Gaming Year Review: A year of hope ending with disappointment, regulatory clarity now expected in 2023

Published on:

The year 2022 started on an optimistic note for the gaming industry with clarity expected on legality and regulation of online gaming. In 2021, two southern states -Tamil Nadu and Karnataka which often rank in the top in the internet usage banned all kinds of games of skill. The industry was fast to respond by challenging the laws in the respective High Courts.

While Madras High Court quashed the law in August 2021, the Karnataka High Court quashed the similar law as unconstitutional in February 2022. The decisions were termed as reaffirmation of long standing view that games of skill are legal and constitutionally protected.

The respective state governments moved the Supreme Court against these decisions. The final battle before the Supreme Court is viewed as a landmark case to settle the jurisprudence of skill and chance gaming debate. The Supreme Court heard these appeals this year and issued notices to the respondent gaming companies.  In a welcome move, the Supreme Court dismissed two cases that alleged fantasy format followed by Dream11 is gambling and betting and hence illegal.

On regulatory front, the industry expected the Group of Ministers (GoM) headed by Meghalaya Chief Minister Conrad Sangma to settle the issue of tax slabs and valuation aspects. However, the GoM failed to arrive at consensus and the matter will now be discussed by the GST Council in the next year 2023.

As part of budget announcement in February, the central government has set up a task force with industry stakeholders as members to recommend measures to boost the sector.

The year also saw an increased activity at the Ministry of Electronics and Information Technology (MEITY). For the first time in recent years, the ministry called on the stakeholders to discuss the regulatory aspects in the gaming sector. The meetings were chaired by Minister of State in MEITY Rajeev Chandrasekhar. The ministry even held a meeting with gamers to take their views on aspects of regulation. The news reports suggested that the government is willing to bring in a soft touch regulation. However, as we inch closer towards the end of the year, the work is still in progress on this aspect.

The illegal offshore betting and gambling portals mushroomed even occupying prime advertisement slots across print, television, and digital media. However, this did not go unnoticed. The Ministry of Information and Broadcasting had issued two advisories in June and October.

The October advisory even pointed out the illegal ads by leading print and digital media and asked them to refrain from the same. In the same month, the domains of illegal betting portals were blocked under the Information Technology Act. However, the portals quickly adopted by changing the domain names and continuing operations.

While the GoM deliberated on the tax slab and valuation, the GST department in later part of the year, cracked whip by issuing a rupees Rs 20,000 crore tax notice against Bengaluru-based Gameskraft treating proceeds from skill games like poker, fantasy sports as betting and taxing on full amounts. Gameskraft challenged the notice before the Karnataka High Court and the decision is currently reserved with legal who’s who arguing for Gameskraft and other impleading parties from the industry including EGF.

While these issues continued without any resolution this year, Meghalaya was rocked by protests by opposition and civil society against the proposed casinos in the state. The state government had to finally accede to the request and enact a repeal law reversing the law that proposed casinos on the lines of Goa and Sikkim.

In the South, Tamil Nadu which challenged earlier decision of Madras High Court quashing the online gaming ban law as unconstitutional, had promulgated an ordinance for a similar ban law while the appeal before the Supreme Court against the earlier law is still pending. With parties across the lines supporting, the Tamil Nadu assembly passed a bill to replace the ordinance. But this time, the governor Ravi queried on legality of such law delaying the assent and letting the ordinance lapse.

Earlier this month, the Telangana High Court moved a transfer petition to the Supreme Court tagging the constitutional challenge to Telangana Gaming (Amendment) Act, 2019 with the appeals filed by Karnataka and Tamil Nadu governments. Telangana is the first state to prohibit all kinds of online games of skill played for stakes. The constitutional challenge is pending since last few years before the Telangana High Court.