CAIT, representing eight crore traders and over 40,000 trade associations, warned that by banning online gaming, the Karnataka Police Amendment Bill, 2021, will harm the Indian start-up sector, Indian gaming and animation industries, and millions of Indian gamers and e-sports players.
There will be a direct impact on Indian start-ups such as Dream11, Nazara, MPL, Games 24*7, and Paytm First Games by the online gambling ban proposed in the Indian Bill. The Tracxn data platform finds that India has 623 gaming startups.
“Unfortunately, the Karnataka Government Bill does not differentiate between games of skill and games of chance,” writes CAIT Secretary General Praveen Khandelwal in a letter to Karnataka Chief Minister Basavaraj Bommai. Games of chance are pure gambling, and as such should be banned. The proposal, however, by including skill games in the scope of the Bill, will not only go against established jurisprudence but also threaten the thriving Indian gaming start-up sector.”
CAIT predicted that the proposed legislation will encourage illegal offshore gambling and betting apps operating in the grey market. There are thousands of innocent Indians who have lost their savings to these illegal casino apps.
The trade body called for the establishment of a ‘significant and stable regulatory mechanism for online skill games and urged the Karnataka government to review the bill keeping in mind the interests of Indian companies and developers.
What Is the Bill About?
As a result of the new Bill, the following things change:
- According to the bill, gaming is defined as all sorts of wagering, including electronic means and virtual currency, electronic fund transfers in the case of a game of chance, but does not include a lottery or wagering or betting on horses in races run within or outside the state, whenever such wagering or betting occurs.”
- A new section of the law now covers “any act of gambling, or risking money, for the unknown outcome of an event that also includes a game of skill, and any other behaviour or action specified above carried out directly or indirectly both by players of a game or by a third party.”
- The amendment now includes “computers, mobile apps, internet, cyberspace, virtual platforms, computer networks, computer resources, communication devices, electronic applications, software and accessories related to online gaming, as well as any document in electronic or digital form. Cybercafes are also included in the amendment.
- As a result, the maximum jail term of one year has been increased to three years, and the fine has been set at Rs 100,000 instead of Rs 1000. Furthermore, the minimum fees have been increased from Rs 500 to Rs 10,000 and the penalties have been increased from one month to six months.
The impact on skill-based gaming startups
In its current form, the amended Act is expected to negatively impact startups in the online gaming sector, as well as growth and investment in the industry.
The Quint was told by Gautam Kathuria, a senior research associate at The Dialogue, a think-tank focused on privacy policy, that Karnataka is home to many gaming firms, developers, and engineers.
Approximately 4,000 individuals are employed in this industry, and the decision threatens their future well-being as well.
As part of the bill, Catheruria argues that there needs to be a clear distinction between games of chance (gambling) and games of skill, so as to provide clarity and not disrupt the rapid growth of the digital skill gaming industry.
Purveen Khandelwal, the secretary-general of the Confederation of All India Traders (CAIT), believes the new amendment will hurt the Indian startup industry, the Indian video game and animation industries, and millions of Indian gamers and esports players around the country.
Managing Director and Co-founder of ATechnos Group, which runs the gamification platform Gogames.run, Apurv Abhay Modi told The Quint that around 600 gaming startups are established in India every year, and the industry is worth approximately Rs 10,000 crore.
According to Modi, the CG Act will profoundly change the gaming sector as India has the fifth largest online gaming market in the world. Also, skill-based gaming, a sunrise industry, has been attracting an increasing number of unicorns in the country, particularly in Karnataka. In parallel, the International Association for the Advancement of Mobile (IAMAI) said that the amended Act only affects the Indian gaming startups, which typically charge a small registration fee for their games, and will not affect foreign games, where children spend thousands on in-app purchases.
The ban will also prohibit Indian games such as Chess, Carrom, Archery, Hockey, and digital versions of traditional sports, according to IAMAI.
What Will Happen To The Fantasy Sports?
