next big thing in the country. Industry bodies made rosy predictions—online gaming in India was set to grow from a Rs 90 billion industry in 2020 to Rs 143 billion one by 2022.
No Dice, All Bets Are Off
Online gaming is in a regulatory limbo due to continuing uncertainty over the roles of skill and chance
And then a slew of suicides, especially in South India, brought online gaming under the scanner. The proliferation of loan apps that charge hefty interest rates and shame people if they fail to pay up added to the complexity. With court cases highlighting how operators were luring people with celebrity brand ambassadors like cricketers Sourav Ganguly and Virat Kohli and actors Tamannaah and Rana Daggubati, besides advertisements promising tenfold returns, the ‘sunrise’ industry has entered a corridor of uncertainty.
In November 2020, the Tamil Nadu government passed an ordinance banning online gaming activities that entail placing bets and where the result is influenced more by chance than skill. Online rummy operators have moved the Madras High Court challenging the ordinance. Led by four of the biggest rummy companies—Rummy Circle, A23, Junglee and Rummy Culture—the operators argue that it impinges on the right to free trade and commerce. Meanwhile, Karnataka and Kerala are thinking on Tamil Nadu’s lines and, if these three states join Andhra Pradesh and Telangana, it will spell doom for the online rummy business that accounts for approximately 50 per cent of India’s online skill gaming industry, estimated to be worth around Rs 5,250 crore by KPMG. The potential of the business can’t be denied, however, and the Union ministries of Information and Broadcasting and Information Technology have made some effort in recent weeks to address the grey areas. While the I&B ministry has managed to stop operators like MPL and Games24x7 from running advertisement campaigns that are silent on the perils of placing bets, the IT ministry has not been successful in preventing illegal betting sites to thrive even in states that have banned online gaming activities.
“Some concerns surrounding real money online gaming, especially those relating to addiction and allurement using enticing advertisements, are justified,” says Jay Sayta, a regulatory expert on gaming. “As individuals have a propensity to lose vast sums of money on online gaming websites, regulation is definitely required. Banning all kinds of games for stakes will just lead to their proliferation in the grey market. It is also impossible to regulate the internet at the state level as it leads to problems of enforcement and compliance.”
On December 14, 2020, a division bench of the Delhi High Court comprising Chief Justice D.N. Patel and Justice Prateek Jalan asked the Centre to file a reply on a PIL seeking a direction to the IT ministry to exercise its powers under sections of the Information Technology Act, 2000, to prevent online gambling websites. Stating that gambling or wagering on games of chance is illegal and most state legislations have expressly forbidden it, the petitioners sought the quashing of an order dated October 21, 2020, in which the Centre had said it did not have the competence to block gambling and betting websites.
“Due to the bans in Andhra and Telangana, law-abiding operators like us immediately stepped out of the market, while illegal and unscrupulous operators continue to take customers,” says Bhavin Pandya, co-founder and CEO, Games24x7. “This is why the Rs 1,500 crore Chinese gambling scam happened in Telangana, and now you have a number of reports about players continuing to access online rummy from these jurisdictions using fake GPS on sites that do not intend to follow the law. It exposes players to the worst operators.”
Meanwhile, the NITI Aayog has added to the consternation of operators by floating a draft paper in December 2020 titled ‘Guiding Principles for the Uniform National-Level Regulation of Online Fantasy Sports Platforms in India’. This is the government’s first attempt to put systems in place in a rather unregimented industry. NITI Aayog’s focus on fantasy sports, however, has irked most operators. “NITI Aayog should set up a single self-regulatory body to standardise regulations governing the entire skill gaming industry,” says Sameer Barde, CEO, The Online Rummy Federation, the self-regulatory body for India’s online rummy industry. “Like fantasy sports, India’s skill gaming industry suffers from the same byzantine set of state-specific laws and regulations. There is a need to regulate the broader skill gaming industry, not just fantasy sports. Given the significant overlap between fantasy sports and other games of skill (including pool, carrom, quiz and rummy), such an approach would benefit the country.”
NITI Aayog didn’t say who they consulted before releasing the paper. Top operators like MPL, Games24x7, Paytm First Games or Head Digital Works say they were not invited. “The Frontier Technology Vertical of NITI Aayog has released the draft discussion paper in its capacity as a policy think-tank on a topic that is current and where there is potential to leverage technology,” says Anna Roy, advisor (data management and analysis), NITI Aayog. “The paper was released for public consultations from the entire ecosystem of stakeholders. I request you to take the draft discussion paper in its present form with no further qualifications at this stage.”
Industry sources say the focus on fantasy sports is understandable. Coming at the back of IPL, the government wants to ride cricket’s popularity and maximise the revenue potential of a particular fantasy operator. Fantasy also has the sports ministry’s support at a time when Esports is set to become a medal sport in the 2022 Asian Games. The Federation of Indian Fantasy Sports, a body formed by owners of fantasy cricket operators Dream11, is said to have had a major role in drafting the NITI Aayog paper, though FIFS chairman Bimal Julka denies this. Controlled by Dream11, a sponsor of the Indian cricket board (BCCI), FIFS is a self-regulatory body with a vice-like grip on a clutch of fantasy operators like My11Circle. Endorsed by M.S. Dhoni, Dream11 faces charges of tax evasion reportedly amounting to over Rs 2,000 crore in the Supreme Court. In March 2020, the apex court also stayed a Bombay High Court order that had said fantasy sports involved skill and didn’t entail betting or gambling.
Online operators claim that the broader skill gaming industry has been attracting a lot of foreign investment from aggressive global players like Sequoia and Tiger Global. Over Rs 5,000 crore in foreign investment has come into India in the overall skill gaming industry. While 10 non-fantasy sports companies have successfully raised capital, only two fantasy sports players have attracted FDI. “Due to lack of a structured and regulated framework for operators and state authorities, online gaming hasn’t reached its true economic potential,” says Piyush Choudhary, director of sales (India subcontinent) of Sportradar, an international organisation that sits at the intersection of sports, media and betting industries. Expert Jay Sayta adds: “We need a central legislation to regulate the industry and provide guidelines for state governments on what kinds of games are permissible, along with rules for limits on game play, KYC, anti-laundering etc. It seems the Centre is looking at amending the IT Act, 2000, to define and regulate online gaming. It will end the regulatory confusion around online skill gaming.”