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The Curious Case of Online Gambling in India

Editor, TRANSFIN.
Mar 17, 2021 8:45 AM 5 min read
Editorial

What do Mobile Premier League (MPL), GetMega, bet365, Unibet and Paytm First Games have in common?

All of them are major players in India's burgeoning online gaming scene.

What is Online Gambling?

Online gambling (sometimes clandestinely referred to as “online gaming” depending on the percentage of skill involved across the “skill” vs “chance” gamut but more on that later...) is basically the wagering of money on the internet. It’s the usual betting scene involving poker, casinos and sports...but conducted online.

Gambling is a popular pastime in India, notwithstanding the legalese surrounding it. Add to this the robust mobile-first internet economy and virtually universal smartphone usage, and it might seem unsurprising that as much as 40% of Indian internet users have expressed interest in online gambling. In terms of number of e-gamblers per capita, India could very well soon surpass the UK, which is currently the global betting tsar. Some offshore e-betting platforms like Dafabet, for instance, have special sections just for Indian punters. Others, like m88, have Hindi tele-support to help address players’ concerns.

So, online gambling is increasingly popular in an increasingly digitised country where gambling in general has long been a popular hobby. What, then, explains Google pulling down Paytm's fantasy sports app from the Play Store? Or online casinos finding payment methods getting blocked? Or some states moving to ban gambling altogether?

 

Gambling with the Law

The British-era Public Gambling Act of 1867 bans all types of gambling in the country.

But there are three caveats here. One, of course lawmakers 150 years ago didn’t have the foresight to predict the Internet Age. So there’s nothing in the 1867 Act or any law passed thereafter that bans online gambling.

Two, the way the law is worded, it allows for a distinction between a “game of chance” and a “game of skill”. While the former is considered illegal, the latter in general is granted more leeway. For instance, while betting on horse races is thought of as a game of skill and treated as legal, cricket betting is understood as a game of chance with any related betting deemed as illegal.

FYI: This differentiation stems from a 1996 Supreme Court ruling where it was declared that horse racing is a sport of skill as it primarily depends on special abilities - speed and stamina - of the horse acquired through training and the jockey. Absence of a similar precedent for cricket and the lack of clarity within the regulatory framework implicitly pushes the sport towards the status of a game of chance.

And three: gambling comes under the State List in the Constitution i.e. states have the power to frame their own laws and policies on the subject. As such, the 1867 Act need not apply pan-India. This is why in some areas - such as Sikkim, Daman and Goa - gambling in specialised establishments is legal. But in others - such as Telangana and Andhra Pradesh - it is outright banned or strictly restricted.

 

Life in the Gray Area

But coming back to online gambling in India, it remains in a regulatory gray area. There is no law actively banning it and it has consequently thrived, benefiting from growing network coverage, an increase in disposable incomes, rushing attention from offshore gaming sites, and an uptick in internet usage induced by the COVID-19 pandemic.

At the same time, operating in a gray area has made the sector’s prospects delicate and uncertain. E-betting platforms remain at the mercy of payment platforms, which can cut their services at any time for fear of regulatory scrutiny, or tech companies like Google, which recently refused to add India to the list of countries where gambling apps are allowed, citing legislative ambiguity. They are also at the mercy of state governments, which can ban them anytime (currently, Andhra Pradesh, Telangana and Tamil Nadu have imposed such bans). More on the drawbacks of living life in the gray area here.

 

Money Makes the Stances Go Around

Fans of such platforms may have reason to hope, though. The winds seem to be blowing in favour of the gambling sector within Government chambers. The Minister of State for Finance, for example, has openly called for the legalisation of betting. There is a general shift towards repealing outdated laws. And there is growing recognition of the economic benefits of letting the gambling and e-gambling sectors function and flourish freely.

As per one study, an additional ₹10.2bn could have been generated in 2020 for the exchequer had all of the “underground” or “unsanctioned” online gambling in the country been subjected to a 15% tax. A higher tax of 20-30% would have allowed the Government to rake in nearly twice that amount.

Considering the money-starved state coffers and widening fiscal deficit targets, every Rupee counts!

FYI: The UK’s mature betting industry is worth £6bn and supports over 100,000 jobs.

 

Play for Pay for Play

Now, coming to the companies that rule the e-gambling roost. Some of them are online gaming platforms that also have some options to place monetary bets. Others are all-out betting sites.

There’s MPL, which is one of the largest gaming platforms in the country and has raised $95m and touts an impressive $945m in valuation. (It is currently banned in many states.)

Paytm First Games was briefly banned on Google Play Store in September last year. It was up again after three weeks, but it helped bring attention to the online fantasy sports scene. And unrelated, but it also shed more light on the dangers of Big Tech’s monopolies; Paytm is one of the biggest competitors of Google Pay in the digital payments space. Click here for a deep-dive into the Paytm ban saga and click here for a deep-dive into the fantasy sports scene in India.

Gaming startup GetMega was formally launched only yesterday, after functioning under the radar for two years. It has raised over $9m from Accel India, Nexus Ventures Partner and other angel investors in early-stage funding rounds. With 5 million registered users already, it is targeting hitting 50 million by the end of the year.

Some other popular platforms include GamingMonk, Dream11, LXG, NODWIN Gaming, FanFight, Betway, ComeOn, bet365, 22bet, Casumo, 1xbet Funbet and 10Cric with wide-ranging degrees of skill involved.

As for what games Indian users love betting on, local classics like Andar Bahar and Teen Patti enjoy widespread popularity. Quintessential gambling games like rummy, slots and baccarat are also crowd favourites.

FYI: In case you’re wondering, the primary way these platforms make money is by taking a share of the bets being made. For example, if two users place bets of ₹100 each on a certain sports game, one of them wins the bet and he/she walks away with ₹(200-x), where ₹x is the platform’s cut. They can also charge an entry fee from players or charge a hosting fee if they are conducting a tournament.

All in all, going forward, outlawing online gambling in India may not be the way to go. Regulatory safeguards can be put in place - such as limits on games that can be bet on, the number of players or the amount of money that can be involved - but disallowing two or more consenting adults to place bets with their own money reeks of big government and state excess. Especially considering the monetary benefits of the alternative - a reasonably regulated but legal online gambling industry.

FIN.
 

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