Indian skill gaming startups seek a self-regulatory central policy framework

The segment has also minted two startup unicorns (companies with more than $1 billion valuation) in the past year - MPL and Games24x7. Dream11 parent Dream Sports became the first unicorn in the space in 2019.

However skill-based real money gaming, which accounts for a significant chunk of the industry's revenues, is in the crosshairs of several state governments including Tamil Nadu, Andhra Pradesh, Telangana, Kerala and Karnataka who have banned or tried to ban them since gambling is a state subject.

Many of these bans were challenged by skill gaming startups and industry associations in the respective state courts who overturned these suspensions. The Supreme Court also upheld fantasy sports as a game of skill in July 2021.

What was discussed in the meeting?

Among the topics that were discussed at the meeting include the growth of the sector, how these startups are running their business and the livelihoods they are creating, the type of innovation they are doing, elements that could distinguish game of skill from game of chance, the menace of illegal offshore players, future growth opportunities, and the challenges and pitfalls in the sector.

The stakeholders sought establishing a self-regulatory organisations (SROs) within the industry, quite similar to the country's video streaming sector. They also requested to ensure the proposed regulatory framework be applicable across the country to ensure regulatory certainty for the nascent but fast-growing industry, people familiar with the matter said.

"It is heartening to note that Government of India through this task force and this consultative meeting under MoS MeitY Shri Rajeev Chandrasekhar with industry are aiming to work towards an approach that will safeguard skill based gaming startups while striving to protect user and consumer interests," Rameesh Kailasam, CEO of industry body IndiaTech.org that represents founders of Indian startups and investors, told Moneycontrol. IndiaTech.org counts Zomato, MPL, Dream11, Meesho, Steadview Capital and Falcon Edge Capital among its key members.

"We had submitted detailed recommendations to the Government of India on how centre should bring the much needed clarity for this sunrise sector, and possibly look at a process of whitelisting gaming formats through prescribed standards, so that online games of skill which are already judicially approved and those games following certain standards and principles of skill predominance are able to work without any uncertainties that currently emanate from different states's interpretations of their own gambling laws," Kailasam said.'

Need for central regulation

A central regulation has been one of the long requested demand from skill-based gaming startups and industry associations, although one of the key issues has been that online gaming sector doesn't have a nodal ministry since it intersects with multiple ministries such as MeitY, Ministry of Information and Broadcasting (MIB) and even Sports ministry to a certain extent, as pointed by AIGF CEO Roland Landers in a Moneycontrol Masterclass episode in November last year.

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 experts say.

Last month, the government had set up a seven member inter-ministerial task force to work on regulations for the online gaming industry. The task force comprised Niti Aayog CEO as well as secretaries of home affairs, revenue, industries and internal trade, electronics and IT, information and broadcasting and sports.

The task force will look into framing regulatory mechanisms for the segment, protection of gamers, ease of doing business, among others apart from identifying a nodal ministry for the sector and other measures to promote online gaming, as per a PTI report.

Kailasam said the industry could have a self regulatory mechanism backed by a soft-touch regulatory approach for oversight besides also having self-regulatory options where possible.

Following this meeting, online gaming startups and industry bodies can now individually and collectively recommend to the government on possible standards and guidelines to be followed by SROs as well as suggest the ideal regulatory frameworks, he said.

This includes recommending  parameters that will be followed for due diligence of formats, methodologies for establishing skill predominance, and methods to reduce harm, and consumer protection, among others.