Outlawing an important sector of Bengaluru’s digital economy is neither wise nor constitutional, industry analysts claim. A revision of the recent regulation might need some in-depth research and more precise definitions. Those are, however, inevitable if Karnataka is to avoid legal challenges and economic losses.

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Coarsely Assembled Legislation

Online gaming is a booming economic sector in India that has to constantly prove itself against moral restraints. When legislators turn against it, as they recently did in Karnataka, the industry faces an uphill battle for its survival.

In late September, authorities in Bengaluru passed amendments to the state Police Bill, banning all online casino games for money. The lack of clear distinction between skill and chance, as well as the various monetization schemes, goes clearly against the legal practice and, more importantly, the sustainability of the digital sector.

While the bill leaves horse racing and online lottery in Karnataka out of the ban, legitimate skill games will suffer a blow without improvements in the regulatory definition. Analysing the game formats, elements of skill and the importance of various entry fees and prizes will make for a better legal framework that can stand the test of higher courts and general business practice.

The Status of Bengaluru Is under Threat

Previous studies have shown that the overall levels of economic and social development qualify the major urban areas in the Union as communities that consume more than half of the online gaming and entertainment services.

Bengaluru, in particular, is the home of hundreds of tech startups employing thousands of engineering and IT professionals. Gaming studios and other related businesses have always called for the regulation of the sector that is hampered by illegality and offshore competition. With the new laws, the thriving fantasy sports and mobile gaming market will withdraw from Karnataka and will seek alternatives elsewhere.

Digital entrepreneurs need to plan long-term to be able to expand their tech services and innovations globally. Karnataka’s standing in the business community now remains uncertain and the new ban represents an unexpected U-turn compared to the national digital agenda.

A Wave of Negative Impacts

Employment levels in the IT industry are just one of the aspects that will be negatively affected. Most startups in the segment have already declared their intent to shift operations elsewhere in India or even abroad, should the legal climate not change soon.

The lack of policy support is all the more astounding, as gamers in India have already passed 400 million and are expected to reach 510 million by the end of next year. Investors have already received all the wrong signals, both national and foreign.

Companies like Dream11 and the MPL have repeatedly defended their legitimate status, being defined as skill-game operators by at least four High Courts and even the Supreme Court over the summer. The latest law amendments will certainly face other legal challenges, as they lack clarity on criteria and motivations of their overbearing nature.

The All India Gaming Federation and the Internet Freedom Foundation are just some of the bodies announcing their support for counter-litigation. Industry experts advise that a stakeholder panel between authorities and directly affected businesses has the potential to recommend meaningful reviews and improvements to the Bill.

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