Regulatory policy

Why India Should Regulate the Online Gambling Industry with a Uniform Policy Instead of Banning It

“Many states, including Telangana, have blanket bans on online gambling as they were under tremendous pressure in the early 2010s due to fraudulent illegal apps that exploited users. I remember being an administrator when many suicides were taking place. Regulators, including the police, did not have the capacity or means to effectively regulate online gambling,” said Jayesh Ranjan, Chief Information Technology Secretary, Telangana Government at a table. round on the regulation of the online gambling sector organized by the All India Gaming Federation (AIGF).

“It seemed easier to ban everything related to money and gambling rather than educating the public about the risks and creating a regulatory mechanism for gambling at that time,” he explained. .

Ranjan was joined by James Sangma, Cabinet Minister, Government of Meghalaya; PK Misra, a former IAS officer who is a member of the Skill Games Council; Sai Srinivas, Co-Founder and CEO, Mobile Premier League (MPL); and Dr. Sutanu Behuria, a former IAS officer who is also a member of the Skill Games Council, in a discussion moderated by AIGF CEO Roland Landers.

He admitted that the ban came with its set of consequences. “We have seen that people who are serious about gaming or are addicted to gaming continue to play online using VPN. Fraudulent claims continue to proliferate; many people continue to be exploited eventually because there is no authorization that assures them that the game is safe,” he explained.

“The ban did not prevent suicide. We also saw a wave of suicides happening afterwards,” Ranjan added.

The issue of online gambling regulation has become relevant as the sector has seen a dramatic increase in registrations during the pandemic. People have flocked to these sites in large numbers, which requires a regulatory framework that puts checks and balances in place.

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Main takeaways from the discussion

Why does India need online gambling regulations?

  • The regulatory framework inspires confidence: “A regulatory system gives people the confidence to play these games online because they know there is a regulator watching them. Regulations could cover things that are important from a player’s point of view; means there should be an ethic in the system that will help people find some comfort,” said PK Misra.
  • The game will prevent people from turning to social evils: “Young people’s salary level is much higher than productive levels, so there will be unemployment because people are unskilled. This aspiration gap will lead to frustration. For example, the standard salary that people receive in factories is Rs. 8,000 to Rs 10,000 in the industrial belt of Himachal Pradesh Chief Ministers may make a point of giving 70% jobs to the locals but no Himachali want to go and work, but he is frustrated. He earns nothing. He is likely to turn to drugs and prostitution, which will lead to robberies and burglaries,” said Dr. Sutanu Behuria. “Gambling will have significant benefits despite the risk of addiction; if someone spends 60% of their time gambling, at least evils like drugs, prostitution is likely to be controlled,” Behuria said, suggesting that a concerted effort must be undertaken to ensure the way people interact with the game.
  • Avoid regulatory uncertainty: “India is going to become a net exporter of games and game content to the world in the long term. graphics, etc. We need to avoid unclear regulatory setups. We should have as much clarity as possible. There have been significant moves in the space where the difference between games of chance and skill has been reiterated,” said Sai Srinivas of MPL.
  • License requirement: “It is necessary to grant licenses to the industry. It is necessary to create several security controls. The industry must be brought to self-regulate instead of having a police attitude. Telangana has drafted a bill and I am awaiting the opportune moment to present it to the cabinet. We did a lot of consultation exercises, so it’s not that the new law was prepared keeping a top-down approach,” Ranjan said.

What should be kept in mind when developing a regulatory framework?

  • States must ensure that they collect taxes: “We have to recognize that gambling is inevitable. It will be extremely difficult to control or regulate it in any serious way in fact. States should be interested in ensuring that they receive their fair share. He should list the terms to make sure he knows the amount of taxation,” Behuria said.
    • Clarify taxation: “Having a rational tax slab will significantly improve the revenue of the treasury and create a regime in which companies can also do a good job in running their business,” Srinivas recommended.
  • Proposed Standard Rules: “It would be a huge advantage if states agreed to standardized regulations regarding their positions on games of skill and chance while identifying the difference between skill and luck at the same time. This would easily multiply the valuations of some of the companies in the space significantly, as some of our peers outside of India have clear regulations and therefore their valuations are obviously much better,” Srinivas explained. .
    • A uniform configuration will not cause complications: Behuria echoed Srinivas’ recommendations in his remarks. “We need to look at having a uniform regulatory setup eventually, with a national committee so that India can be a unified market rather than having different sets of rules in different places where operators will have to change their approach and that becomes much more complicated,” reasoned Behuria.
  • Draft legislation in consultation with stakeholders: “Getting everyone involved first will help write good legislation and it will bring in a lot of revenue for the state because it (the gaming industry) will be acceptable (to the public). Gray operators will gradually disappear and therefore existing businesses will be able to reach many people with confidence. This will attract investment. Many countries have drafted and enacted laws. They have become market leaders. We can become market leaders once we have a clear and stable environment,” Misra said.

How does a ban affect the sector?

  • The ban criminalizes players: “One of the biggest shortcomings of blanket bans is that gamers are seen as criminals, which is very unfortunate because if you view gamers as criminals, it creates a barrier because victims don’t report incidents to the police because they will be treated like criminals. They are happy not to report. I am of the opinion that a ban is not the solution. We have to regulate it,” Ranjan said in his remarks.
  • Gaming regulations should allow, not penalize: “This sector itself is changing, so you have to have an open mind. We tend to penalize Indians when we make regulations. This is something to be avoided at all costs. I’m not saying there shouldn’t be a penalty, but the approach shouldn’t be, “How do we penalize these guys?” The approach will kill them. It has to be an environment that is conducive to development and we have to stop thinking that people who work in this field should not earn money.

Can other states learn from the Meghalaya Gaming Regulation Act?

James Sangma said that the state has stuck its neck out and given clarity to gaming companies by identifying games of skill and chance in the Meghalaya Gaming Regulation Act 2021. It manages several ministries of the Meghalaya State Government such as Information and Public Relations, Law, Taxation, Registration and Stamps among others.

Sangma explained that the state chose to issue this regulation because COVID-19 has led to lower state coffers as the state depends on tourism for its revenue. “We also found that a lot of people were spending time on online games during COVID-19. This number is quite stable at the moment; we hope it will continue to grow. We have already given three operators a temporary license to start,” he concluded.

“The government of Meghalaya has started with a lot of small steps because we have just realized that there are areas that we have not yet covered in our regulatory framework. This is a work in progress, we are not rigid on this whole issue. —James Sangma

“The main thing is to ensure close cooperation between all the players that are the industry, the operators, the AIGF and the regulators like us. This is the key to meeting the challenges,” Sangma said.

Telangana will create an online gaming committee

“We find that the online gaming landscape is extremely dynamic. It’s extremely complex and the government doesn’t have the ability to be the regulator. We proposed an online gaming committee. The government will be part of it, but we want the industry and its associations to be part of it with judges and retired police officers. This committee should be given full responsibility. They will decide on the legality and what will be allowed within the framework of games of skill,” Ranjan revealed during the discussion,

He went on to add that the committee will refer to three High Court judgments when drafting the provisions. “The verdicts made it clear that it’s undemocratic to ban everything,” Ranjan told Landers. “The government will have no right of veto or a dominant right of scrutiny over the functioning of the committee. It will be very democratic.

But he also warned the gambling industry that they should not forget the circumstances under which bans were introduced in several states.

“We need to ensure that strong and strong security controls are in place that support KYC, use of an approved payment gateway, anti-addiction measures, anti-fraud, anti- money laundering, grievance mechanism, data protection guidelines, prevention of dishonest advertising, etc. Ranjan recommended.

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