Karnataka Home Minister tables Bill to ban online gaming; industry expresses concerns, calls for regulation

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The Karnataka Police (Amendment) Bill, 2021, was tabled in the Legislative Assembly on September 17 to ban online gaming or betting by amending the Karnataka Police Act of 1963, with maximum imprisonment of three years and a penalty up to Rs 1 lakh.

Home Minister Araga Jnanendra introduced the Bill, which aims to ‘ban online games, involving all forms of wagering or betting, including in the form of tokens valued in terms of money paid before or after issue of it’. It intends to ban electronic means and virtual currency, electronic transfer of funds in connection with any game of chance’.

Most of India’s unicorns are based in Bengaluru, considering the fact that it has progressive policies for start-ups, regulatory certainty and a young and skilled workforce. However, the Karnataka government may hamper this image of Bangalore and probably the overall gaming ecosystem of the country by introducing a law prohibiting online real money skill gaming in its State.

The legal jurisprudence emanating from Supreme Court for over the past 60 years is very clear, that games of skill are not gambling, and offering of games of skill is a legitimate activity protected under the Indian Constitution. This has been reiterated multiple times by various high courts, including the Karnataka High Court.

Despite the clear law and the judgments, multiple states including Tamil Nadu have tried to ban skill-based online games. The Tamil Nadu High Court last month gave a detailed judgment striking down the Tamil Nadu law which prohibited online games of skill, as unconstitutional. The Court clarified that any restriction on games of skills, whether online or offline needs to be narrow, and the state should try and regulate, instead of a ban.

The Court also came down heavily on the State government for passing the law as a populist measure in the lead-up to state elections, without following the established law. The Court also stated that Entry 34 of the State List under the Constitution, from where the Karnataka amendment traces its power, cannot be used to regulate games of skill, and can only be used to ban/ regulate games of chance.

Commenting on the same, Roland Landers, CEO, All India Gaming Federation states, “India is the fifth largest online gaming market globally and skill-based gaming, a sunrise sector, is giving birth to an increasing number of unicorns within the country, especially Karnataka. The sector has been a strong financial contributor to the Indian economy even during an unprecedented period of slowdown and is further expected to generate revenues in excess of $ 3 billion by 2025. The move by the Karnataka government in tabling the Karnataka Police (Amendment) Compliance Act, 2021 act can be seen as a setback to the state’s reputation of being a tech-hub and start-up capital.”

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Skill-based gaming cannot be compared with gambling, and banning is not a solution. Elaborating this further Justice Vikramajit Sen, a former Judge of the Supreme Court & former Chief Justice of the Karnataka High Court, added, “The Indian regulatory framework has clearly differentiated between games of skill and games of chance in India. Just because games of skills may involve an entry fee they cannot be considered gambling. Games of chance are considered gambling as it involves luck rather than skill and thus it is expressly prohibited by the law, wherein games of skill are considered legal across most states including digital & online. The sector needs the support of state governments to promote initiatives towards responsible gaming and recognition of the AIGF ‘Self-regulation Framework’. AIGF and its advisory members look forward to an opportunity to engage stakeholders within the state government to make an industry representation on the matter.”

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The Karnataka Police Act, in line with the laid down law, prohibited games of chance. However, now in the garb of including online gambling within its ambit, the government is also trying to slide in games of skill.

The draft bill will also prohibit games likes online chess, archery, online quiz games, other Indian games, all digital versions of traditional sports, including games included in the Asian Games and Olympic Virtual Series. In the backdrop of Asian Games announcing that 24 medals will be awarded for eSports at the next year’s edition, this law can be very problematic for the professional gaming players as this may affect the livelihoods and income of these gamers living in that state.

With serious concerns looming from the Karnataka Government’s move to ban online gaming, PK Misra, President Players’ Association – AIGF and former senior IAS said, “The move will affect the online skill-based gaming sector, putting an end to player’s right to earn their livelihood. There is no clarity on the scope of this law, and we remain in constant fear of the players’ livelihood being banned at any time without prior information or dialogue.”

Spearheading the initiatives of the Players’ association at AIGF, Mr. Misra has held key positions in Indian bureaucracy. Providing his proven guidance and bringing to the table his decades of experience and a keen understanding of the industry, the AIGF, and its self-regulatory perspectives, he aims at ensuring that the growth is inclusive and monitored regularly for the players and the industry.

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Mr. Misra further added, “Around 10-12% of India’s gaming community is based in Karnataka, and many of these players who compete at the international level are afraid for not only their livelihoods but also their ability to pursue their dreams of becoming professional players on international platforms. I certainly hope the state government draws a clear distinction between gambling and games of skill. Since 1957, the Supreme court has reiterated games of skill as a legitimate business protected under article 19(1)(g) of the Indian Constitution, also supported by the Karnataka High Court in multiple judgments.”

AIGF CEO Roland Landers recently informed that the entire gaming industry could be valued at around Rs 9000 crore as of today and the subscription-led (Real Money Gaming) or transactional led online skill gaming could be close to Rs 7000 crore while the remaining 2000 crores are made up by the in-app purchase market.

As the oldest online skill gaming industry body, AIGF has been at the forefront of ensuring global best practices for its stakeholders through the self-regulation skill games charter that covers all aspects of the online gaming business, overseen by an advisory of experts. AIGF and all the professional players sincerely hope that the government of Karnataka is listening to the concerns, and will ensure that skill gaming is not affected by this law.