The Government of Karnataka recently notified the Karnataka Police (Amendment) Act, 2021 (Act). The Act bans gaming through internet and mobile apps and enhances the punishment for gaming for the orderly conduct of citizens.
NASSCOM made a representation to the Government of Karnataka to highlight the unintended impact of the Act on the growth of gaming companies in Karnataka, and on Karnataka’s reputation as a hub for innovation and start-ups.
In our representation, we suggested the following to the Government of Karnataka:
- Removing ambiguities from the Act
- Delineation of game of skill vs game of chance
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 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).
For instance, amendment to Section 78(1)(a)(vi) and (vii) includes game of skill within the ambit of wagering. This has created uncertainty in the gaming industry because games such as online Crossword, Chess or Sudoku for which registration fees is paid and are dependent on skill of players, may be considered as wagering.
- Definition of “gaming”
The Act defines “gaming” broadly to include online games, involving all forms of wagering or betting. The definition does not carve out an exception for ‘games based on skill’ such as racing, fantasy sports. In its current form, the definition does not intelligibly differentiate between game of skill and game of chance.
- Uncertainty about future of gaming companies based in Karnataka or doing business in Karnataka
The online gaming industry is projected to grow at a CAGR of 21% over FY 21-25 and will reach a size of INR 29,000 crore. Clause 3(a)(iii) and 3(a)(iv) of the Amendment Act amends Section 78 of the Karnataka Police Act. The Amendment Act has made it difficult for companies in the gaming sector to operate and conduct their business from Karnataka.
- Delineate games of skill from games of chance, and restrict scope of the Act to games of chance.
- Exhaustively define gaming and carve out exceptions for online games based on skill.
- Amend Section 78 to carve out an exception for gaming companies running operations based on preponderance of skills in Karnataka.
- Contemplate a self-regulatory code for gaming companies which will encourage development of gaming sector in the state.
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