Online Gaming Rules: A New Dawn For Real Money Games? For a long time, the online real money gaming companies have been equated with gambling. However, the new rules by government on gaming is expected to give regulatory clarity to sector besides boosting investor confidence, innovation as well as employment opportunities in this sunrise sector, say experts
This story appears in the May 2023 issue of Entrepreneur India. Subscribe »
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W ith 450 million gamers, India is one of the world's fastestgrowing online gaming markets. Gaming skyrocketed especially in the midst of the Covid-19 lockdown where most Indians, especially youngsters leaned towards online games due to scarcity of entertainment choices to stay connected in isolation. Interestingly, of the total of 516 online gaming companies in India, nearly one-fourth or 106 companies are real money gaming companies (RMGs), according to data from market intelligence firm Tracxn. The value of the real money gaming segment of India's online gaming market is expected to increase by 11 billion INR to reach 60 billion INR in the next four years.
Unlike casual games, realmoney games (RMG) reward players with real cash. A user makes a deposit in cash or kind with the expectation of earning winnings on that deposit. Card-based games such as rummy and poker were part of the first wave of real money games in India. Fantasy sports and quizzing games are among those driving the second wave. Some of the prominent online real money gaming companies in India include Dreams11, Zupee, MPL, Adda52, RummyCircle and Ace2Three.
Battling gambling perception
For a long time, the online real money gaming companies have been equated with gambling. In fact, most of the suicide cases in the states have been linked to the addictive nature of the games and involvement of real money. In their defense, however, companies have been making a "game of skill" argument, wherein using one's mind and acumen to win money can't be termed as an illegitimate activity and plagued as gambling.
Facing blanket bans
In the wake of reports of people committing suicides by losing heavily in online real money games, real money gaming companies witnessed themselves banned by many states in the country including Karnataka, Tamil Nadu and Telangana. However, according to the gaming industry, a blanket ban on real money games by the state governments on legitimate Indian operators will have an adverse effect, and push more and more people towards illegal offshore websites. "Bans, such as that which was introduced recently by the Tamil Nadu government, disregards the six decades of established legal juris prudence that protects online games of skill, and will lead to the proliferation of offshore gambling websites and apps which flourish when constitutionally protected India apps are banned," says Roland Landers, CEO, All India Gaming Federation.
Concurs Ankur Singh, Founder and CEO, Witzeal Technologies, "The blanket ban imposed by certain states is impacting the industry, causing disruption and lack of uniformity. Hence there is an urgent need for a central regulation to have utmost clarity and uniformity. If we fail to do so, other countries may benefit from the chaos by bringing in uniform central legislation and creating investment opportunities. We have seen this in the past where manufacturing units moved from Maharashtra to Gujarat within India and now, we are seeing this again internationally, where manufacturing units are shifting bases from China to India and other countries.
New rules by government
In December 2022, the Ministry of electronics and information technology (MeitY) was appointed as the nodal ministry for online gaming. Few months later, on April 6, 2023, the government notified new rules to monitor online gaming platforms. Under these rules, real money games involving wagering or betting have been prohibited. Further, the online gaming platforms will be regulated by Self-regulatory Organizations (SROs). The latter will comprise industry players, gamers, an educationist, a psychology or mental health professional, and an (ex)member of an organization working in safeguarding child rights. The government will delegate the responsibility of approving games to operate in the country as per guidelines to these SROs. Under the guidelines, SROs will be required to create a framework for the protection of users/players against financial loss and fraud on websites and gaming addiction.
"Balanced regulations for gaming, such as that offered by the newly notified IT Rules, which provides due diligence obligations and oversight mechanisms for online games, has provided a fillip to investor sentiment," adds Roland.
Protecting consumer interest
While regulations by the government are welcomed across the industry and are expected to give it more teeth, the big question that arises is: are they enough? Do regulations absolve companies from taking up the onus on themselves? While speaking to Entrepreneur India, some companies said that they are already taking steps for consumer safety.
"Many of the rules that will come into effect with this amendment including age verification, responsible gaming practices etc are already being followed by us as part of the code of conduct of E-Gaming Federation (EGF) of which we are members. These rules will support this sunrise sector to become a significant contributor to India's techade," says Trivikraman Thampy, Co-Founder and CEO, Games24x7, which boasts of various games like rummy circle and 11 circle.
"We constantly monitor our players and take immediate action if we notice any unusual activity. We work closely with law enforcement agencies to identify and address any issues related to addiction or loss of life savings due to gaming and are committed to implementing additional measures to ensure the safety and well-being of our players," adds Singh.
Bot certification need of the hour
While the companies are taking various measures like eKYC, anti-addiction measures, and restricting below age 18 gamers from accessing the games, experts feel that audit of algorithms and their script (code) that works in the backend is of utmost importance. "It should ideally be done by a third party who doesn't have any involvement with their company and operations. The government should have an oversight mechanism over it so that it can be ensured that all the random number generators in the backend and scripts and algorithms are not read or weighted in a specific way to promote certain behavior in the gamers. Ideally, it should be once or twice a year," says Harish Chengaiah, Founder, Outlier games.
Experts also think that no-bot certificates, which are issued globally to companies, make playing games much safer and should be adopted by India. "It is to ensure that they are playing against real people and not AI simulating as real people. When a code is reviewed, this concern is also looked at. It is a subset for a larger evaluation process," adds Chengaiah.
In FY 2022-23, $64.5 million poured into the online gaming industry. Of which a whopping $48.5 million was raised by real money gaming companies alone, as per data shared by Tracxn. The new regulations are expected to further boost investor sentiment.
"Online gaming has the potential to contribute significantly to India's digital economy and this much needed regulatory clarity will boost investor confidence, innovation as well as employment opportunities in this sunrise sector," adds Thampy.