Tuesday, Nov 09, 2021 00:00 [IST]
Last Update: Tuesday, Nov 09, 2021 12:05 [IST]
Recently Karnataka legislators passed an Amendment to the State Police
Act banning all paid games online. Local e-gaming companies warned that
the move is unconstitutional and will only bring economic losses to a
thriving business sector. While Bengaluru authorities have not responded
yet, industry associations are preparing for a lengthy legal battle.
Gaming Companies Ready to Put up a Fight
One
of the nation’s top tech startup hubs, Bengaluru, has lately seen its
digital gaming segment threatened by the Karnataka ban on all paid
online gaming. Fears of job and income losses are a consequence of the
blanket prohibition forcing many businesses to relocate or completely
cease operations.
Industry experts have stressed their confusion and intention to challenge the new ban in court,
especially after the Madras High Court struck down a similar law in
Tamil Nadu. As it stands, the Karnataka Police (Amendment) Bill can lead
to fines of up to Rs 1 lakh and prison sentences of up to three years
for hundreds of gaming companies and millions of desi mobile users.
Buying an online lottery ticket in India
or placing a horse race bet is not explicitly mentioned in the Act.
However, the wide definition of digital monetary transactions for gaming
services leaves in the balance top game development companies and a
multitude of supporting digital services.
Nearly 100 gaming startups
are registered in Bengaluru alone (out of over 600 in Bharat), one of
the metro areas with a traditionally strong IT presence. The Internet
and Mobile Association of India (IAMAI) has warned that the move could
cost more than 4,000 jobs. It will also lead to a loss of
competitiveness compared to other leading IT centres like Hyderabad or
Pune. Companies are already reportedly seeking legal advice on
challenging the bill.
Huge Revenue Loss
An in-depth research piece on India’s lottery market
reveals just how big some of these gaming markets are. While lotteries
are first choice for a large number of desi players, the over Rs 50,000
crore they bring to the exchequer each year make the industry one to be
reckoned with.
All online gaming genres have been on the rise in the
past few years, with India passing 400 million active gamers in late
2020. People's favourites include casual mobile games, fantasy sports
and card classics like rummy, poker or teen patti.
Yet all of these need some kind of monetization to operate – from
in-app purchases to subscription services, from paid sessions to fees on
the prize pools shared among players.
Online gaming businesses hire
thousands of highly educated developers, animators and other engineers
for well-paid positions. And while private businesses might have to
relocate or shut down, public revenue will also suffer. Gaming-related
income taxes and GST will inevitably drop in Karnataka. More
importantly, much of the money flows will be directed to offshore and
illegal markets, all non-reporting entities according to the Tax Service
authorities.
Lacking Economic and Legal Grounds
Karnataka
Government stance that online gaming amounts to unregulated gambling is
not justified, IAMAI reminds. The Supreme Court has repeatedly defended
skill gaming as a business protected by Article 19 of the Constitution.
The surprise of all gaming developers and operators stems from the fact
that State legislators have ignored such notable indications.
As the Madras High Court pointed out in its last ruling
(against a blanket ban on online gaming in Tamil Nadu), there is
nothing stopping State authorities from coming up with a regulatory
mechanism for the gaming industry instead of outlawing it altogether.
The
“startup and tech capital” of the Union will inevitably feel the
backlash in the gaming segment. The numerous legitimate businesses will
have to find a way out, hoping that they don’t lose too much ground in
the meantime – to the inevitable offshore and black market competition.
