Gaming Report: Madhya Pradesh to Introduce New Law to Restrict Online Gambling; Gaming Company CEOs Criticize Google’s 30% Tax on Apps & More

There have been several significant developments in the gaming industry recently. Just as Tamil Nadu enacted a law banning all real-money online games in the state, Madhya Pradesh is on the verge of following suit. The state government intends to introduce a new law to curtail online gambling, replacing the outdated Gambling Act of 1876. Chief Minister Shivraj Singh Chouhan recently confirmed the news, expressing concern over the rise of online gambling.

CEOs of several major gaming companies voiced their opposition to Google’s 30% tax on gaming apps at the Consilience 2023 conference. They complained the tax is unfair and extortionist, especially for Indian consumers who already have to pay GST.

Social gaming platform WinZO has approached the Delhi High Court seeking an order to direct Google to include its games on the Google Play Store. The company claims that its games are skill-based and compliant with Indian laws. The court granted an adjournment, listing the next hearing for April 24.

In its bid to curb unauthorized operators, the Ministry of Electronics and Information Technology is working on blocking payment gateway transactions for offshore online gaming sites.

Madhya Pradesh Government to Introduce a New Law to Curb Online Gambling

The government of Madhya Pradesh is likely set to introduce a new law, the Madhya Pradesh Gambling Act 2023, to curtail online gambling in the state. The current gambling act dates back to 1876 and has no provisions regarding online gambling.

In a recent press conference, Madhya Pradesh Chief Minister Shivraj Singh Chouhan expressed concern over the rise of online gambling and stated that the new law would have adequate measures to prohibit such activities, with appropriate punishment for violators.

He said, “Online gambling is a big problem. So we have decided that Madhya Pradesh Gambling Act 2023 will be made in place of the current Gambling Act. The continuous campaign is going on against chit-fund companies in the state.”

Chouhan added, “A special cell headed by the Additional Director General of Police (ADG) is being set up at the police headquarters in the state capital for effective action against chit-fund companies and monitoring the process of refunding investors’ money. So that action can be taken against these companies, and those who have invested their money can be returned to them.”

Madhya Pradesh intends to follow in the footsteps of Tamil Nadu, which recently banned all forms of real-money online gaming. The state government formed a task force in December last year to investigate the legal and technical aspects of banning online gambling. This decision follows a directive from the MP High Court from August last year to take steps to control illegal gambling. The High Court had criticized the government for delaying enacting a law to regulate online gambling.

Under the new law, people engaging in online gambling can be fined up to ₹5,000 and imprisoned for three months, while those providing such services can be liable to pay a fine of ₹10 Lakhs or face imprisoned for three years.

CEOs of Online Gaming Companies Criticize Google’s 30% Tax

CEOs of major gaming companies have spoken out against the 30% tax imposed by Google on gaming apps, calling it “extortionist.” The issue was discussed at the Consilience 2023 conference, organized by the Law and Technology Society (L-Tech) at the National Law School of India University (NLSIU) in partnership with the All India Game Developers’ Forum.

The co-founder of IndiGG, Manish Agarwal, stated that the 30% tax on gaming apps is unfair and likened to “extortion.” Agarwal said that adding an extra 30% tax on top of GST is a significant expense for consumers and unproductive from a gamer’s perspective.

CEO of gaming at JetSynthesys, Anuj Tandon, echoed Agarwal’s opinion. He pointed out that the 30% fee was revolutionary when app stores and play stores were launched, but as the industry and business models have evolved, there needs to be a relook at the rates.

Co-Founder & CEO of Mobile Premier League (MPL), Sai Srinivas, highlighted that the 30% commission might be viable in developed markets like the US. However, in a nascent market like India, industry stakeholders need to ensure game developers receive more revenue to invest in game development and build more games.

Srinivas explained, “Let’s evaluate the unit economics: if a developer charges ₹100, ₹30 go to the play store or app store, and ₹70 goes to the developer. From that ₹70, they have to pay for hosting, user acquisition, and other expenses. My view is that we should provide Indian game developers with more revenue to invest in game development and build more games.”

