Navigating the regulatory universe of gaming in India – Some pressing issues persist

The dawn of the digital age has ushered in a new era of entertainment, where the lines between reality and the virtual world are blurring. At the forefront of this revolution stands the online gaming industry, a burgeoning sector that has captured the hearts and minds of millions worldwide. India, with its youthful demographic and burgeoning digital landscape, is poised to become a global gaming powerhouse. However, to fully realize its potential, a robust regulatory framework is imperative.

The Indian online gaming sector is a vibrant tapestry, woven with threads of skill-based games, esports, and virtual sports. While these segments offer immense entertainment and economic opportunities, they also present unique challenges that require careful consideration. The absence of a unified regulatory authority has led to a fragmented landscape, with different states enacting their own rules and regulations. This patchwork approach creates confusion, hinders growth, and undermines the industry’s potential.

To navigate this complex terrain, a comprehensive regulatory framework is essential. This framework should strike a balance between fostering innovation and protecting consumers. It should establish clear guidelines for different gaming categories, ensuring that skill-based games are differentiated from games of chance. Additionally, robust player protection measures, including age verification, responsible gaming initiatives, and safeguards against addiction, are crucial to safeguard the well-being of players, especially minors.

To address these challenges and unlock the full potential of the Indian gaming sector, a multi-pronged approach is necessary. This article delves into the key areas that require attention, including regulatory reforms, player protection, taxation policies, and industry collaboration.

Current state of regulations in the online gaming sector

Gursharan Singh, Secretary General, Skillhub Online Games Federation, noted, “The Indian online gaming sector has emerged as a vibrant growth story, driven by India’s demographic and digital advantage. Prime Minister Modi’s endorsement has further boosted the industry’s potential, yet gaps remain in strategy, regulation, policy consistency, and competitive events. To realize its full potential, the industry needs stable support from the government in areas like taxation, technology, and promotion through tournaments. In response, the Skillhub Online Games Federation (SOGF) has led the way, forging key international partnerships with International Esports Federation (IESF), Global Esports Federation (GEF), and International Mind Sports Association (IMSA) to elevate India’s gaming landscape. With the recent announcement to host major multinational esports events in India in 2025 in partnership with IESF and GEF, we aim to unify stakeholders and position India as a global gaming and esports hub.”

Ashwin Haryani, Country Head, Ampverse DMI, said, “The online gaming sector in India is definitely evolving, and the government’s efforts to catch up are encouraging. Recently, we saw the Ministry of Electronics and IT update the IT Rules to include provisions specifically for gaming intermediaries, which is a solid step forward. The idea here is to draw clear lines between games of skill and chance, but there are still some gray areas. For instance, certain states are more permissive while others have outright bans, which creates a variable patchwork of rules for operators.”

According to Haryani, one thing that would really help is if there was a single national regulatory body. This way there would be consistency and operators wouldn’t be caught in a tangle of state-level regulations. “Overall, though, it’s heartening to see these initial steps, as they show the government recognizes the industry’s potential and understands the necessity for changes,” he added.

A spokesperson for All India Gaming Federation (AIGF) emphasized, “The Ministry of Electronics and Information Technology introduced amendments to the Intermediary Rules, 2021, which aimed to set up self-regulatory bodies (SRBs) for the online gaming ecosystem. However, since SRBs have not yet been implemented, there is an urgent need for clear, consistent regulations to address the unique nature of skill-based gaming. The existing guidelines must prioritize robust user verification, anti-fraud measures, and ensuring fair play and responsible gaming.”

Additionally, clear and streamlined regulations on taxation and compliance processes are essential to create a sustainable environment for the industry. Protecting against illegal offshore platforms remains a critical concern, as these platforms operate outside the purview of local regulations, creating significant risks for consumers. Collaboration between industry stakeholders and regulatory bodies will be crucial to ensuring that these regulations are both practical and effective, thereby restoring investor confidence, which has been impacted by regulatory uncertainty, remarked the AIGF spokesperson.

Stan Kim, Board Director, Teen Patti King said, "The online gaming sector in India is experiencing significant growth, driven by a surge in smartphone usage, increasing internet penetration, and a growing interest in competitive gaming. However, the regulatory landscape remains fragmented and underdeveloped in several key areas such as;.
1. Lack of Centralized Regulation: Unlike other countries that have established comprehensive frameworks for online gaming, India lacks a centralized regulatory body specifically for this sector.
2. Focus on Skill vs. Chance:
3. Taxation Issues: Online gaming companies face complex taxation.
4. Content Regulation: There are no specific regulations governing the content of games, including issues related to violence, gambling, or appropriate age ratings.
5. Consumer Protection: While some regulations exist, there is a lack of robust measures to protect users, particularly concerning responsible gaming, data privacy, and financial transactions.
While some states are beginning to adopt better practices concerning online gaming regulations, a cohesive approach at the national level would be beneficial to harness the sector's potential and mitigate the risks associated with it. As the market continues to evolve, stakeholders will need to collaborate to address these regulatory gaps proactively."

