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An Analysis Of Current Regulation Of Online Gaming In India

A national lockdown triggered by the COVID-19 pandemic, combined with an increase in work-from-home practices, has resulted in an increasing number of people spending more time online in search of new forms of entertainment, whether it's consuming music and entertainment on OTT platforms or playing online games, giving the segment a new lease on life.

India's internet gaming business has a lot of promise. Gaming has increased in India during the pandemic. People's time spent online gaming has increased by nearly 65 percent since pre-Covid levels. It is one of the sectors with great potential and has already started increasing.

Online gaming is divided into three categories:
  1. e-sports,
  2. fantasy e-sports, and
  3. online casual games.

Over 275 gaming firms, over 15,000 game developers, and around 300 million gamers make up India's online gaming sector.

A member of Parliament recently pushed the government to develop a comprehensive framework for regulating online gaming. The amount of time that children spend online gaming has significantly increased. Online gaming has numerous negative effects on children. Recently, China restricted the time limit for children below the age of 18 on time spent on online gaming and reduced it to 3 hours only.

In India, PUBG, the online multiplayer game that got banned in September 2021 due to its violent nature, Online games not only cause addiction but also stress, anxiety, and nearsightedness. There is a lack of regulatory oversight in this thriving industry. Even while the proper tax rate is being contested in relevant circles, online gaming is in a regulatory grey area with no complete legislation regarding its legality or borders with gambling and betting.

India's internet gaming business has a lot of promise. It is a valuable source of revenue production as well as a producer of highly skilled jobs in fields such as graphic design, coding, marketing, management, and auxiliary sectors, with a compound annual growth rate of over 40% in India.

Given its large pool of enthusiasts and growing availability of digital infrastructure and engineering talent, India is well positioned to give this industry a huge boost and turn it into a growth engine that will generate both money and jobs, much like the software sector's first wave of massive growth.

The online gaming industry in India began in the early 2000s, when console and PC gaming introduced countless middle-income Indians to digital gaming platforms. During the mid-2000s, the majority of internet gaming was in the form of social games. This adoption was aided mostly by multinational developers' worldwide games. The Indian development ecosystem predominantly served multinational developers as service providers. Since then, India has become a volume-driven market, thanks to increased internet penetration and smartphone usage.

About Online gaming Industry

By 2023, India's online gaming sector is anticipated to be worth Rs 15,500 crore, according to the All India Gaming Federation. According to a 2019 survey conducted by Limelight Networks in the United States, India has the second-largest number of gamers behind South Korea. While online time spent in India is still lower than in other nations, the poll discovered that over a quarter of adult Indian gamers have missed work while playing games.

The gaming industry is now being seen as an important pillar of the economy. This emerging industry has the potential to generate thousands of new jobs in the country. Several gaming startup firms are expected to firm up their hiring plans to support growth in the next few years. With India being the world's fifth-largest gaming market, regulating online gaming will benefit the economy and generate more than $3 billion in revenue by 2025.

Various emerging job sectors are coming to the online gaming industry that will create employment. The online skill gaming and e-sports industry is one of the few that has not only weathered the pandemic's slump but has also experienced exponential growth. The business is expected to expand even further, providing new career options for both players and game producers, as well as assisting in the globalisation of Made in India titles.

The addition of e-sports as a medal event in the Asian Games will provide numerous opportunities for young e-sports professionals. Now that online gaming is getting recognition from the government time and again, the industry will continue to evolve. India currently has over 400 gaming firms, including Infosys Limited, Hyperlink InfoSystem, Fgfactory, and Zensar Technologies, to name a few.

According to the WEF, the rise in gaming is due to a growing need for virtual entertainment among friends, family, and peer groups, as well as an increase in influencers urging Indians to play more games.

Various reports suggest that the online gaming sector will reach $1 billion by the end of 2022.

Recent developments in Online Gaming

The NITI Aayog also recognises gaming as a category in which the development of indigenous applications is to be encouraged and celebrated. Also, PM Narendra Modi has recognised online gaming as one of the emerging sectors that has the potential to solve problems like unemployment, poverty, etc.

The government will set up an Animation, Visual Effects, Gaming, and Comics (AVGC) sector and a promotion task force to employ youth and build domestic capacity to serve Indian markets as well as cater to global demand, according to Finance Minister Nirmala Sitaraman's announcement in this year's Budget.

