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Online Gaming Market in India, and proposed rules

  • Category
    Economy
  • Published
    14th Oct, 2022

Context

A task force set up by the Ministry of Electronics and Information Technology (MeitY) has prepared a final report of its recommendations to regulate the online gaming industry in India.

Background

  • Online gaming has flourished during the pandemic. The average time spent on online gaming has gone up almost 65% from pre-Covid levels.
  • India currently has no comprehensive legislation with regards to the legality of online gaming or boundaries that specify applicable tax rates within the betting and gambling industry.
  • In this regards a task force was mandated to study global best practices and recommend a regime for a uniform regulatory mechanism for online gaming.

About

Recommendations of Task Force:

  • A Central-Level Law: A central-level law should apply to real money and free games of skill, including e-sports, online fantasy sports contests, and card games among others.
    • Casual games with no real money element in the form of stakes may be kept outside the scope of such rules. Unless they have a high number of users in India, or permit the publication or transmission of information in the nature of any inappropriate content like violence, nudity, addictive content or misleading content.
  • Dispute Resolution: A three-tier dispute resolution mechanism, similar to that prescribed under the Information Technology Rules, 2021 for online streaming services, consisting of:
    • A grievance redressal system at the gaming platform level,
    • Self-regulatory body of the industry, and
    • An oversight committee led by the government.
  • Formation of a Regulatory Body: This body will determine what qualifies as a game of skill or chance, and accordingly certify different gaming formats, seek compliance and enforcement.
  • Online Gaming platform Mechanism as a legal entity: Any online gaming platform – domestic or foreign– offering real money online games to Indian users will need to be a legal entity incorporated under Indian law.
    • These platforms will also be treated as ‘reporting entities’ under the Prevention of Money Laundering Act, 2002.
  • They will be required to report suspicious transactions to the Financial Intelligence Unit-India.
  • Nodal Ministries: MeitY may act as the nodal ministry to regulate online gaming, except for the e-sports category on which the Department of Sports can take the lead.
    • Certain other aspects of online gaming such as advertisements, code of ethics relating to content classifications etc. could be regulated by the Information and Broadcasting Ministry.
    • The Consumer Affairs Ministry can regulate the sector for unfair trade practices.

Online Gaming Market in India:

  • Market growth: The online gaming industry in India grew at a compounded annual growth rate (CAGR) of 38% between 2017-2020, as opposed to 8% in China and 10% in the US.
  • New user base: India’s percentage of new paying users (NPUs) in gaming has been the fastest growing in the world for two consecutive years, at 40% in 2020 and 50% in 2021.
  • Revenue generation: The revenue of the Indian mobile gaming industry is expected to reach $5 billion in 2025.

Banning of Online Gaming:

  • Many social activists, government officials and those in law enforcement believe that online games like rummy and poker are addictive in nature, and when played with monetary stakesleads to depression, mounting debts and suicides.
  • Earlier, the World Health Organisation (WHO) had announced a plan to include “gaming disorder” as a mental health condition.

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