Editorial: Regulate online gaming industry

The absence of a specialised regulatory authority and enforcement for the industry is too glaring to ignore

With substantial growth in smartphone penetration, the online gaming industry is on the cusp of a major transformation in India. However, there is a popular misconception that gaming is synonymous with gambling. This misrepresentation creates a negative narrative surrounding the sector. The harmful activities of the illegal offshore betting and gambling platforms further exacerbate this misrepresentation. These complexities pose a challenge to the regulatory authorities tasked with overseeing the activities of the online gaming industry. A balanced, collaborative approach between the government and the online gaming industry is essential for responsible and sustainable growth of the sector. Accounting for nearly 83% of the world’s gamers, India is the biggest gaming market with 568 million users, 1,400 gaming companies and over 9.5 billion gaming app downloads in 2023. The industry, predominantly a home-grown startup ecosystem, has been on a continuous rise and is expected to reach $8.6 billion by 2028. Mistaking the gaming industry for gambling is the biggest stumbling block that could jeopardise its potential for growth, employment creation and contribution to national development. At present, there is no mechanism for individuals to differentiate between legitimate gaming platforms and illegal gambling/betting sites. The absence of a specialised regulatory authority and enforcement is too glaring to ignore. The surge in online gaming, while promising economic growth, has led to a host of concerns, from addiction and mental health issues to financial fraud and national security risks.

Given that online gaming platforms operate in the digital realm, it becomes a jurisdictional nightmare for regulatory authorities to curb malicious activities such as illegal betting and gambling that operate outside the jurisdiction of the countries where the users reside. Offshore operators are not bound by strict cybersecurity and information security standards, increasing the risk of personal and financial data breaches. Online gaming platforms have also been maliciously exploited for money laundering and terror financing activities. Gaming applications based in foreign jurisdictions have served as channels for cross-border financial transfers. While ensuring strict action against illegal gambling, the government must also work closely with the legitimate gaming industry to differentiate between legal online gaming and illegal gambling. Such a partnership would not only help clear the negative perceptions but also support the industry’s growth. The International Monetary Fund (IMF) has flagged concerns over how a combination of high taxes and a weak, discretionary approach to regulatory enforcement has become a major impediment to the growth of the online gaming sector. Another critical issue impacting the industry’s regulatory framework is the distinction between games of chance and games of skill. There is an urgent need for clear, consistent and comprehensive regulations to promote the organised growth of the industry, ensuring an open, safe, trusted and accountable internet for its users. The regulatory framework should be compliant with data privacy norms and provisions of the Information Technology Act.

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