Money gaming ban set to play spoilsport

DREAM11, RummyCircle, Pokerbaazi — these are just some of the familiar names associated with the online gaming industry. The first is well known due to its connections with cricket and football as fantasy sports games have become hugely popular. The others are linked to popular games of skill played all over the world at social and professional levels. The online versions of these and innumerable other games are played largely with real money, and this practice has now come under scrutiny.

The outcome is the Promotion and Regulation of Online Gaming Act that bans all real money games (RMG) but seeks to support social and educational online games as well as electronic sports.

At the outset, one must explain what defines a real money game. The new law says an RMG is any online game, which could be based on skill or chance, where a user deposits money or places a stake with the hope of winning something valuable, usually money. This is completely different from simply purchasing a game online.

The passage of the law has created an uproar in the country’s burgeoning real money gaming sector. Industry associations estimate that about two lakh people are directly employed by such platforms, with another one lakh in related jobs. They argue that the ban on RMG could lead to most losing their livelihoods at a time when the IT industry in general is going through a shakeout, with jobs being lost due to the advent of artificial intelligence.

The ban will undoubtedly have a devastating effect on those employed in the sector and will equally impact the government’s tax revenue of Rs 20,000 crore. Venture capitalists are also worried about the $2 billion raised for investments made in this sector. Most online RMG platforms now have few options — either to shut down or pivot to the much-less-lucrative advertisement-based model. The beleaguered gaming industry may even be gearing up to make a legal challenge to the new Act.

In its defence, the government claims that these gaming platforms have caused addiction and financial ruin to millions of families. It says that as many as 45 crore people have been negatively affected and faced losses of over Rs 20,000 crore because of these platforms.

The question is: what prompted the government to take such a hard line on real money gaming, after allowing the industry to carry on operations in an unchecked manner for so long? One reason given is the failure of the industry to do self-regulation. It has not been able to implement measures to safeguard players from the danger of addiction, which often leads to financial distress. In addition, there are now concerns over terror financing and money laundering being linked to RMG entities. What is unique about this legislation is the bipartisan support to it. Apparently, online gambling addiction has become such an endemic problem that politicians of all hues feel the need to protect their constituents from its disastrous impact.

Besides, it may appear as if the law has been imposed suddenly, but there were clear indications over the past two years that the industry was treading on thin ice. The Information Technology Ministry laid down rules in 2023 to allow the creation of self-regulatory bodies for online gaming. These were aimed at certifying games and blocking illegal offshore betting platforms. Such self-regulation efforts did not meet with much success.

Subsequently, Goods and Services Tax (GST) levies on the full face value of deposits in RMG were hiked to 28 per cent. Thus, the gaming industry should have been cautious, given the nudges being given to regulate RMG with more care.

As for the need to protect users of these online games, even young gamers recognise the pitfalls. It starts out as a catchy game and the user is then lured into pumping more and more money into it. The suggestion of gamers, as well as of industry associations, is that the ban on RMG should be replaced by a strict regulatory framework. This is based on the premise that bans rarely work effectively. Those who are desperate to gamble are bound to move to unregulated offshore platforms to satisfy their urge to play these games.

The decision to impose an outright ban may have been influenced by revelations in the

Rs 6,000-crore Mahadev online betting scam. It involved a betting platform that enabled illegal gambling on card games and sports. It engaged in match-fixing, money laundering via crypto currency and manipulating games to ensure huge profits for its UAE-based promoters.

The creation of a strong regulatory system, however, could have been the first step before imposing a ban on RMG. It could have given gaming platforms some time to pivot to non-money games as well as to adopt an advertising-based model. The sheer size of the industry and the potential for India to grow into a global hub for gaming also need to be taken into account while formulating such policies.

A report by RMG platform Winzo and the Interactive Entertainment and Innovation Council gives an indication of the size of a sector considered a sunrise industry till now. It says revenues of the online gaming industry were $3.7 billion in 2024 and are expected to reach $9.1 billion by 2029. The report says India has 591 million gamers, comprising 20 per cent of the total global gaming community along with 1,900 gaming companies employing 1.3 lakh skilled professionals. What is significant in the context of the latest ban is the estimate that RMG contributed 85.7 per cent of the sector’s revenue at $3.2 billion.

The new gaming law is thus a harsh step that could affect the growth of a sunrise sector. A rigorous regulatory system could have been adopted initially before deciding to go for a complete RMG ban. At the same time, the widening arc of gambling addiction and financial distress must not be allowed to expand further. For the time being, the industry must evolve to utilise the space available for promotion of social, educational and e-sports that have a huge following in India and abroad.

Sushma Ramachandran is a senior financial journalist.