CEO of Krafton Inc. India, Sean Hyunil Sohn, called for proper intervention by the government and encouraged the development of competition from third-party stores supported by consumers.

Consilience 2023 was the first such conference held after the notification of the new online gaming rules by MeitY. The conference explored topics such as online gaming regulations, taxation of gaming, and new business opportunities that gaming companies can leverage.

WinZO Approaches Delhi High Court For Inclusion of its Games on Google Play Store

Social gaming platform, WinZO has approached the Delhi High Court to direct Google to consider adding its games to the Google Play Store, stating that they are skill-based and compliant with Indian laws. The plea also seeks a declaration that the platform’s games are skill-based.

According to WinZO’s lawyer, Abhishek Malhotra, the games have been independently evaluated by Neelesh S. Upadhye from IIT Madras and are games of skill. Malhotra stated that Google Play Store’s policy only allows for Daily Fantasy Sports and Rummy, even though other skill games are available online.

Google had previously disallowed any apps that permitted the use of real-world currency on its Play Store. However, in September 2022, the company introduced a one-year pilot program that made provisions for DFS and Rummy.

WinZO has been involved in a legal battle with Google ever since the latter began to issue a warning to users seeking to download the WinZO app from the Google Play Store. While a single-judge bench of the Delhi High Court rejected WinZO’s plea against the Google warning in February, WinZO challenged the decision.

In March, a two-judge bench of the Delhi High Court heard the counsels from Google and WinZO and asked Google to consider issuing a lighter warning to users downloading the WinZO app.

Google’s senior advocate, Sajan Poovayya, stated that no games involving money exchange were allowed on the platform until September 2022, when DFS and Rummy were permitted for testing. He added that the company never promised to include all games and said, “I’m a platform; no one can ask me to onboard games, whether skill or chance.”

The plea argues that DFS and Rummy have received legal recognition as skill games from the courts, which is the primary justification stated by the defendants for not permitting other games.

Following the amended IT Rules of April 6, which establish a self-regulatory mechanism, Poovayya said that even if certification is issued, Google is not obliged to onboard because it is a private platform.

The court has noted the plaintiff’s submission and has granted a short adjournment to WinZO’s counsel to take instructions. The case was listed for hearing on April 24.

Central Government Plans to Block Payment Gateways to Illegal Offshore Gambling Operators

The Indian government has taken stringent view against illegal offshore gambling companies. According to recent updates, the Ministry of Electronics and Information Technology (MeitY), the nodal ministry for the online gaming industry, is considering issuing an order to fintech and payment companies to prevent their payment gateways from accessing non-permissible online games.

The move is expected to accelerate the government’s crackdown on platforms that offer betting on specific outcomes. The new provision will discourage internet service providers from being used by illegal gambling and betting companies and help legitimate real-money games establish themselves in the gaming community.

MeitY released the draft online gaming rules in January 2023. The ministry sought feedback from gamers, industry stakeholders, teachers, law firms, industry bodies, and parents. In March, MeitY revealed how it plans to introduce and enforce graded know-your-customer norms for online gaming platforms. On April 6, MeitY officially notified the final rules to regulate the online gaming industry.

The rules bring amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. They also provide for appointing several self-regulatory organizations (SROs), which will declare online games permissible or non-permissible.

“Even though legitimate online gaming companies may comply with the new rules, some illegal actors may continue to operate using payment gateways to operate in India. There is a need to stop these entities from operating,” said the co-founder of an Indian online gaming company.

Rameesh Kailasam, CEO of IndiaTech.org, a body representing internet companies, believes that the new rules will help the RMG companies establish themselves in the online gaming community as the current state interpretations hinder banking services on these platforms. “Hopefully, for the RMG sector, if their games are allowed under the new rules, then it should lead to ease of banking services as well,” he said.

Payment industry executives revealed that fintech companies and banks have proactively blocked access to payment gateways on platforms that fall in the gray areas of the regulations.