Overview of the regulatory landscape of India's gaming system

Overview Of The Regulatory Landscape Of India's Gaming System

India’s love for games goes a long way back in time, but gaming in today’s world has evolved far beyond physical boards and has moved online. India has a population of over 1.4 billion people and has the world’s second-largest internet user base. India is going through a digital gaming revolution, and at the forefront of this is the booming world of real money gaming (RMG). However, while the industry has grown massively, many Indians still fail to navigate its complex and fragmented regulatory framework. We have tried to give an overview of the regulatory landscape of India’s gaming system in layman’s terms.

Gambling Vs Real Money Gaming

The struggle of differentiating between gambling and real money gaming has caused a lot of problems for the RMG industry in India. When the word money is mixed with gaming, people automatically connect it to gambling, something that is highly looked down upon in India. However, games of skill like poker, rummy, and fantasy sports are not something that should be labelled as gambling. RMG is very different to games that rely on sheer dumb luck, and games like poker require very high skill if you want to become a top player and compete with players on a professional level.

Unfortunately, while the newer generations find it easier to understand this concept, the same cannot be said for everyone. RMG is still perceived as gambling in many parts of India, and it is unlikely that things will change unless the government launches widespread awareness campaigns to clarify the differences between gambling and RMG. The fact that the government has banned gambling in India and prohibits games of chance, but excludes games of skill from this ban, should make people realise that there is a difference between the two. Fantasy sports platforms like Dream11 are considered to be games of skill and are hence legal in India.

How Is Real Money Gaming Legal In India?

The reason real money gaming is legal in India is that the government has decided to classify certain games like fantasy sports as games of skill rather than games of chance. This distinction is very important because while games of chance are prohibited in India, the same does not hold true for games of skill. This ruling comes from a Supreme Court ruling in 1957 in the case of State of Bombay v. R.M.D. Chamarbaugwala. This ruling said that games that require skill more than chance are not classified as gambling, and Indian courts over the years have reaffirmed that games like poker and fantasy sports involve substantial skill.

It is thanks to this legal precedent that fantasy sports platforms like Kubera Fantasy, poker platforms like Spartan Poker, and rummy websites like Deccan Rummy are legal in India. While Indians are still iffy as to whether these games are gambling or not, their being legal is a good positive boost, and it gives players the chance to explore the platforms and make that decision for themselves. Playing card games in festivals like Diwali has been the norm in India for centuries, but people start rethinking it when money is involved, especially professionally. However, it is now clear that these are games of skill and are completely legal in India.

Why Is RMG Legal In Some States And Illegal In Others?

While games of skill like fantasy sports and poker are legal in India, the same does not hold true for all Indian states. Despite the courts of law providing clarity about fantasy sports and poker being skill-based games, the reality is much more complicated. This is because India follows a federal structure, which means that laws like gambling fall under the jurisdiction of each individual state. This means that each different state can decide for itself whether it wants to allow games like fantasy sports to be legal or prohibited, despite the Supreme Court ruling them to be legal games of skill.

Telangana and Andhra Pradesh are two Indian states that have banned all forms of real money games, including those involving skill. There are also states that have imposed selective restrictions, like in Odisha, where you can download fantasy sports apps but cannot enter cash contests. Nagaland and Assam have also imposed multiple strict restrictions on real money gaming, which causes a problem for companies. Tamil Nadu initially banned online games like rummy and poker, but this ban was overturned by the Madras High Court. However, despite this ban being overturned, Tamil Nadu still has strict regulations regarding the timings and verification.

How RMG Platforms Navigate Taxation Troubles

India has had to navigate not just regulatory uncertainty but also some very serious taxation problems when it comes to the real money gaming industry. The RMG sector was hit with a massive setback in August 2023 when it was announced by the GST Council that a flat 28% Goods and Services Tax would be levied on the full face value of the amount deposited on the platform by the players rather than on the Gross Gaming Revenue (GGR). This was a shocking introduction as the player has to pay 28% tax before they even start playing, and this caused huge problems in the real money gaming industry.

This means that if a player wants to play fantasy sports in India and deposits ₹1,000 on the platform, they will receive only ₹720 in their account, as ₹280 will be deducted as input tax before they even get to play. While this discouraged many people from participating in real money gaming, RMG companies managed to work around this and did not let the consumers bear the brunt of this new regulation. If ₹280 from a deposit of ₹1,000 is deducted as tax, companies now give bonus cash worth the exact same amount (₹280) so that the full ₹1,000 gets credited to the user’s account.

Conclusion

India has both one of the biggest RMG industries in the world as well as one of the most underutilised RMG industries. Real money gaming has had to go through various hoops in India, like navigating the regulations and taxation problems, while having to deal with the judgment from people considering it to be gambling. However, the RMG industry has dealt with all problems brilliantly and is now booming in India. There is a potential for tremendous growth in the real money gaming sector, and it will be interesting to see just how much this industry grows in the future.