Online Gaming — These are the Legal and Ethical Dilemmas in India
In our previous post, we explored UPI casinos in India, highlighting the speed and security they offer for online transactions. Now, we turn to a more complex topic: the legal and ethical dilemmas surrounding online gaming in India. With the industry’s rapid growth, these challenges have become increasingly important. Let’s take a closer look at the pressing issues and their potential impact on the gaming landscape. India’s online gaming offers exciting entertainment and economic growth, but it also faces legal ambiguities, ethical dilemmas, and social concerns!
The online gaming industry in India has experienced phenomenal growth in recent years, made possible by increased smartphone penetration, affordable data rates, and a growing middle-class population. While online gaming offers entertainment, social interaction, and even economic opportunities, it also presents legal and ethical challenges.
Given that the Indian gaming industry is expected to earn $7.5 billion by fiscal year (FY) 2028, a comprehensive strategy involving active involvement of the government in establishing and enforcing checks and balances in collaboration with the business is essential to maintain a favorable environment.
The Rise of Online Gaming in India
In online gaming, you can enjoy casual mobile games as well as real money games like poker, rummy and fantasy sports. With over 400 million users and the popularity of online gaming, industry reports suggest that the Indian gaming business is expected to reach $7.5 billion by 2028.
Despite this expansion, the industry operates in a gray area due to the lack of a detailed regulatory structure and conflicting laws. In addition, the public and policymakers are concerned about ethical issues, such as addiction, financial exploitation, and privacy violations.
Gaming vs Gambling
The online gaming market is expanding rapidly. However, gaming and gambling are actually two different concepts. Gambling is betting on the outcome of a specific game. It is completely a game of luck. In contrast, gaming is completely skill-based activities that require strategic thinking…
In its seminal decision in Lakshmanan vs State of Tamil Nadu in January 1996, the Indian Supreme Court emphasized the difference between games of skill and games of luck. Games of skill have some element of luck, but the player’s skill, knowledge, and experience determine success. In games of luck, you either rely entirely on luck or on a combination of skill and luck.
Further, the Kerala High Court ruled in Head Digital Works Pvt Ltd vs. State of Kerala (September 2021) that the skill required to play a game does not depend on the stakes and is not a criterion to determine whether it is a game of skill or not. The Court also struck down a notification that sought to ban online rummy played for stakes.
All forms of online gambling are prohibited in Tamil Nadu, and the Tamil Nadu Internet Gambling Prohibition and Online Games Regulation Act, 2022 was largely upheld by the Madras High Court in the November 2023 case of All India Gambling Federation vs State of Tamil Nadu.
Legality and Ethics in Online Gaming
Each state in India has the right to make laws relating to betting and gambling under the 7th Schedule of the Constitution, which has led to different regulations in each state. For example, Telangana and Andhra Pradesh have outlawed all online gaming, eliminating exceptions for skill-based games. Sikkim and Nagaland have also set licensing systems for several online games in their regions.
The Central Goods and Services Tax Act, 2017 and Integrated Goods and Services Tax Act, 2017 amendments, which will come into effect from October 1, 2023, have raised concerns about 28% GST on winnings and similar changes affecting casinos, horse racing and online gaming. Foreign companies offering real money online gaming will now have to register under the Goods and Services Tax (GST) system.
By amending the Information Technology Rules, 2021, Intermediary Guidelines and Digital Media Ethics Code, the Ministry of Electronics and Information Technology has created a central legal framework for online gambling. These online gaming rules are aimed at preventing gambling, user injury, and money laundering, especially when it comes to public access to online real money games.
The Internet and Mobile Association of India announced a code of conduct for online gaming sectors during the 2023 Indian Gambling Conference to ensure a safe gaming environment. Using this code allows customers to set limits on their gaming, as well as use cutting-edge technological capabilities to monitor behavior. Minors are unable to access real money games due to the emphasis on age-appropriate content.
Ethical Concerns
Addiction and Mental Health Issues
Gaming addiction, especially among young people, has become a significant ethical concern. Research says, it can result in mental health problems, such as anxiety and depression, social isolation, and poor performance in school or the workplace. This problem is further aggravated by real money gaming, which fuels a cycle of financial loss and compulsive behaviour, further increasing the negative consequences and necessitating intervention and awareness.
Financial Exploitation
Real money games often target vulnerable populations, including low-income groups and minors, luring them with promises of high returns.
Many gamers lose a lot of money in gaming. The result is that people get into debt and there are conflicts in the family.
Steps Toward Regulation and Ethical Responsibility
Comprehensive Legislation
India urgently needs a unified regulatory framework for online gaming that clearly distinguishes between games of skill and games of luck, defines permissible activities, and establishes standardized licensing and taxation norms.
Establishing Licensing and Tax Norms
A central regulatory authority can monitor compliance. It has to ensure that gaming companies follow legal and ethical standards.
Promoting Responsible Gaming
Gaming companies have a moral obligation to promote responsible gaming by running awareness campaigns about the risks of addiction, offering free counseling services to affected players, and developing games that emphasize skill and creativity rather than financial stakes.
The Role of Technology
New technologies like blockchain and artificial intelligence (AI) can help create an open and equitable gaming environment. AI can recognize addictive behavior patterns, and this will help casino companies take the right steps. On the other hand, blockchain can increase the transparency of transactions and reduce the chances of fraud and money laundering.
Conclusion
The online gaming industry in India is at a crossroads, with enormous growth potential but also significant ethical and legal concerns. The government, industry stakeholders, and civil society must collaborate to solve these problems. With a solid plan that protects user interests while promoting innovation, India can fully unleash the potential of online gaming.
