Karnataka reconsidering funding strategy for gaming under Gaming Policy 2017-22

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The Karnataka legislature has recently approved a bill amending the Police Act, 1963, to ban online games that involve betting and wagering. The broad nature of the amendment raised concerns from the industry on the impact it can have on the gaming sector. Bengaluru is home to several homegrown gaming entities including Sequoia Capital-funded Mobile Premier League.

The growth in Bengaluru and Karnataka for animation services, VFX services, and game developers has been the most prolific compared to any other state in India during the past five years,” reads the Karnataka Animation, Visual Effects, Gaming and Comics Policy 2017-22 (AVGC Policy).

Under the AVGC Policy, the government has set up a corpus fund of INR 20 Crores to fund promising start-ups and MSMEs in the AVGC sector and is in the final stages of shortlisting the companies. Now, considering the new law, reports have emerged that the officials are reconsidering the funding strategy.

We will scrutinize their business model before taking the investment call,” an official was quoted by ET Prime. “Only such gaming apps that help players improve their gaming skills will get our backing,” he added. The apps must also be listed on Google Playstore and Appstore. The authorities fund an AVGC startup up to Rs 2 crore. India has around 600 gaming start-ups per annum and the industry in India is worth Rs 10,000 crore.

In course of promoting the industry, the department will adhere to the framework and be in accordance with the law,” IT and BT minister CN Ashwath Narayan told ET. There are about 91 startups in Karnataka that are in the gaming space. The government is committed to promoting startups including innovators in the gaming industry, the minister said.

The Confederation of All India Traders (CAIT) has sought the exemption of Indian online gaming platforms from the proposed law in Karnataka to ban online gaming and betting. “The move by the Karnataka government in tabling the Karnataka Police (Amendment) Compliance Act, 2021 act (passed late September 21) can be seen as a setback to the state’s reputation of being a tech-hub and start-up capital,” Roland Landers, CEO, All India Gaming Federation had shared his concerns on the amendment in a statement.

Speaking about the gaming sector, Karnataka Addition Chief Secretary, Commerce and Industry Department Ramana Reddy had recently shared at the CII summit, “In the last five years, Karnataka has had the investment of around 250 million US dollars in the last five years and it has a potential of creating 20 thousand new jobs in the next five years. We are also setting up an Esports Lab where when the Asian games will be held, medals will be given for esports activities. We want to encourage people to participate and win medals in the next Asian Games. The gaming industry will improve the cognitive skills of youth. We want to promote, encourage and ensure that it grows in the proper and regulated manner. The biggest USP of Karnataka, I would say is the coordination between the industry, academia, and the government where we have involved the industry itself in formulating our policies from time to time.”

FIFS’ (Federation of Indian Fantasy Sports) legal experts opined that the bill’s agenda is contrary to a catena of judgments delivered by the courts. In fact, vide judgment dated 30 July 2021 the Supreme Court has upheld the validity of online fantasy sports by stating that the issue of whether fantasy sports format amounts to gambling or betting or wagering is no longer res integra.

With the amendment, Karnataka joins the neighboring states Telangana, Andhra, and Tamil Nadu that brought in laws to ban online games involving prize money or stakes. The Tamil Nadu law was recently struck down by the Madras High Court and the government is now contemplating to appeal or bring in a new amendment.