Gaming is one of the fastest-growing industries, and India, with its large user base, can do wonders in this field. Creating a task force would undoubtedly boost the economy, create new jobs for the youth, and contribute to overall economic growth.

If India wants to become a worldwide leader, it is critical that we take gaming seriously, especially given the fact that it covers numerous distinct sectors such as privacy problems, online safety concerns, and data transfer, where the central government must have a significant role. Recently, the Karnataka High Court overturned amendments to the Karnataka Police Amendment Act of 2021 that prohibited certain online gaming activities.

This move was welcomed by the gaming industry. "As the main industry group for online skill gaming, AIGF welcomes the ruling delivered by the court that strikes down the statute outlawing online games," Roland Landers, CEO of the All India Gaming Federation, said in a statement. This is a step in the right direction for the developing gaming sector, following the favourable verdicts for online skill gaming by the Kerala and Madras High Courts in 2021.

Recent judgments of the Madras High Court have stressed the need to have a proper regulatory framework to regulate modern and online games in India that are luring unemployed youth to bet and lose all their money. A clear and structured set of regulations is the need of the hour, and with that, India's online gaming sector looks set for an incredible growth story going ahead.

Legal framework of online gaming in India

Online gambling is now in a regulatory grey area, with no comprehensive legislation addressing its legality. In most regions of the country, skill-based games are permitted, whereas games of chance are classified as gambling, are considered immoral, and are forbidden in most areas. Because betting and gambling are state-regulated activities, each state has its own set of rules.

Except for Goa, Sikkim, and the Union Territory of Daman, every state outlaws any form of gambling, betting, or wagering on games of chance. The states of Assam, Andhra Pradesh, Nagaland, Odisha, Tamil Nadu, and Telangana have also imposed limitations on skill games. However, the Kerala High Court has agreed with the industry that games of skill should not be banned. India's gaming regulations are out of date, and as a result, their application to online structures is complicated. The conflict between the Center and the states, as well as the differing perspectives of various Indian courts, makes it difficult for businesses to understand what activities are permissible in the sector.

The Public Gambling Act, 1867 ("Gambling Act"), which dates back to British administration in India, and the Prize Competitions Act, 1955, are the two most important central gambling regulations in India ("Prize Act"). The anti-gambling discourse prevailing at the time of the Gambling Act's implementation is reflected in current Indian jurisprudence. The Gambling Act applies to 16 states and union territories, although it does not apply to skill games. List II of the Indian Constitution's Seventh Schedule gives state governments the authority to control betting and gambling regulations.

The plethora of laws in the country is currently proving to be a burden for both gamers and gaming corporations. Because all that is required for online gaming is a phone, tablet, PC, or laptop, as well as access to the internet, the location and legality of various state laws is an annoyance and a deterrent to many. This is not encouraging, and it makes it difficult to foster growth in a sector that can generate money both as a source of employment and as a source of professional gaming income´┐Ża rich new-age job. Subjective tests exist for poker, rummy, bingo, horse racing, fantasy sports, and other games.

With the evolution of television, digital, and internet gaming models, the gaming industry is undergoing a paradigm shift.

Need for regulating online gaming in India

Many people confuse online gaming with online gambling, which sometimes results in the banning of online gaming. Recently, the Madhya Pradesh government has planned to ban online gaming in the state. Home Minister of MP stated that online gaming would be included in the online gambling laws soon by amending the law that currently prohibits online gaming in India.

It is illogical to include online gaming in online gambling, which will not only affect the careers of many gamers in India and various gaming industries but also affect the GDP of the country. The need of the hour is a comprehensive online gaming law that protects players and ensures that only legitimate, skill-based online gaming industries are protected and those with games of chance are banned under online gambling laws.

Another aspect is that the online gaming law will help regularise the online gaming industry in India. Sometimes foreign companies that invest in online gaming in India not only harass Indian gamers by making one-sided contracts, but they also have an impact on other stakeholders in India.

A lot of people are becoming addicted to internet gaming. This is claiming lives and wreaking havoc on families. Children's compulsive gaming is harming their academic achievement as well as their social lives and interactions with family members. Many countries have enacted various regulations to limit the amount of time children spend playing online games. Games like PUBG, FreeFire, and CODM are the most addictive games played by a huge number of youngsters in India.

A regulatory framework is needed so that addiction to online games can be tackled. The Union Government has issued a warning to parents and teachers about the dangers of online gaming, noting that school closures as a result of the lockdown have resulted in an increase in youngsters utilising cell phones and the internet.

