In the last month, Tamil Nadu and Andhra Pradesh have both banned online fantasy gaming, especially those involving gambling and wagering. These are games that involve real money such as fantasy sports betting, or online card games. The Andhra Pradesh Legislative Assembly passed the AP Gaming (Amendment) Bill 2020 by voice vote on December 1 while Tamil Nadu passed an ordinance promulgated by Governor Banwarilal Purohit, which bans wagering or betting in cyberspace using computers or any communication device.
Both states said that online gambling causes youngsters to be duped and pushes them into debt. The move also came after some youngsters died by suicide over the past few months. Now Karnataka is also said to be mulling banning online gambling.
While there are concerns over what such games are doing to youngsters, there is an argument of it being gambling versus a game of skill. Now, the industry is calling for a largely unregulated sector to be regulated by a proper framework.
In Tamil Nadu, those found playing online gambling games will be levied a fine of Rs 5,000 and face six months’ imprisonment. The state has also banned electronic transfer of funds for wagering or betting, and distributing winnings and prize money. The ordinance passed by the state also seeks to punish those who run online gaming companies that involve wagering and betting.
In AP, the first offence attracts imprisonment of up to one year and a fine of Rs 5,000, with imprisonment extending up to two years and fine up to Rs 10,000 for every subsequent offence.
Complying with the bans, gaming apps have made the games non-accessible in these states for tournaments involving real money.
Sai Srinivas, co-founder and CEO of Mobile Premier League (MPL), says that they have in-built geo-blocking to ensure that users from the states in question are unable to access cash or real money tournament formats for any of the games they offer.
On the other hand, Sunit Warriach, CEO of RummyBaazi.com, says, “We have been prompt in banning all the accounts and refunding the amount in users’ wallets from those states. Furthermore, we shut down all the marketing activities in those states and do not entertain any new registrations on the app.”
However, free versions of the games that do not involve real money transactions are still available.
The ban on online gaming by a few states comes at a time the industry has been witnessing immense growth. The industry grew by 40% in 2019, according to a report by the Federation of Indian Chambers of Commerce & Industry and Ernst and Young. This report, released in March 2020, projected the sector to reach Rs 18,700 crore by 2022. Then came the pandemic that accelerated the growth of the industry, and this was also seen in the number of online gaming startups that raised funds over the past few months.
Online fantasy gaming platforms are governed by the Public Gambling Act of India, 1867, according to which gambling is illegal in any form. However, these platforms have long argued that games such as rummy and poker are games of skill, and do not amount to gambling. They have received some validation by some High Courts that have recognised them as games of skill. This exemption was seen in the Tamil Nadu Gaming Act that exempts ‘games of mere skill’. However, Telangana (which banned online gaming in 2017) and AP have put a blanket ban on online games.
According to Surbhi Kejriwal, Rishabh Bharadwaj and Abhishek Rao of law firm Khaitan & Co, while the TN ordinance seeks to prohibit online real money games such as rummy and poker, the prohibition does not apply to games of mere skill. However, online rummy and poker are permitted under the prevailing legal framework. The Supreme Court of India has held that rummy is a game of skill. Similarly, poker is permitted in West Bengal, Sikkim, Nagaland, Goa, and Daman and Diu (by legislation) and Karnataka (by judicial precedent).
This results in further confusion in an industry already marred by legal multiplicity and uncertainties, experts say. It is pertinent to note that Google Play Store also doesn’t allow apps that promote or are involved in gambling or betting involving real money.
“We hope that this confusion will be cleared by the Tamil Nadu Legislative Assembly once it’s in session and that online games involving skill will be permitted. The Assembly is required to approve the Ordinance, with or without changes, within six weeks of reassembling pursuant to Article 213 of the Constitution of India, failing which the Ordinance will cease to be in force,” the authors said in an analysis on the TN ban.
With online fantasy sports such as fantasy cricket or football also involving real money, gaming companies are having to bear the brunt of these bans as well.
“We wish to make it clear that as per Indian laws, fantasy sports are completely legal and allowed all over India, except in a few states… They are a game of skill, just like chess and quiz,” Paytm First Games told The Week in an interaction.
The industry has been calling for regulation of the sector with a proper framework instead of a ban. Currently, there are several industry bodies such as the Federation of Indian Fantasy Sports (FIFS), All India Gaming Federation (AIGF), The Online Rummy Federation (TORF), among others, which ensure some form of self-regulation in the industry and look to protect the interests of the industry by making representations to the government.
“The industry has been having dialogues with both state and central governments consistently along with the federations. We have presented a detailed report of how all the members are self-regulated and follow the charters laid out by relevant authorities/bodies like AIGF, FIFS, TORF, etc., that have been drafted by ex-Chief Justices and senior government officials. We’re hopeful that the government will consider our representations and regulate the sector with a proper framework instead of implementing bans,” Sunit says.
While the argument of gambling versus game of mere skill has been going on for long, Sunit says that the need of the hour is to differentiate between Indian companies and the offshore companies that run illegally, and actions to be taken based on that.
Earlier this month, NITI Aayog published a draft guidelines proposal for the online fantasy gaming sector, while recognising the potential of the industry. It said that the sector grew at a compound annual growth rate of 212% from two million users in 2016 to 90 million in December 2019, with the potential to attract Foreign Direct Investment (FDI) of more than Rs 10,000 crore over the next few years and generate 1.5 billion online transactions by 2023.
While saying that the sector has the potential to generate employment in India, the proposal seeks to establish an independent oversight body (a self-regulating body) that will control operational issues of the platforms and companies in the space. With some states banning these apps and others allowing it, the proposal seeks to bring uniformity in regulations.
This has been welcomed by the industry, especially as it validates the sector’s potential.
“With progressive, light-touch regulations in place, India will be well-placed to become a global leader in e-sports, a sector that is likely to create millions of job opportunities. We strongly believe that the self-regulatory body proposed by NITI Aayog should be set up on the principles of fairness, transparency and independence, so it can help spur further innovation and ensure a level-playing field for all platforms,” MPL’s Sai Srinivas says.
Meanwhile, Sunit says that a centrally regulated system is in the best interests of the industry that’s growing at such a rapid pace. He adds that the steps proposed by NITI Aayog to formulate and centralise the online gaming fraternity shall serve as the foundation to a more stabilised, controlled and systematic niche.
“It promotes the ideology of skill-based gaming, which is what fantasy sports is at its core, and favours the overall growth of the sector. We also want to urge them to have a broader perspective and consider other games of skill such as poker and rummy that are growing rapidly in India,” he adds.