Regulating Online Games – UPSC GS3

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Context:
  • Online gaming has flourished during the pandemic.
  • The average time spent on online gaming has gone up almost 65% from pre-Covid levels.
  • More than 43 crore people have spent time on virtual gaming.
  • In light of this, this industry needs to be regulated in India.
Present legal framework regarding online gaming in India?
  • Presently, online gaming falls in a regulatory grey area and there is no comprehensive legislation with respect to its legality.
  • Games based on skills are allowed in most parts of the country, while games of chance are categorised under gambling, treated as immoral and prohibited in most parts of the country. As betting and gambling is a state subject, different states have their own legislation.
  •  Every state in India prohibits any sort of gambling, betting or wagering on games of chance. Exceptions: Goa, Sikkim, and the UT of Daman.
  • Assam, Andhra Pradesh, Nagaland, Odisha, Tamil Nadu and Telangana have placed restrictions on games of skill as well.
  • Centre, in an advisory to states, has laid out useful dos and don’ts to educate parents and teachers.
Various State laws struck by courts: 
  • Karnataka Police (Amendment) Act, 2021 was introduced by the Karnataka government to ban online gambling and skill-based gaming platforms like rummy, poker and fantasy sports that involve any wagering or risking of money. A division bench of the Karnataka High Court delivered a judgment striking down major portions of the Act.
  • A similar law introduced by the Tamil Nadu government was struck down by the Madras High Court in 2021.
  • In 2021, the Kerala High Court had also quashed a notification issued by the State government specifically banning the game of online rummy when played for stakes.
Why these laws were struck?
  • The Karnataka High Court struck down the amendments to the Karnataka Police Act on three major grounds: 
    • Violation of fundamental rights of trade and commerce, liberty and privacy, speech and expression;
    • Law being manifestly arbitrary and irrational insofar as it did not distinguish between two different categories of games, i.e. games of skill and chance;
    • Lack of legislative competence of State legislatures to enact laws on online skill-based games.
  • The court held that games, where substantial effort, knowledge and skill is required, are different from games of mere luck or chance.
  • The judgment also noted that State governments have been granted powers under the Constitution to make laws for ‘gambling and betting’ but interpreted the word ‘betting’ for this purpose to mean betting on gambling games, i.e. betting on games of chance and not games of skill.
Issues associated with online gaming:
  • Gaming addiction: Numerous people are developing an addiction for online gaming. This is destroying lives and devastating families. Compulsive gaming by children is affecting their performance in schools and impacting their social lives & relationships with family members.
  • Impact on psychological health: Online games like PUBG and the Blue Whale Challenge were banned after incidents of violence and suicide. This addiction is also said to be causing near-sightedness in our youth.
  • Threat to Data privacy: Inadvertent sharing of personal information can lead to cases of cheating, privacy violations, abuse, and bullying.
  • Betting and gambling: Online games based on the traditional ludo, arguably the most popular online game in India, have run into controversy, and allegations of betting and gambling.
Benefits of regulation:
  • This industry is expected to generate revenues in excess of Rs 29,000 crore in 2025 with over 65.7 crore users. It is estimated that more than 15,000 direct and indirect jobs will be created.
  • The GST and Income Tax generated from this industry will add to the economic multiplier.
  • Potential to attract significant global investment. Current investments in gaming companies like Dream11 are good indicators.
Way forward:
  • Strengthening of KYC norms
  • Implement an age-rating mechanism wherein minors are allowed to proceed only with the consent of their parents — OTP verification on Aadhaar could resolve this.
  • No in-game purchases to be allowed without adult consent and wherever possible, the in-game chat option should be disabled.
  • Gaming companies should proactively educate users about potential risks and how to identify likely situations of cheating and abuse. Anonymity of participants should be removed and a robust grievance handling mechanism needs to be built.
  • A Gaming Authority at the central government should be created. It could be made responsible for the online gaming industry, monitoring its operations, preventing societal issues, suitably classifying games of skill or chance, overseeing consumer protection, and combatting illegality and crime.
  • – Moreover, various forms of self-regulation should also be encouraged for the industry.
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