Building a robust national regulatory framework for the online gaming sector

Gursharan Singh opined, “The government and gaming stakeholders, represented by an industry body, should establish clear guidelines for mind sports (skill-based games), esports and virtual sports, creating appropriate oversight for each category. A dedicated regulatory authority can streamline policies, enforce compliance, issue licenses, and address grievances, ensuring fairness and transparency. Measures to protect players – especially minors – from addiction and exploitation, such as age verification, spending limits, and responsible gaming campaigns, are essential.”

Adding further, Singh said, “Data privacy and security standards must be enforced to safeguard personal information and build user trust. Regular collaboration between the government, gaming companies, and the representative federations will keep the framework adaptable to technological advancements. Policies that encourage growth, such as tax incentives and support for local developers, can enable the sector to expand responsibly and contribute significantly to India’s economy and position in the global gaming market. Finally, gaming events of international level and representation of Indian athletes across the globe would catapult the Indian gaming space to a new territory.”

According to Ashwin Haryani, to really lay down a strong foundation, a few things need to happen. First, we could use a central law that covers the needs of the whole country. Right now, regulations vary from state to state, which can be confusing and tough for businesses. A unified law would create a clear framework for everyone.

Secondly, having a dedicated regulatory body just for online gaming would be a big win. This body could handle things like licensing, compliance, and enforcement all in one place. Collaboration is also key here – getting input from industry players, legal experts, and even the public could make for a balanced set of rules. And, on top of that, public awareness campaigns about responsible gaming and platform legality would go a long way in helping consumers make informed choices.

The AIGF spokesperson observed, “To build a robust national regulatory framework for the online gaming sector, both the government and industry stakeholders must take collaborative and proactive steps. The government must first establish clear legal distinctions between skill-based games and games of chance, ensuring that skill-based gaming is not mistakenly categorized as gambling. This will help avoid regulatory ambiguity that stifles industry growth.

Additionally, stronger measures are needed to tackle the rise of offshore betting platforms, which operate outside of local laws and pose a risk to both consumer safety and national revenue. Enhanced enforcement, such as collaborating with ISPs to block illegal offshore websites, is critical to protecting Indian consumers and ensuring a level playing field for domestic operators.”

Collaboration between the government and the gaming sector is essential to strike a balance between effective regulation and fostering industry growth. The government should engage closely with stakeholders to ensure that any regulations are not only comprehensive but also practical and adaptable to the fast-evolving nature of online gaming. They must prioritize the implementation of best practices in areas like user protection, transparency, and responsible gaming. This includes robust KYC processes, anti-fraud measures, and self-regulation to ensure fairness and protect players.

Additionally, the industry must work closely with regulators to ensure that policies are both realistic and enforceable. Educating consumers about the legal differences between skill-based gaming and gambling, as well as promoting responsible gaming behaviors, should be a priority for operators.

Stan Kim noted, "The online gaming sector in India is experiencing significant growth, driven by a surge in smartphone usage, increasing internet penetration, and a growing interest in competitive gaming. 

Building a robust national regulatory framework for the online gaming sector in India requires a multi-faceted approach. Both the government and gaming stakeholders need to collaborate effectively to ensure the sector is well-regulated, safe, and conducive to growth. "

Here are some steps that can be taken:

About Steps for Government

1. Establish Clear Definitions: Define what constitutes online gaming, including distinctions between games of skill and games of chance, to provide clarity for regulation.
2. Create a National Regulatory Authority: Establish an independent regulatory body responsible for monitoring and regulating online gaming, ensuring compliance with legal and ethical standards.
3. Draft Comprehensive Legislation: Develop clear laws that cover licensing, taxation, consumer protection, data privacy, and advertising standards. 

1. Tax Structure: Formulate a fair and transparent tax system that incentivizes investment and growth in the sector while ensuring that the government receives appropriate revenue.

About Steps for Gaming Stakeholders

1. Responsible Gaming Initiatives: Adopt and promote responsible gaming practices, ensuring that players are aware of the risks and know how to gamble wisely.
2. Compliance with Regulations: Stay compliant with the laws and regulations set by the government, including obtaining necessary licenses and adhering to consumer protection standards.
3. Industry Standards and Best Practices: Collaborate with other stakeholders to develop and implement industry standards, best practices, and self-regulation initiatives.
4. Stakeholder Engagement: Participate in discussions with government bodies to contribute to policymaking and share insights based on industry practices and challenges.

Unified regulator in the gaming sector

Gursharan Singh believed that to create a conducive policy landscape for a unified regulator in the gaming sector, the government could establish clear guidelines for all online games and esports, implement strong player protections, and enforce data privacy standards. He said, “A neutral and impartial industry body/federation, with a diverse, goal-driven and experienced administrative board, could serve as the central regulatory body, ensuring compliance, facilitating competitive tournaments, promoting industry collaboration, and fostering responsible growth to build a transparent and accountable gaming ecosystem.”

