India panel calls for regulatory body, new law for online gaming: Report

The long awaited report is seen as shaping the future of the mobile gaming industry in India, which is estimated to reach $5 billion by 2025, from $1.5 billion this year.
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India should create a regulatory body to classify online games as based on skill or chance and will look to introduce rules to block prohibited formats and take a stricter stance on gambling websites, reported Reuters.

The panel of Prime Minister Narendra Modi's top officials has for months been drafting regulations for the country's online gaming sector, where foreign investors such as Tiger Global and Sequoia Capital have backed gaming startups Dream11 and Mobile Premier League (MPL), hugely popular for fantasy cricket.

The much-awaited report is seen as shaping the future of the mobile gaming industry in India, estimated to reach $5 billion by 2025, from $1.5 billion this year. It comes amid rising concerns over games causing addiction and "inconsistent state laws" disrupting business.

In its confidential draft report dated Aug. 31, viewed by Reuters, the panel of government officials calls for a new regulatory body under India's IT ministry. This body will look to classify certain online games as games of skill, then "seek compliances and enforcement."

This 108 page report also notes a need for a federal online gaming law, which will provide regulatory flexibility "with punishment provisions, along with blocking powers, for the government against prohibited gaming formats".

Stricter enforcement

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 as well as 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.

States to take call on gambling games

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

State governments, per the report, find it "difficult to implement and monitor geo-fencing measures" to ensure that no user in a given region is accessing an illegal form of gambling or gaming.

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

Addressing addiction

India may soon have some solutions for addiction to games, as the draft is also said to be working on the issue. A senior gaming industry executive said the recommendation that a regulatory body evaluate different formats of online games could raise entry barriers for new players and increase scrutiny of companies' current offerings.

As per the report, a spike in interest among young players of such games had led to addiction that often caused, financial losses or even suicide.

However, it is likely that fresh regulation will bring in regulatory clarity, certainty and investments into the sector once implemented, a senior executive told Reuters declining to be named due to the sensitivity of the matter.

The report calls for laws and rules to include so-called "de-addiction measures" such as periodic warnings and advisories and fixing deposit and withdrawal limits. It also calls for "responsible advertising".

After receiving suggestions from India's revenue department, the government panel stated that online gaming companies should be required to report any "suspicious transactions" to the government's Financial Intelligence Unit. 

Edited by Akanksha Sarma

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