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Eximius Ventures

Can Real Money Gaming Leap Over the Hurdles in India?

Credit: Tekrevol

Until recently, India did not have a ‘gaming community’ as such. Yes, there were online games popular among youngsters, but barring a few hardcore gamers, the general junta had no clue about Steam or Call of Duty. And then PUBG happened. The whole nation was hooked. And the pandemic only egged on the growth of these online games, which people started playing for monetary stakes. Welcome to the world of Real Money Gaming (RMG) that involves playing any sport or skill-based game online for a cash-prize wager.

Is it Legal in India?
This is a much-debated question. In India, chance-based gambling games are prohibited. However, skill-based games are allowed. This has led to an ongoing debate over the legality of RMG in India, with many regional courts, as well as the HC and the SC on occasions, passing judgments that have, over time, evolved as an industry standard. The government has set up a two-step test to figure out whether the games Indians play online are chance or skill based.

How does it work? The basic test sees whether you can opt to lose the game. This means you need to exercise your will to win — like you do in Ludo. The second test sees whether your performance improves with time. The more you play the game, the easier it is for you to win. Now, this is a tough one. It means, the game cannot entice the player in endless loops. However, most games place the stakes on the skill of the player and slip through the ‘gambling’ clause.

Growth in the Last Few Years
Online gaming is on an exponential growth curve across the world. It had been steadily climbing the popularity charts in India (₹258 crores in 2013–14; ₹3,400 crores in 2017–18), despite bans and half-hearted regulations, until COVID-19. With major sporting events and entertainment avenues cancelled, people took to online gaming. The average gaming time for youth increased from 5 hours to 40–60 hours a week. This saw more real money games cropping up. In that sense, 2020 has been a landmark year for the sector. Online Poker, Rummy, StandOff 2, etc. with their engaging interfaces, promises of virtual socialising, and skill-based rewards have won through the year.

Now, many companies are getting into the sector — investment is flowing, content quality is improving, creation is speeding up, and many are collaborating for merchandise and hosting online tournaments. As per a Maple Capital Advisors report, the Indian gaming industry grew by 47% in 2020, and a KPMG report guest estimates that the online gaming industry in India will earn ₹11,900 crore by 2023. There are 400+ gaming startups in India at present, and new ones are entering the market each day.

What Aided the Growth
Most creators leverage the smartphone usage among the youth and bank on the option of easy and accessible online payments. But there is another thing abetting this growth: the rise of digital wallets allowing players to immediately withdraw winnings.

The gaming industry has also benefited with the entry of big players into the fray. It is now more structured, offers quality games and bigger tournaments, promises fair play, and most importantly, has data privacy guidelines in place.

However, the real big daddy that’s helping the real money gamers flourish is data, and the ease of mapping your data using the phone you play the game on. Digital analytics and AI monitoring help game creators create a profile of each player and customise the stakes: the frequency at which you play, how you lose and win, who you lose to, what you spend on gaming, which rooms you frequent, and more. Why? To give you an addictive game — offering discounts, incentives (even gold coins!), etc. It’s a cycle now: the more the money pumped into creating games, the more money it begets the industry. This is where the problem starts.

Regulatory Hurdles
RMG has gained legal acceptance only when it’s played for real — on ground! At present, archaic laws govern the ambit of online gaming in India. One of them is The Public Gambling Act, 1867, that prohibits the operation of public gambling houses and punishes the visitor, but this law exempts “any games of mere skill.” Clearly, since this legislation came much before virtual gambling, it only lays down the laws for physical gambling houses.

So, much of the legality is still grey in the RMG world. Of course, many state legislations have come up over the years and poker, roulette, fantasy sport betting, etc. all have different prohibitor codes in different Indian states, but this is not enough to ensure ethical and legal operations of online gaming.

In 2018, Shashi Tharoor proposed a private members’ bill, called the Online Gaming and Prevention of Fraud Bill, 2018, based on the Law Commission’s recommendations to legalise online gambling and betting under strict regulations. He proposed a commission to supervise online gaming websites and track illegal online sports gaming. But nothing has come out of it yet.

In India, luring players to play or gamble with the promise of a cash prize is illegal. It is also illegal for gaming platforms to profit from the winning hand. But since the law rules, these are applicable only for a physical gambling house. Most gaming sites escape citing the ‘skill-test’ model, as it then becomes real-money gaming, not gambling.

Of Bans and More
Though listing out all the gaming platforms and tracking their pattern is beyond the ambit of this article, of and on, one does hear about games coming under the legal purview, thanks to their popularity. For example, JeetWin, a mobile-app based online casino, brought on board Sunny Leone as their brand ambassador. But its over-the-top marketing strategies that promised extravagant wins, led to it being called out and banned in many states. Then there is Mobile Premier League (MPL) — endorsed by Viral Kohli. It too lures players to pump in money with no option to recoup. MPL is now banned in Tamil Nadu, Andhra Pradesh, Assam, and others.

But the reverse also happens. Gliding on the skill-test success is a version of fantasy football played on Dream11(the player has to choose a team of 11 players from across a league to win). It was legalised by the Punjab and Haryana high court which adjudged that putting together a team that can win is a business skill, and therefore, legal.

In short, the legal loopholes and grey areas pertaining to online RMG are not allowing a level playing ground for gamers and gaming sites.

What Next?
It goes without saying that a few good legislations are a must to build up on the momentum gained in 2020.

Survey projections by RedSeer Consulting suggest that the RMG market will develop at a 50%-plus rate and shall be valued at $1.5–1.7 billion by 2022. Add to this the fact that the world sees India as the biggest potential market for RMG, especially since 75% of India’s population is <45 — the ideal target audience. However, although India can potentially become the industry leader, it remains to be seen whether RMG can overcome the ‘gambling’ tag, and get past all the legal hurdles to become a mainstream source of entertainment.

Let us know your thoughts in the comments section.

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Eximius Ventures is a micro venture fund investing in young and dynamic Indian entrepreneurs with a precedence for female founders. You can reach out to us at pitches@eximiusvc.com

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Eximius Ventures

Eximius Ventures

Micro venture fund investing in young and dynamic Indian entrepreneurs with a precedence for female founders.

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