Ashwin Haryani added here, “I think the calls for a self-regulatory body makes a lot of sense, given how fragmented things are now. First off, aligning state and central policies would be a game-changer. It would eliminate contradictions and create a seamless regulatory environment. Clear roles and responsibilities are crucial too – this way, the regulator can work efficiently without overlapping with other authorities and help the sector to grow in the right direction under the ambit of all necessary regulations. Looking at successful models from other countries can be helpful. For example, some places have implemented clear frameworks that balance growth and user protection really well.”

The AIGF spokesperson noted, “While the idea of a unified regulator for the online gaming sector has gained traction, it may not fully serve the purpose given the diversity and rapidly evolving nature of the industry. The online gaming ecosystem is dynamic, with a wide range of games and platforms that cater to different segments of the market. A single, centralized regulator could struggle to keep pace with the innovation and fast-moving developments in this space.”

Instead, a model based on multiple self-regulatory bodies (SRBs) as envisaged in the Intermediary Rules could prove more effective. These bodies would benefit from more structured frameworks and clearer mandates, but they would also retain the flexibility needed to address emerging trends in the sector. Additionally, SRBs can focus on promoting voluntary compliance and collaboration between operators and regulators, while ensuring user protection and responsible gaming practices.

Stan Kim believes, "Creating a more conducive policy landscape for a unified regulator in the gaming sector in India involves several strategic steps. Here are some considerations that can facilitate this goal:

1. Stakeholder Engagement: Encouraging continuous dialogue among all stakeholders, including game developers, operators, regulatory bodies, government agencies, and consumer advocacy groups, can help identify common goals and concerns.
2. Public Awareness Campaigns: Raising awareness about the importance of a unified regulator for consumer protection, responsible gaming, revenue generation, and public safety.
3. Legal Framework Review: Conducting a thorough review of the existing laws and regulations governing different forms of gaming (e.g., online gaming, lotteries, sports betting, etc.) is crucial.
4. Risk-Based Approach: Implementing a risk-based regulatory approach can allow for flexibility in regulation, tailoring oversighteral key"

Current taxation policies for the gaming sector

While Gursharan Singh said that current taxation policies for the gaming sector reflect the government’s effort to regulate a rapidly growing industry, he also felt that there is room for refinement to support long-term growth. He stressed, “Striking a balance between fair revenue collection and encouraging innovation is essential for sustainable progress. A stable and predictable tax environment, particularly for skill-based gaming, would foster investor confidence and enable the sector to expand responsibly. Working closely with policymakers to align tax structures with industry needs could help unlock the full potential of the gaming sector, positioning India as a global leader in this space.”

Ashwin Haryani noted, “The new taxation rules have been a big shake-up for the industry! In July 2023, the GST Council brought in a uniform 28% GST rate on the full face value of bets, whether it’s a game of skill or a game of chance. While it creates consistency, the rate is pretty steep and has raised concerns, especially for platforms focusing on skill-based games.

There’s also the income tax side of things, winnings from online gaming now have a 30% tax, plus TDS on net winnings, which adds up. The aim here is to regulate the sector and boost revenue, which makes sense, but the high tax burden could potentially discourage new players and affect growth.

“In an ideal world, the taxation approach would consider the differences between games of skill and chance, creating a more balanced system that supports the industry while still ensuring responsible gaming practices,” Haryani added.

According to the AIGF spokesperson, “The amendments to the GST regime have had a detrimental impact on the online gaming industry. The imposition of a 28% tax on deposits and the retrospective taxation of over Rs 1.2 lakh crore have significantly affected the financial health of many operators. The high tax burden has led to job cuts, company closures, and a decline in investment, which is stifling innovation within the sector. Many companies are struggling to sustain operations in this environment.”

While operators have adopted cost-cutting measures, the combination of high taxes and the ongoing presence of illegal offshore platforms undermines the ability of legitimate Indian operators to thrive. The lack of enforcement of intermediary rules only exacerbates this issue. The government needs to rethink the taxation policy and adopt a more favorable and clear structure to encourage growth and innovation in the sector.

“A more balanced approach would help foster a sustainable online gaming industry, supporting both local operators and the broader economy while ensuring consumer safety and compliance,” the spokesperson added.

Stan Kim said, "Taxation policies for the gaming sector in India have been a topic of considerable debate and discussion. The gaming industry, including online gaming, esports, and gambling, has been growing rapidly, and with this growth, the need for a clear and effective taxation framework has become increasingly important.

• Taxation on Winnings: Players are subject to income tax on their winnings from gaming activities. This can lead to a significant portion of winnings being taxed, which might dissuade participation in the sector.
• Encouraging Growth vs. Regulation: The challenge for policymakers is to strike a balance between regulation and encouraging growth in the gaming sector. 
• Focus on Skill-Based Games: There is also a distinction made between skill-based games and games of chance, and how they are taxed. Skill-based games often face lower tax rates, which is essential for promoting this segment of the industry.

Overall, while the taxation policies for the gaming sector in India are aimed at generating revenue and regulating the industry, there is a strong need for dialogue between the government and industry areas."

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