February 22, 2022 | 3 minute read

COVID-19 and Online Gaming in India

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Sharad Vadehra

Managing Partner

Get in touch

Sharad Vadehra

Managing Partner

The advent of COVID-19 and subsequent lockdowns has undoubtedly given a major boost to the already growing online gaming market in India.

With the closure of schools, libraries, eating joints, gyms, cinemas, parks and other recreation facilities, and work from home becoming the new normal, the physical and social interaction among people has been severely restricted. This has led to people relying upon online modes for entertainment, relaxation and communion, such as video streaming on OTT platforms like Netflix or using social media like Facebook/Instagram to virtually connect with friends and family.

One such form of recreation which has not gone unnoticed is online gaming. The rapid evolution of mobile ownership and internet usage has also been a major contributing factor in the rise of online gaming in India. As per a recent study by KPMG, India has the world’s second highest number of online gamers, after China.

This puts the question of legality of online gaming in India into limelight. Unfortunately, there is no black and white answer to it. The subject of gaming/gambling has been included in the States List of the Indian Constitution empowering the states to frame their own rules and regulations with respect to gambling. Thus, the central enactment- The Public Gambling Act, 1867, which mainly emphasizes on physical games and gambling in physical establishments- has been adopted by some states, while some have framed their own laws to regulate gaming/gambling activities within their territories.

Generally, in most of the states such as for example Nagaland, the “game of skill” i.e., which requires expertise of the player is allowable as opposed to the “game of chance” which depends upon random factors like luck. However, there is no strict uniformity in law among different states which acknowledge online gaming. For example, in the states of Andhra Pradesh and Telangana, the online games for money/stake have been completely banned. In contrast, the state of Sikkim allows games of skill or chance such as Roulette, Blackjack, Bingo, Poker, Baccarat, Backgammon upon issuance of license which authorizes the operator to control and manage online games within the state of Sikkim. The initial plan of the state to make this service available throughout the country was later backtracked to ensure there is no contravention of certain provisions of the IT Act, 2000 which specifically bar Internet Service Providers from hosting gambling-related content.

Thus, owing to lack of uniform and exhaustive rules and regulations, this thriving industry regrettably falls into a grey area. It goes without saying that this industry which is estimated to reach $4-5 billion in the year 2025 according to the EY – AIGF report can be a major source for creation of direct and indirect jobs in animation, VFX and the like, and result in rapid economic growth of the country. It would also help in growth of other quarters such as telecom and IoT. The online gaming sector has the potential of inviting remarkable global financing and thus, lead to increased revenue. The income tax generated will also add to the government exchequer.

It is thus heartening to see that the Union Budget 2022 has laid emphasis on accelerating the online gaming and animation industry by proposing to set up an AVGC (Animation, Visual Effects, Gaming, and Comics) task force which will propose ways for employment of youth and cater to the Indian as well as the global market. This will also give a major boost to local innovation furthering the “make in India” campaign and attract more investments.

It is also hoped that the AVGC taskforce will bring in greater clarity to the existing gaming laws in the country and that the different states will align with the vision of the Centre. The task force could also play an important role in managing the operations of this growing industry including taxation, combating societal challenges such as managing over-dependence on online gaming by children and defending consumer rights.

In this regard, it is also imperative to mention that the Advertising Standards Council of India has issued guidelines for advertising online gaming for real money winnings.

The guidelines include not showing persons under 18 years of age engaging in such online games for real money winnings in advertisements; print as well as audio/video advertisements carrying the disclaimer that these games involve financial risk, may be addictive and should be played responsibly; not depicting online gaming as an income opportunity/alternative employment option and not suggesting that persons involved in such gaming activity are more successful than others in such advertisements.

Thus, even though the Indian online gaming market is at its nascent stage and has been facing its fair share of challenges, there is no doubt that with more encouraging measures by the Central Government and greater uniformity in laws between states, the online gaming industry will emerge as a sunrise industry in India.

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