Central Government Reportedly Planning to Appoint a Regulator For the Real-Money Gaming Industry to Curtail Money Laundering

Central Government Reportedly Planning to Appoint a Regulator For the Real-Money Gaming Industry to Curtail Money Laundering
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  • Attreyee Khasnabis April 20, 2022
  • 4 Minutes Read

The online gaming industry in India has grown in leaps and bounds over the past few years. While there is no denying that real-money online gaming is the future, several states and the central government have long since held the notion that uninhibited online gaming can spike crime rates and fuel gambling addiction.

Perhaps understanding the importance of the need to let the industry flourish in an organized manner, the central government is reportedly considering a proposal to create a regulator to stimulate investment and protect player interests. However, some reports suggest that the need for regulation largely stems from concerns about money laundering through real-money games. The government is reportedly contemplating bringing the sector under the Prevention of Money Laundering Act (PMLA), pushing for stricter KYC norms and more oversight of industry operators.

 

Need For Regulation

With the gaming industry expanding exponentially, there is more need than ever before for a regulator. As Rajya Sabha member Sushil Kumar Modi, in an article, pointed out, “This authority could be made liable for the online gaming industry, checking its tasks, forestalling cultural issues, appropriately characterizing games of skill or chance, directing customer assurance and combatting illegality and crime.”

Sushil Kumar Modi
Sushil Kumar Modi

 

The Telangana government’s Principal Secretary of IT, Jayesh Ranjan, has urged gaming companies to implement robust KYC mechanisms. Even the finance ministry and the Reserve Bank of India (RBI) have reportedly expressed concerns about the lack of a regulatory framework for real-money online gaming.

Jayesh Ranjan
Jayesh Ranjan

 

Despite Telangana being one of the first south Indian states to ban online gaming in 2017, Ranjan, while speaking at a gaming seminar organized by IAMAI last September, advocated the need to regulate online gaming in the state instead of an outright ban.

 

AIGF Weighs In

The self-regulatory body for gaming, the All-India Gaming Federation (AIGF), has clear guidelines on its charter to be followed by all its members.

“All member entities offering online games of skill, primarily online fantasy sports games, online rummy, casual games, and poker games, will be duly incorporated/ registered in India or have a corporate presence in India.”

“Participation in pay-to-play game formats in India will be restricted to users in only those Indian states in which the pay-to-play formats of the games are legal…play-to-pay formats of games of members will not be offered to or targeted at any person less than 18 years old.”

The AIGF has suggested that “a National Gaming Authority can be made and ordered to classify games as per the vast majority of skill or chance in ongoing gameplay and end ambiguity over this difference for good.”

 

Status of Online Gaming in India

In 2020, a flurry of blanket bans on the online gaming sector was imposed by several south Indian states. However, the High Courts of Madras (August 2021) and Karnataka (February 2022) overturned the bans in their respective states, urging the state governments to consider regulating the industry instead of outright banning it.

Even though the Tamil Nadu and Karnataka governments preferred to appeal these High Court judgments to the Supreme Court, regulation will be the only route left for them if they eventually fail to get the order overturned.

However, where several southern states have shown apathy towards the industry, other states have tried to accommodate it through regulation.

In January 2021, Meghalaya announced its intention to officially legalize online gaming by overturning the Meghalaya Prevention of Gaming Act of 1970 with the Meghalaya Regulation of Gaming Ordinance 2021. On April 19, the state effectively legalized online gaming. Meghalaya is now the third north-eastern state to legalize online gaming after Sikkim and Nagaland.

In March, during his budget speech, Rajasthan’s Chief Minister Ashok Gehlot had announced that his government was looking to regulate the online skill gaming sector, instilling a positive spur among the industry stakeholders.

Ashok Gehlot
Ashok Gehlot

 

While online gaming is considered illegal in several Indian states, most notably Gujarat, Orissa, and Telangana, it has legal protection in others like West Bengal and Goa.

The cash-rich Maharashtra is another state where the question of the legality of real-money gaming has made its way to the High Court. In January, the Aurangabad bench of the Bombay High Court, in response to a PIL, had asked the state government to clarify its stance on whether an online poker game amounts to gambling or is considered a game of skill. A decision on the matter is still pending.

According to the KPMG-FICCI 2021 report, India’s gaming market will reach ₹143 Billion ($2.03 Billion) by FY22, up from ₹62 Billion in FY21. According to recent reports by Sequoia India and Boston Consulting Group, the mobile gaming market in India is expected to explode to $5 Billion by 2025, up from $1.50 Billion at present, making online gaming one of the fastest-growing sectors in the country.

Given that India now has three online gaming companies that have entered the ‘Unicorn Club,’ namely Dream11, Mobile Premier League, and Games24x7, the industry will only get bigger in the coming days. And regulation will only act as a catalyst for its exponential growth.

Even though regulation might be the need of the hour, pushing the gaming industry under the umbrella of the Prevention of Money Laundering Act (PMLA), as the central government is contemplating, will bring strict oversight on operators, adding more protection to players’ interests and transparency to the burgeoning gaming industry!

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