Ban on online 'game of chance' in Karnataka may hurt subscription revenue, say experts

The move is unlikely to have much impact on the advertising revenues or spends by the sector as none of the ad-based platforms come under the purview of this law, say industry watchers

e4m by Mansi Sharma
Published: Sep 23, 2021 8:42 AM  | 5 min read
online gaming

After the ban on rummy games in Kerala earlier this year, now the Karnataka government has passed the Karnataka Police Act amendment act that seeks to ban online “games of chance” wherein the end user could have any chance of losing money. The state government has emphasised that it will be dealing against operators and abettors who run games of chance camouflaged as games of skill. The bill makes offences like operating such games, sheltering such operations, and abetting and participating in such online games both cognisable and non-bailable. The offenders will have to serve upto three years in prison and pay fines of upto one lakh. 

However, the lack of distinction between games of chance and skill-based games has left the industry worried. It is being speculated that a huge chunk of subscription revenue for such apps will get impacted because of the move hurting a sunrise sector. 

All India Gaming Federation CEO Roland Landers says, “India is the fifth largest online gaming market globally and skill-based gaming, a sunrise sector, is giving birth to an increasing number of unicorns within the country, especially in Karnataka. The sector has been a strong financial contributor to the Indian economy even during an unprecedented period of slowdown and is further expected to generate revenues in excess of $ 3 billion by 2025. The move by the Karnataka government is a setback to the state’s reputation of being a tech-hub and start-up capital.”

PK Misra, President Players' Association- AIGF and a former IAS, highlights that around 10-12% of India’s gaming community is based in Karnataka and the move will therefore cast a big harm on the sector. He notes, “The move will affect the online skill-based gaming sector, putting an end to player’s right to earn their livelihood. There is no clarity on the scope of this law. I certainly hope the state government draws a clear distinction between gambling and games of skill. Since 1957, the Supreme court has reiterated games of skill as a legitimate business protected under article 19(1)(g) of the Indian Constitution, also supported by the Karnataka High Court in multiple judgments.”

However, the move is unlikely to have much impact on the advertising revenues or spends by the sector. As Landers clarify, “None of the ad-based platforms come under the purview of this law as it is clearly mentioned that only the apps that require some sort of entry or subscription fee will be banned. However, there could be a potential drop in the subscription revenues of such platforms.” 

Madison Media & OOH Group CEO Vikram Sakhuja further adds that there is going to be an increased emphasis on the “skill-based” aspects of any such apps in their ads going forward. He elaborates, “The crux of the issue lies in distinguishing between game of chance and game of skill. If that is not clarified, then we may be throwing the baby out with the bathwater. Most apps will lobby to be classified as a game of skill and so not be pulled off. If that doesn’t succeed, then their revenues will most certainly be affected. Either way I can see more advertising focusing on the skill aspect.” 

Industry expects some dialogue with the state government

The matter has, albeit, left the industry worried about its future and is wanting to engage in some sort of dialogue with the state government. 

Games24x7 VP Corporate Affairs Dinker Vashisht says, “The ban in Karnataka is disconcerting for this sunrise sector in India, particularly at a time when higher judiciary has reiterated the difference between games of skill and games of chance. That Karnataka, which is a tech and startup capital of India, should take such a step is all the more distressing because a lot of other states realize gaming’s potential and are working on policies to attract investment from gaming companies- in view of the sector's immense multiplier benefits.” 

Justice Vikramajit Sen, a former judge of the Supreme Court & former Chief Justice of the Karnataka High Court adds, “The Indian regulatory framework has clearly differentiated between games of skill and games of chance in India. Just because games of skills may involve an entry fee they cannot be considered gambling. Games of chance are considered gambling as it involves luck rather than skill and thus it is expressly prohibited by the law, wherein games of skill are considered legal across most states. The sector needs the support of state governments to promote initiatives towards responsible gaming and recognition of the AIGF ‘Self-regulation Framework’. AIGF and its advisory members look forward to an opportunity to engage stakeholders within the state government to make an industry representation on the matter.”

Expressing her views, Muskan Sethi, Responsible Gaming Ambassador of All India Gaming Federation said, “Every professional gamer devotes his or her time and effort in improving their skills and gameplay to perform better at any domestic or international gaming tournaments. The decision to ban online skill gaming across the state of Karnataka may affect the livelihoods and income of these gamers living in that state. Instead of banning such games from the market, as a player, I would suggest the government should seek to devise a regulatory framework in consultation with the industry stakeholders so that it encourages professional gameplay and controls the rise of the grey market of gambling.”

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