How Karnataka's Online Gambling Bill Could Impact Skill-Based Gaming Startups

According to industry analysts, Karnataka's planned legislation to outlaw online gambling might have significant ramifications for Indian skill-based gaming companies since it brings them inside the scope of the regulation by eliminating the distinction between the game of skill and game of chance.

Karnataka's legislative assembly presented a bill on Friday to modify the Karnataka Police (Amendment) Act, 2021, in response to a public interest case filed in Karnataka High Court to prohibit internet gambling. It encompasses all types of online gaming, including skill and chance games, in which money is sent in digital or other electronic forms. However, the change excludes offline lotteries and horse racing.

The law looks to be misplaced, according to the Federation of Indian Fantasy Sports (FIFS), a self-regulatory industry group for fantasy sports, because it penalizes legitimate firms by putting them on par with illicit internet gambling, betting, and wagering platforms. Such perplexing messages may stymie the development of sports in the state.

It requested that the Karnataka government remove any ambiguity or confusion in the law in order to maintain the continuation and expansion of the fantasy sports business in the state, according to a statement. FIFS and its members think that predictability is essential to the rule of law, and so the bill must give certainty and clarity to companies, the investment community, and consumers in order for the industry to flourish and develop in an orderly manner. Dream11 is a founding member of the 35-member organisation, which also includes MPL and My11Circle.

This move also comes at an important moment for these players, who are hoping to capitalize on the high level of interest in cricket from spectators during the present Indian Premier League event and the forthcoming ICC T20 World Cup.

Putting all categories of games within the same bucket is unjustified

Putting all types of games in the same category is illogical since the Supreme Court recognizes the distinction between games of skill and games of chance, and the Madras High Court recently threw down a similar rule passed by the Tamil Nadu government, according to technology lawyer Jay Sayta.

Sector groups such as IAMAI and CAIT have also encouraged the Karnataka government to reconsider its bill to prohibit online gambling, citing the impact on Indian startups in the online skill gaming industry and the potential loss of employment in the state.

A game of chance is plain gambling and should be outlawed. However, by including games of skill in the bill's scope, it has not only violated established jurisprudence by the Honourable Supreme Court and Karnataka High Court, but it also threatens the thriving Indian gaming startup sector, according to Praveen Khandelwal, secretary general of the Confederation of All India Traders (CAIT), in a letter to Karnataka chief minister Basavaraj Bommai.

Khandelwal stated in the letter that the law will harm the Indian startup sector, the Indian gaming and animation industry, and millions of Indian gamers and esports enthusiasts throughout the country.

According to the Internet and Mobile Association of India (IAMAI), the bill appears to have been prepared without taking into account the different legal and constitutional views by incorporating a broad definition of "gaming" in revisions to several Supreme Court and High Court rulings. It might also harm Karnataka's status as the country's startup hub, resulting in job and income losses for the state.

The industry association urged the state government to take a progressive stance and guarantee that genuine online gaming firms covered by Articles 19(1)(g) and 14 of the Indian Constitution continue to operate in the state.

Legislative actions may unintentionally result in investors recalibrating their investments

Legislative measures like these may generate a cloud of confusion and regulatory ambiguity, which may unintentionally result in investors recalibrating their investments in the state and many current firms considering leaving the state, according to the report.

Gambling is a state topic in India, thus different measures are being taken by different governments to curtail these activities. Andhra Pradesh has outlawed all types of internet gambling, whilst Kerala has outlawed games such as online rummy. Tamil Nadu passed an ordinance prohibiting internet gambling in November of last year, but it was overturned by the Madras High Court last month.

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