Tamil Nadu's new rules for real-money games: Blank hours, mandatory KYC norms, ban on minors, more

South India is a particularly important market for skill-based games like Rummy, which has significant penetration in these states

Tamil Nadu is introducing usage restrictions on real-money gaming platforms as part of the state's broader efforts to regulate the burgeoning sector, marking the latest setback for an industry already grappling with higher GST rates.

As per the rules issued by The Tamil Nadu Online Gaming Authority, a copy of which has been seen by Moneycontrol, real-money gaming platforms have to impose 'blank hours' between midnight and 5 am, disabling login during these restricted five hours.

The guidelines also prohibit minors from playing real-money games and mandate companies to offer players the ability to set daily, weekly and monthly monetary limits.

Additionally, platforms should display pop-up caution messages when a player has been playing for more than one hour, and continue to display them every 30 minutes to remind them of their playtime. Real-money gaming apps should also continuously display caution messages about the addictive nature of these games, with the wordings "ONLINE GAMING IS ADDICTIVE IN NATURE" on their respective login pages.

Whenever players deposit the money, RMG apps should also display the fixed monetary limit and the amount spent so far, in "reasonably bold letters", the guidelines stated.

Other measures include mandatory Know Your Customer (KYC) verification at the time of account creation. The initial login authentication will require KYC verification through Aadhaar, authenticated by a second-layer verification through One Time Password (OTP) sent to the phone number linked to the Aadhaar number.

Who is affected?

These rules apply only to online real-money games, which is defined as games where users make a deposit in cash or kind with the expectation of earning winnings on that deposit, similar to the gaming amendments to the union government's IT Act 2021.

The regulations also noted that winnings refers to any prize, in cash or kind, which is distributed or intended to be distributed to a user of an online game based on the user's performance and in accordance with the rules of such games.

Tamil Nadu Online Gaming Authority, a five-member regulatory authority was set up by the state government in August 2023. Chaired by retired IAS officer Md. Nasimuddin, the authority has powers to regulate online games, issue registrations and oversee the functioning of local online gaming providers, identify games of chance for suspension, and resolve any grievances or complaints received against any gaming provider.

In April 2023, the Tamil Nadu government had prohibited online rummy and poker under the state's online gambling law, by calling them as online games of chance, thereby bringing them under the purview of online gambling. Gambling is a state subject in India.

South India is a particularly important market for skill-based games like Rummy, which has significant penetration in these states, industry executives have previously told Moneycontrol.

The Madras High Court set aside the ban on online rummy and poker in November 2023. However, it stated that the state government is free to formulate rules to regulate the time spent or impose age limits for these online money games.

"The provision of following blank hours from 12 to 5 am is a bit arbitrary especially considering the fact that appropriate warnings and deposit limits are already mandated" said Jay Sayta, a technology and gaming lawyer.

He mentioned that since the rules don't define exact spending limits, each company could fix their own limits, resulting in different limits across different platforms.

"The biggest pain point may however be implementing these regulations for only one state with the possibility of varying regulations in different states in future" he said.

Roland Landers, CEO of skill gaming industry body All India Gaming Federation, believes that substantial progress has been made toward player protection, fostering innovation, and furthering the sector's growth in these guidelines

"It is commendable that many provisions mirror the MeitY rules or borrow language from them, creating a degree of regulatory consistency...While some aspects of the new rules may require further deliberation by the industry to assess their operational impact, we look forward to continued engagement to create a balanced and progressive regulatory framework," he said.

Landers further added, "However, the biggest threat to players, the economy, and national security remains offshore illegal gambling apps, which operate outside Indian regulations and put users at risk. Addressing this menace requires a collaborative effort between the industry and authorities to develop effective solutions."

No uniform gaming rules yet

These moves come at a time when India is yet to implement a comprehensive regulatory framework for the 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. But, the ministry later reportedly dropped the SRO plan.

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.