New Delhi: Trade bodies and digital industry experts are taken aback by the new law, pointing at its negative impacts on Indian tech startups. While a High Court is almost certain to strike down the blanket ban in the end, it is likely to have immediate and lasting negative impacts on the industry. Businesses See Bill Amendment as Wrong and Inefficient The Confederation of All India Traders (CAIT) and the Internet and Mobile Association of India (IAMAI) are urging Karnataka authorities to reconsider the new regulations banning all online gaming for money. The recently passed Amendment on the state Police Act has been a response to populist sentiment and is neither lawful nor efficient in their view. The definition of gaming, as upheld by numerous Supreme Court and High Court decisions, has a legal segment based on skill. Games of chance, on the other hand, are left for States to regulate, with about half of India deciding to allow lotteries, horse racing and various casino and card games. Imposing a blanket ban on all online games will now make popular powerball lotteries and skill games such as rummy or poker illegal. More importantly, it will render many businesses unable to operate, as hundreds of desi game development studios based in Bengaluru are expected to lose their contracts and customer bases while the legal battle continues. The new law foresees penalties up to Rs 1 lakh and even prison terms of up to three years. Industry experts have warned that this will make users play at offshore platforms and forein gaming apps, causing losses to State and business revenues. Perennial Doubts over Chance vs Skill Critics have been adamant that skill-based games have repeatedly been defended by courts, as they are allowed by the Constitution. Lottery is India’s most popular form of gambling and it makes up for a huge market, as it is regulated and available in 13 States. Other games of chance are also left up to state authorities to decide upon. The CAIT National Secretary has written to Karnataka’s CM reminding of the legal distinction between chance and skill. Ultimately, businesses expect the Law to be repealed but it is likely to involve a protracted legal battle which might cause irreparable damage to the digital industry and the consumer market. Traditionally, online games of skill and mobile apps have flexible monetization of their services, with some offering in-app purchases or subscriptions, others hosting paid sessions or peer transactions. Yet the new regulations forbid all digital monetary exchanges, placing a huge amount of desi companies on the wrong side of the Law. Solid Business at Risk The last thing that India’s booming tech industry expected – in times of continuous digital transition for almost all markets – was a blanket ban on a segment. IAMAI reminds that Karnataka is a national leader in tech startups, with 92 registered in Bengaluru alone (out of over 600 gaming development studios). Support services like animation, fintech and content support will also be hurt by the latest legal Amendment. Experts estimate that around 4,000 jobs are at risk, and recent investments of over Rs 3,000 crore will be written off, damaging the digital business ecosystem beyond what legislators may have thought. While these regulations will directly affect desi businesses, they will have no effect on foreign apps and platforms offering casual or skill gaming for money. An increase in black markets and other illegal offshore games is also expected. Losing the nation’s competitive edge in a growing business segment will not only place Indian tech companies at a disadvantage in the global markets, it will make them lose money and consumers right in their backyard.
