Karnataka will soon introduce a legal framework to ban gambling while allowing skill-based games in the state, following a model similar to Chhattisgarh.
“We are considering (regulatory) models that create a better environment for the gaming industry, including evaluating the Chhattisgarh model" Karnataka IT-BT Minister Priyank Kharge told Moneycontrol on the sidelines of an event in Bengaluru on March 6.
"The idea is that we cannot kill the industry—even the industry itself wants regulation. We are working to ensure that, with their help, we can create a framework that fosters innovation, sustains the industry, and builds skills while also protecting people from losing money to fraudulent gaming sites or shady networks operating outside the system,” Kharge said.
Chhattisgarh's online gambling law, which came into effect in March 2023, applies only to 'games of chance', where the winner is predominantly determined by luck. Skill-based games, where the outcome is predominantly determined by the knowledge, training, expertise, and experience of the participant, are exempted from the law.
Kharge said that the government is discussing with multiple internal stakeholders before drafting a bill. “We (Information Technology department) are in discussions with Law and Home departments since this issue spans multiple sectors. Gaming and innovation fall under IT, so I must take the lead in educating them about its nuances. There is a fine line between a game of chance and a game of skill, and we must tread carefully to avoid harming the industry,” he said.
In 2021, the Karnataka government introduced a bill in the legislative assembly to ban all forms of online gambling. The Karnataka Police (Amendment) Bill, 2021, sought to prohibit all wagering, betting, and gambling—except lottery and horse racing. However, it had removed the distinction between game of skill and game of chance, thereby bringing skill-based gaming startups under its purview.
In February 2022, Karnataka High Court struck down majority of the bill’s provisions on online gambling, deeming them unconstitutional. The state later moved the Supreme Court challenging the decision. Subsequently, the Supreme Court issued notices to skill-based gaming firms and industry bodies over Karnataka's plea against the high court's ruling that struck down its online gambling ban. The matter is still pending in the apex court.
Lack of uniform central regulation
Karnataka's move to introduce a state law comes at a time when the union government has yet to implement a central regulatory framework for the fast-growing sector.
In April 2023, the Ministry of Electronics and Information Technology (MeitY) notified gaming-related amendments to the IT Act, 2021, which allowed multiple self-regulatory organisations (SROs) to determine whether a real-money game could be permitted in India or not. However, the ministry is said to have later dropped the SRO plan.
Over the years, several real-money gaming companies have pushed for uniform central regulation to eliminate the uncertainty of navigating through various state-specific regulations, which frequently disrupt their business operations.
For instance, Tamil Nadu recently notified a set of state-specific regulations that introduced time and usage curbs on real-money gaming platforms, as part of its efforts to regulate the burgeoning sector. These rules are now facing a legal challenge from skill gaming companies Games24x7, Junglee Games, and Head Digital Works (A23), as well as the player association Esports Players Welfare Association.
A central regulation is also crucial to fight the menace of illegal offshore gaming operators since a state law cannot be enforced against a foreign operator, industry executives have previously told Moneycontrol.
The Indian gaming industry reported revenues of $3.8 billion for the financial year 2024, a 22.6 percent growth from $3.1 billion in FY23, according to a report by the gaming and interactive media venture fund Lumikai. Of the $3.8 billion in revenue, about $2.4 billion came from the real-money gaming segment.
The report also said the sector is estimated to cross $9.2 billion in revenue by FY29 at a 20 percent CAGR over the next five years.
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