Indian Government Draft Report Backs Online Gaming Regulation

September 16, 2022
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A cross-ministry committee exploring the regulation of India’s online gaming industry has produced a draft report recommending national online gaming legislation and a national regulator, as well as a mechanism to block unregistered platforms.

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A cross-ministry committee exploring the regulation of India’s online gaming industry has produced a draft report recommending national online gaming legislation and a national regulator, as well as a mechanism to block unregistered platforms.

The August 31 draft, revealed by Reuters in a report on Thursday (September 15), supports a regulatory body under the information technology ministry that would identify skill-based games with or without stakes and “seek compliances and enforcement” in that sector.

A national online gaming law, possibly known as the Digital India Act, would empower the regulator with “punishment provisions, along with blocking powers, for the government against prohibited gaming formats”.

Games of skill such as poker, rummy and fantasy sports offered by domestic and India-facing foreign operators would be regulated, while online games of chance such as baccarat and roulette may be shut out of the regulatory space, it said.

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

However, Reuters cited an unnamed senior government source as saying that, per constitutional practice, state governments would retain the power to regulate games of chance rather than prohibiting them entirely.

Esports would also be regulated separately, it said.

The acceleration toward national regulation of a once-taboo sector is continuing amid pressure on the central government to resolve inconsistent online gaming legislation between states, and upward pressure on India’s vast court system to harmonise gaming rulings.

Short of a constitutional amendment, a national regulatory scheme would require voluntary, opt-in support from state governments given the constitution’s delegation of authority on gambling matters to the states.

But any national scheme would likely super-charge expansion of the online gaming sector, even in the event of many states holding out.

The report has been released as the Supreme Court of India, which has consistently protected skill gaming with stakes, prepares to hear an appeal by the Tamil Nadu state government over its anti-gaming legislation that was struck down by the state’s high court.

The Supreme Court is also set to determine today if a similar appeal from the Karnataka state government defending anti-gaming legislation should be added to the docket, a process that may see the two cases merged into one.

Both appeals are fuelled by considerable political and social anxiety over problem gambling, with Tamil Nadu preparing to also amend its legislation to bypass court objections while restoring its ban on online gaming.

In regard to problem gambling, the cross-ministry committee report has backed counter-measures such as product warnings, “responsible advertising” requirements and restrictions on bet size, although Reuters did not elaborate on these.

In addition, the gaming ecosystem would combine self-policing with formal regulation, abide by a code of ethics with due diligence and know your customer (KYC) mechanisms, and file suspicious transaction reports to the central government’s Financial Intelligence Unit, the Reuters report said.

The cross-ministry committee, which was formed in May, combines the expertise of the government’s top think tank, NITI Aayog, with that of secretaries of several ministries, including home affairs, sports and information technology.

The draft report will now be circulated among committee members for fine-tuning before being submitted to the Cabinet for approval, Reuters said.

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