Gaming addictions disrupt sleep, eating, careers, and social lives, causing physical, social, and emotional harm. Insomnia, nearsightedness, isolation from social interactions, academic failure, and severe wrath and irritability are all symptoms of addiction. For example, following incidences of violence and suicide, online games like PUBG and the Blue Whale Challenge were outlawed. In 2018, the World Health Organization classified gaming illness as a mental health issue solely for these reasons.

There are some positive reasons for the regulation of online gaming. With over 65.7 million players, the online gaming sector is estimated to earn revenues in excess of Rs 29,000 crore by 2025. More than 15,000 direct and indirect jobs are expected to be created. 2. The GST and income tax money generated by this industry will contribute to the government's revenue; 3. The industry has the potential to attract major international investment. These economic benefits will definitely help the country in the long run.

Threats like data privacy, betting, and gambling pose a threat to children. Also, data privacy has become one of the major concerns of our time. Protecting the interests of gamers should be the priority of the government.

Other areas of concern include the lack of safety for gamers and precautions against unlawful conduct. There have been reports of gamers being exploited, with some losing their lives, prompting several jurisdictions to prohibit online gaming. However, this isn't the only option. Limits on the amount of money a player can bet could be considered.

The Niti Aayog has advocated for a minimum gaming age as well as the fairness of game terms and conditions, disclosures, and responsible advertising. ASCI has also advocated that real money game advertisements be self-regulated. Not just for OFS games, but for all games, these steps are required. To avoid criminal actions and money dealings, game operators should conduct KYC checks, user authentication, and other procedures.

There are some suggestions that should be taken to make online gaming a safe and secure sector so that its positive effects can be utilized. Under Section 69 of the Information Technology Act, games that promote gambling or are harmful for children's mental health should be banned immediately so that any harm can be prevented.

At the central level, a gaming authority should be established. It could be in charge of overseeing the internet gaming industry's activities, preventing societal concerns, properly classifying games of skill or chance, ensuring consumer protection, and combating illegality and crime.

India, like advanced jurisdictions, can take a hands-off attitude. In the United Kingdom, skill games are exempt from the same licencing rules that apply to games of chance. Similarly, the Unlawful Internet Gambling Enforcement Act in the United States creates a safe haven for fantasy sports. Children's internet gaming hours can be regulated by the government. For example, China recently prohibited players under the age of 18 from playing online for more than three hours per week. The limit is also in effect during specific periods. China assigned the task of implementing the limitation to the industry.

It is not only the responsibility of the government but also of gaming companies to help regulate online gaming. The gaming companies should take measures to reduce the toxicity of online gaming to make it a better place. Companies should prioritise mental health as well, so that children do not suffer from the negative effects of online gaming.

Real-money gaming enterprises must also consider difficulties such as:
  1. foreign exchange restrictions,
  2. setting up and managing a payment gateway,
  3. data privacy requirements for collecting data on their platforms,
  4. goods and services tax issues, and
  5. artificial intelligence in gaming.
All of these challenges should be addressed in one framework by the unified gaming regulations. It's important to remember that gaming-related concerns aren't just about games.

Gaming firms can work together to build a sense of responsibility and adhere to self-regulatory body norms, such as the AIGF's Charter, which is both comprehensive and objective and focuses on responsible gaming company growth. Perhaps the government might explore pursuing a trust-building strategy with the business, similar to how India's advertising industry operates and ASCI's role in regulating its members. Validation of payouts in the industry would result in the adoption of best practices.

The industry might take the lead in being compliant with societal interests while generating a profit and growing by adhering to specific self-established norms. If gaming firms achieve this goal, the government will not need to be overly paternalistic in its attitude.

Efforts should be made for the online gaming industry to make India one of the biggest countries in terms of online gaming. AI in gaming also aids online platforms in preventing cheating, and AI in immersive gaming has proven to improve plots and characters. Surprisingly, AI can also be utilised to combat the problem of gambling addiction.

As strange as it sounds, it works in the following way: when a person is gambling online, the AI may detect addiction difficulties and, depending on the software, either prohibit the player from playing the game or display a warning to make the player aware of his or her activities. This is a forward-thinking approach to internet gambling addictions that removes the need for government laws to keep addictions in check. E-sports should not be compared to online gambling. E-sports is one of the most recognised sectors in the world.

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