Online Gaming Needs Regulatory Body In India To Classify Games Based On Skill Or Chance Strict Rules Govt Panel

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A panel of Prime Minister Narendra Modi’s top officials have said that India needs to have a regulatory body which will classify online games based on skill or chance. The body should also impose strict rules to ensure prohibited formats remain blocked and to come down hard on gambling websites, as per a report prepared by the government panel, as seen by Reuters. This development comes at a time when online gaming and online gambling apps are put under the scanner, with state governments such as Tamil Nadu and Kerala looking to ban games such as rummy and others entirely.

India’s mobile gaming industry currently stands at $1.5 billion this year, and is expected to reach $5 billion by 2025. The report from the Central panel is expected to affect the future of this potentially lucrative market. The panel has reportedly been drafting regulations for the online gaming sector in the country for months. 

In its confidential draft report dated August 31, the panel of government officials calls for creation of a new regulatory body under India's IT ministry to determine which online games qualify as games of skill, then "seek compliances and enforcement."

To streamline the legal framework, the 108-page report says India needs a new federal online gaming law, which will provide regulatory flexibility "with punishment provisions, along with blocking powers, for the government against prohibited gaming formats".

Though the panel considered only online skill games, and not gambling, which is handled by states, it noted that many offshore betting and gambling websites that are illegal in India have become popular among Indian users. The new legal framework would apply to both free and pay-to-play skill games.

"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 stated.

A senior government source said that although the federal government could classify chance-based games as harmful, it would let states make the final call on whether to allow gambling.

The report noted that state governments already find it "difficult to implement and monitor geo-fencing measures" to ensure that no user in their region is accessing illegal forms of gambling or gaming.

The IT ministry will finalise the report after receiving further comments from panel members, who are some of Modi's top bureaucrats, including the heads of the revenue and sports ministries. It will then be sent to the cabinet secretariat for approval, though there is no timeline for finalisation.

As per rulings of multiple Courts, ‘games of skill' are legitimate business activities protected under Article 19(1)(g) of the Indian Constitution since they do not fall under the purview of ‘gambling'. These precedents have repeatedly emphasised that games of chance constitute gambling activity while games of skill do not.

Union Finance Minister Nirmala Sitharaman in July categorically termed online gaming "nothing but gambling". "Whether it is horse-racing or online gaming or casinos, the common thread that the Committee highlighted was they are part of betting and gaming,” Sitharaman said. "In other words, they are essentially gambling. There may be an element of skill in it or an element of chance in it. But essentially, all the three are gambling.”

In August, the Group of Ministers (GoM) met industry bodies and leading operators to discuss the valuation approach for GST on online gaming and attempted to understand how online skill gaming is different from betting and gambling.