Bengaluru | Mumbai: Online real-money gaming startups in the rummy, poker, and fantasy space are facing an increasingly challenging regulatory landscape, with Indian states banning or shutting down their operations on concerns over gambling addiction and income loss.

After the Madras High Court refused to stay Tamil Nadu’s ban earlier in the week, the sector’s impressive growth streak may slow down. Tamil Nadu was the third south Indian state to ban these games, after Telangana and Andhra Pradesh, and Karnataka is considering a similar move.

“The financial impact of the ban in Tamil Nadu will be significant… a double-digit hit in terms of market share,” said Sameer Barde, CEO of The Online Rummy Federation, which represents companies such as RummyCircle, Ace2Three, Paytm First Games and Mobile Premier League. “We are open to talks with the government. However, since the ban has been imposed, there have been no active talks.”

According to KPMG, the market for online fantasy sports (OFS) was estimated at Rs 2,300-2,700 crore, while for non-fantasy, real-money gaming such as rummy and poker it was between Rs 2,500 crore and Rs 3,000 crore in the previous financial year. The number of OFS players is close to 100 million and that of real-money gamers is 30-40 million.

“The recent ban of online games in Tamil Nadu and similar talks going on in other states will, of course, affect the gaming ecosystem in India,” said Amit Burman, promoter of Mind Sports League, which owns Poker Sports League. “What we really need is a centralised regulatory framework.”

Gaming in India is regulated by states, which permit games of skill and consider games of chance gambling. The difference lies in whether the outcome is determined by mental or physical skill, or chance or luck.

However, each state can decide which games are considered games of skill and which games of chance. The existence of contradictory regulations across Indian states has confused companies and investors.

“Instead of banning online gaming, state governments should seek to devise a regulatory framework… Regulating this sunrise sector can boost investment trends in states, create jobs and contribute economically,” said Roland Landers, CEO of the All India Gaming Federation.

Rajeev Suri, managing partner of Orios Venture Partners, said online gaming companies did phenomenally well during the Covid-19-led lockdown, but if the regulatory overhang continues, it will become more likely for money to flow out from here to other sectors.

“There is an upside coming in gaming. If the government puts its ‘tang’ (leg) in and self-regulation isn’t able to control excesses, there is more risk,” he said. Orios has invested in online gaming app Zupee and is evaluating other gaming companies.

Nikhil Narendran, a partner at Trilegal, said the government’s role should stop at controlling online real-money gaming to an extent that it doesn’t become a social and law-and-order problem. However, the government is taking a moral stand, which creates unsafe spaces for gambling, he said.

“The gaming industry in India is at a nascent stage, where it must be nurtured through carefully drafted legislation which promotes growth and investments and at the same time protects the interests of the customers,” Kaushik Moitra, a partner at law firm Bharucha & Partners. “A balance must be found between societal and business interests.”

Some companies told ET the ban was absurd, given that in many places in south India, physical or offline rummy is very popular and only online has been barred. They said there is a lack of consensus within the industry itself, which needs to unite on this matter.

“If you ask an online fantasy sports company, they will say fantasy sports is a game of skill, while other real-money games like poker and rummy are not. Similarly, a poker company will say fantasy is closest to betting and thus, is a game of chance, but poker needs skill,” a founder of one of the affected companies said on condition of anonymity.

Source: Gaming360.in