Earlier this year, the Supreme Court dismissed the SLP filed by Dream11 challenging the Online Fantasy Sports (OFS) format, claiming that it was gambling, wagering, and betting, and not a game of skill.
The Court’s October 2020 judgment underlines the Court’s belief that games of skill are not gambling and are legitimate business activities protected by the Constitution. Kathuria notes that the Court’s decision echos the October 2020 judgment of the Rajasthan High Court.
The 7th Schedule of the Constitution includes entry 34 of List II, which confers legislative authority on states to regulate betting and gambling, however, it does not explicitly state that games of skill will be included under this jurisdiction”.
According to the Federation of Indian Fantasy Sports (FIFS), an industry self-regulatory body for fantasy sports, the law appears misguided since it penalizes legitimate businesses by putting them on the same footing as illegal online gambling, betting, and wagering platforms.
There is a possibility that such confusing signals might hinder progress in sports in the state, the report says.
In a statement, FIFS and its members stated that reasonability and certainty are integral to ensuring orderly growth and development in the fantasy sports sector. The law should provide certainty and clarity to businesses, investors, as well as consumers, to ensure orderly growth and development.
MPL and My11 Circle are other members of the 35-member body. Dream11 is one of its founding members.
The Karnataka state government needs to rethink its position regarding online skill games.
The CEO of the All India gaming federation is Roland Landers
What is the list of games banned in Karnataka?
On Wednesday is on 6th of October, 2021, Sequoia Capital-funded Mobile Premier League (MPL) was among the first few gaming startups to begin blocking access to users in the state of Karnataka following a ban on online gaming. This video will help you to understand more about this.
A new law that became effective late Tuesday, that is on the 5th of October, 2021 banning online games that involve betting and wagering, and “any act that involves gambling, risking money, or otherwise wagering on an unknown result, including games of skill”.
Recent state regulations have stoked concerns that state regulations could negatively impact India’s booming but nascent gaming sector, where foreign investors have recently pumped in millions of dollars.
Users in Karnataka were shown the following messages in MPL’s app on Wednesday morning: “Sorry! The law in your state does not allow you to play fantasy sports”, “Fantasy games are locked,” and “cash games are locked.”.
With the gaming app, users can play fantasy cricket and football and bet real money on the games.
Tiger Global’s Dream11 app, one of India’s most popular gaming apps, was still available, but Paytm First Games was no longer available.
With some of the most powerful tech companies in the world based in Karnataka and India’s tech capital in Bengaluru, Karnataka is the latest Indian state to ban such online games after Telangana and Andhra Pradesh. The Tamil Nadu high court also struck down a similar ban, but it had not been implemented.
Reuters cited an industry source earlier who revealed that these states are important for companies in the gaming industry and account for about 20 per cent of their overall revenues.
According to Roland Landers, the chief executive of the All India Gaming Federation, this action will be challenged in court and legal recourse sought.
Reuters reported on Wednesday that other industry sources reported that companies and gamers were planning to file lawsuits against the new law.
It was implemented amid growing concerns that online gaming platforms, like gambling, can be addictive and lead to financial harm. Violations of the law can be punished with hefty fines and prison terms.
Do other states plan to follow suit?
In making such a decision, Karnataka is not the first state to do so. After the Tamil Nadu government banned online gambling in November 2020, and earlier this year, Kerala imposed a ban on online rummy games, there is now a ban on online gambling in Kerala as well.
Despite the influence of the Supreme Court decision, however, experts do not believe it will be enough to encourage these movements to gain momentum
Tamil Nadu’s High Court has struck down the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, which banned the play of games like rummy and poker on the Internet with stakes.
This Act amends the Tamil Nadu Gaming Act, 1930 by amending Part II of the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021. Under Article 19(1)(g) of the Constitution, the Court determined that the complete prohibition on for-money online skill games under the Amendment Act was unreasonable, excessive, and manifestly arbitrary.
