Online Gaming Needs a Unified Policy, Not Disparate State Laws

In September 2024, the Gujarat National Law University (GNLU) released a report titled Evaluating Blanket Bans and Mandatory Limits in Gaming. The report called for a unified legal framework and a dedicated regulatory body for online gaming in India to address industry concerns. It also recommended gaming operators implement features allowing users to set limits on their gaming activities.

In this context, it is notable that unified legislation across various industries has helped standardise practices, improve transparency and reduce compliance burdens, allowing companies to focus more on efficiency and growth. For instance, the National Digital Communications Policy (NDCP) improved ease of doing business, reduced costs and helped the industry cope with financial stress.

Additionally, schemes like Make in India, Production Linked Incentive (PLI) and Startup India policy and changes in FDI regulations have provided clarity for manufacturers to enhance productivity and operations. These policy changes have also simplified regulations to attract higher industry investments.

In this context, policy action for the sunrise gaming sector will not only enable higher growth, investments and employability in the sector but also encourage the youth to develop skills, games and gaming products for the world to see. History is evidence to the fact that stable and unified regulatory policies have not only streamlined operations but also improved regulatory compliance.

Laws and the Regulatory Regime

The gaming industry in India has been regulated for nearly a century by state governments under the Public Gambling Act of 1867 and Section 108 of the Indian Penal Code (IPC). These laws addressed cheating in games and street gambling, with penalties under Section 415 (45 of the 1860 code) for fraudulent practices or unlawful devices. The framework was functional, with state-issued licenses regulating location, space, timings and other aspects of gambling.

Additionally, the central government, under the IT Act, 2000 and the Information Technology (IT) Amendment Rules of 2021/2023, defined online gaming and introduced a registration mechanism with the self-regulatory board (SRB) to allow games—both free and real money games (RMGs)—across India. Despite this progress, neither the SRB has been established nor the criteria distinguishing games of skill from games of chance been defined.

Leaving regulation to individual states would create confusion and make enforcement nearly impossible. An online game permitted in one state but banned in another could not be restricted geographically, much like liquor stores on state borders in states with prohibition. However, unlike physical liquor stores, online gaming has no geographical boundaries.

The disaggregated state wise legislations aggravate the problem of ensuring legitimacy and legality of online gaming operations. The disconnected nature of state wise legislations and lack in synergies in interstate regulation of gaming operators has left a vacuum and given rise to gray areas. Instead, a unified gaming regulation would help states in establishing a licensing regime based on the distinguishing parameters and effectively curb chance-based gaming, irrespective of the location of users or gamers.

Challenges in Regulation

With the advent of electronic gaming, which required consoles and frequent game purchases, gaming became more of a home entertainment activity and did not demand significant regulation. However, the landscape changed drastically when gaming moved online. The digital revolution in India brought about cheaper and faster internet connectivity along with increased access to smartphones and ease of online payments. These provided the right ingredients for the growth of various forms of gaming platforms to cater to a rising demand and increasing user base.

Consequently, the unexpected surge in online gaming challenged existing regulations that could not cope with the new dynamics of online gaming, while disabling the physical regulatory aspect such as place, time and location. Online games, accessible via smartphones from anywhere, allow users to play games globally, bypassing traditional geographical boundaries. Additionally, the rise of mobile phones and digital payments enabled players to participate in RMGs across state and national borders, leading to a growing need for regulatory oversight and standardised regulations.

Rising concerns of the social impact of online gaming have pushed certain states to instead establish their own regulatory body. For instance, the Tamil Nadu government has consistently emphasised the social impact of online gaming, particularly on young children who may become addicted and spend excessive time and money on these platforms.

Tamil Nadu has acted in the absence of central guidelines or the formation of the SRB, setting an example for the regulation of online gaming. The wider concern for social impact underscores the importance of incorporating an industry-wide SRB, and for legal norms and measures to be made applicable across India and not just in individual states.

What’s the Way Forward?

India is home to the second largest community of gamers and is expected to become the world’s largest hub of gamers. Self-regulatory organisations (SROs) as industry-led bodies have acknowledged rising social concerns and implemented age verification measures to prevent players under 18 from accessing RMGs. They have also introduced features allowing players to set limits on their spending and playtime, with constant red-flag alerts built into game designs.

SROs have also established a pan-India code of conduct, mandating know your customer (KYC) verification and maintenance and monitoring of digital records to curb concerns of potential money laundering, thus ensuring immediate reporting. These organisations have also adopted the Advertising Standards Council of India (ASCI) code, ensuring that advertisements do not promote crime, violence or discrimination based on race, caste, religion, gender or other factors.

The current challenge is the lack of clarity on where online games should register and how to differentiate between games of skill and chance. Games of chance must register with designated regulatory authorities and comply with gambling laws. However, these laws need to be amended to include norms for online games of chance. With the internet’s borderless nature and self-regulation trends, a central registration system is essential. This would help the industry adopt credible policies, ensure safeguards and encourage offshore gaming operators to register and comply with Indian tax laws.

India should not miss the opportunity to become a global gaming hub, encouraging innovations and investments in the online gaming sector, as the lack of a consistent national policy may drive developers and platform providers to relocate outside of India. While offshore game developers are willing to pay taxes and invest in India, the current regulatory framework discourages them. Consistent and credible regulatory policies would not only favor industry growth, but ensure safeguards and encourage offshore gaming operators to enter India and register with the central regulatory authority under Indian gaming and tax laws.

The author is a practitioner development economist and former secretary, ministry of electronics and IT. Views expressed are personal.