In its recommendation, Nasscom said the ban would hurt the growth of gaming companies in Karnataka, and impact the state’s reputation as a hub for innovation and startups.
Nasscom said the amendment to Section 78(1)(a)(vi) and (vii) of the Act includes games of skill within the ambit of wagering, which has created uncertainty in the gaming industry as games such as online Crossword, Chess or Sudoku – for which registration fee is paid and are dependent on players’ skills – may be considered as wagering.
“In its current form, the Act has obliterated the distinction between ‘game of skill’ and ‘game of chance’. A ‘game of skill’ does not completely omit the element of chance. However, it is primarily dependent on knowledge, training, and adroitness of a player. It has been settled by the law that competitions involving ‘substantial skill’ form a distinct category from ‘game of chance’ and are categorized as business activities protected under Article 19(1)(g),” Nasscom said.
IndiaTech.org, an industry body representing the founders of Indian startups and investors, has asked the state government to issue necessary clarifications and carve-outs on the applicability of certain provisions, either through new rules or guidelines.
“While the primary intent of the government was aimed at online gambling and betting, it is equally critical for the government to start engaging with industry to remove confusion around certain clauses that can be erroneously interpreted to apply to all legitimate online gaming businesses,” said Rameesh Kailasam, chief executive officer at IndiaTech.Org.
It is important for the state government to send the right signal to investors and startup founders that till such rules are brought out, no action would be initiated against anyone, he said. “Many in the online gaming industry – for which Karnataka has been the hub – are assessing their way forward on whether they would be able to continue further operations or invest in the state for this emerging sunrise sector. The government needs to reassure legitimate skill-based online gaming startups in this regard, many of whose business models have already stood the test of multiple courts in India,” Kailasam added.
Nasscom said the online gaming industry is projected to grow at a compounded annual rate of 21% over financial years 2021 to 2025 and will reach a size of ₹29,000 crore.