The online gambling market in India and the proposed rules to regulate it

An interministerial working group, set up by the Ministry of Electronics and Information Technology (MeitY) to propose the outlines of legislation at the national level to regulate online gambling, has proposed the creation of a central industry regulator, clearly defining what games of skill and chance are, and bringing online gambling under the Prevention of Money Laundering Act 2002, among others.

The task force, set up by MeitY in May 2022, included the CEO of the government think tank Niti Aayog and secretaries from ministries such as IT, interior, finance, information and broadcasting and the consumption, among others. The task force reportedly prepared a final report of its recommendations and submitted it to the Department of Computing.

Why a law at the central level?

Until now, online gambling has been a state subject, but state governments have said that they find it extremely difficult to enforce certain rules such as geo-blocking certain applications or websites within the territory of their State. Additionally, there are concerns that rules adopted in one state may not be applicable in another, which has led to inconsistencies in the way the online gambling industry is regulated in the country. State governments also do not have enough blocking powers like the Center to issue blocking orders for offshore betting sites.

Stakeholders highlighted a number of societal concerns that may arise from the proliferation of online gambling in the country. There have been a number of reported incidents of people losing large sums of money on online gambling, leading to suicides in various parts of the country. Along with this, there is currently no regulatory framework to govern various aspects of online gambling companies, such as the establishment of a grievance mechanism, the implementation of player protection measures, the protection of data and intellectual property rights and prohibition of misleading advertisements.

For online gaming companies, the inconsistency has led to uncertainty. The idea within government is to have a nodal agency that will deal with all issues related to online gambling, including the introduction of a uniform law to determine what forms of online gambling are legally permitted.

What is the size of the online gaming market in India?

India’s mobile gaming industry revenue is expected to exceed $1.5 billion in 2022 and is expected to reach $5 billion in 2025. The country’s industry grew at a CAGR of 38% between 2017 and 2020 , compared to 8% in 2025. China and 10% in the United States. It is expected to grow at a CAGR of 15% to reach Rs 153 billion in revenue by 2024. India’s percentage of new paying users (NPUs) in gaming has seen the fastest growth in the world for two consecutive years 40% in 2020. and reach 50% in 2021.

According to a report by EY and FICCI, revenue from transaction-based games grew by 26% in India, with the number of paying players increasing by 17% from 80 million in 2020 to 95 million in 2021.

What are the task force’s recommendations?

According to a source familiar with the task force report, a central-level online gaming law should apply to real-money and free-to-play games of skill, including esports, online fantasy sports competitions and card games, among others. Casual games without a real money element in the form of wagering may be kept outside the scope of these rules, unless they have a high number of users in India, or allow posting or transmitting information in the form of any inappropriate content such as violence. , nudity, addictive content or misleading content.

He also recommended creating a regulatory body for the online gambling industry, which will determine what is considered a game of skill or chance, and certify different game formats accordingly, seek compliance and application.

A three-tiered dispute resolution mechanism, similar to that prescribed by the Information Technology Rules, 2021 for online streaming services, consisting of a grievance system at the gaming platform level, industry self-regulatory bodyand a government-led oversight committee should be set up for online gambling.

Any online gaming platform – domestic or foreign – offering real money online gaming 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 and will be required to report suspicious transactions to the Financial Intelligence Unit-India.

Which ministry will be in charge of regulation?

The task force suggested that MeitY could act as the nodal ministry to regulate online gambling, except for the e-sports category where the Ministry of Sports can take the lead. The scope of regulation by MeitY should only cover online games, i.e. games of skill, and issues of online betting and gambling being games of chance by nature should be excluded from its scope, the working group learned.

Certain other aspects of online gaming such as advertisements, content ratings code of conduct, etc. could be regulated by the Ministry of Information and Broadcasting, while the Ministry of Consumer Affairs can regulate the sector for unfair commercial practices.

What did the offshore betting application working group say?

Regarding the prohibition of gambling, gambling websites or online applications, the Digital India Bill may include it in the list of prohibited harms to users which will not be not allowed, the task force said.

“Many offshore betting and gambling websites which are illegal in India have become popular among Indian users. Although based outside India, some of these websites are widely advertised in Indian newspapers and TV channels and allow users to transact in Indian rupees through popular digital payment methods such as online banking, UPI and popular wallets,” the task force learned. said so in his report.

Last month, The Indian Express had reported that betting sites such as 1xBet and FairPlay had placed substitute advertisements on streaming services during the Asian Cup and US Open.

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