Karnataka Losing Competitive Edge with Online Gaming Ban

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Karnataka Losing Competitive Edge with Online Gaming Ban

The local Legislative Assembly has passed a new bill outlawing all paid online games. Besides being unconstitutional and inefficient, it is likely to hurt the local tech industry and resonate around India’s digital economy, experts warn.

Karnataka’s Standing as a Startup Hub under Threat

The recent news of a blanket ban on online games for money has stirred digital industry experts and trade associations in Bengaluru. The Internet and Mobile Association of India (IAMAI) and the Confederation of All India Traders (CAIT) have instantly lent their support to the local business ecosystem, declaring the latest Amendment to Karnataka’s Police Act unconstitutional, misguided and dangerous.

On one hand, the Supreme Court has upheld in several landmark judgements all games of skill as legal on a national level, leaving games of chance to be regulated by States as they see fit. Placing a blanket ban on all online gaming goes against such rulings and will ultimately be struck down.

Crucially, on the other hand, many tech startups that provide gaming solutions for popular genres like fantasy sports, cricket betting sites or online blackjack in India may have to exit the market, stifling a booming business segment. The new legislation threatens operators and consumers with fines up to Rs 1 lakh and prison terms of three years. Experts warn that such measures will only worsen the digital business climate in Karnataka, while users will simply turn to offshore or illegal alternatives.

Metropolitan Areas Driving the Digital Market

While rural users have been quickly catching up on their digital consumption, studies confirm the importance of large gaming communities centered around well-developed urban areas. Karnataka is a prime example of this trend, as Bengaluru drives up internet usage penetration (with almost 7 million metropolitan users) and over 90 gaming startups out of more than 600 in the entire Union.

Urban users – mostly young and tech-savvy – appreciate innovation and the ongoing digital transition in India, providing demand for IT services that are competitive on a global scale. Industry reports indicate that Karnataka gaming options have even established cryptocurrency among regular payment methods for in-app purchases and subscriptions.

The new blanket ban, however, excludes the possibility of any digital transactions, making desi legal skill games inaccessible and company operations unsustainable. Considering the immense popularity of casual mobile apps, fantasy sports, traditional card games and online lotteries, it is almost untenable to concede the entire market to Chinese mobile apps and offshore casino sites. Yet it is precisely what industry analysts expect would happen.

Putting down a Competitive Business not a Solution

Karnataka’s image as a tech hub will be greatly damaged by recent developments, IAMAI insists. Over 4,000 jobs are at risk, while both Indian and foreign investors are unlikely to continue their support in a number of digital segments.

Local companies like Gameskraft, Moonfrog Labs and Dumadu have been developing web and mobile games absolutely legally for a number of years. Other small studios have supported homegrown gaming giants like Dream11 and Nazara by supplying video, animation, content development, design and countless other programming and engineering services.

The digital ecosystem also includes marketers and broadcasters, CAIT reminds, and it will all be adversely affected if Karnataka residents are unable to produce or use such gaming-related services. Typical desi games that require some sort of payment include Carrom, Chess, Rummy, Hockey and many other digital versions of people’s favourite pastimes.

Industry exponents and legal experts only hope that Karnataka authorities will reconsider their stand and allow gaming developers to operate from within the State. Engaging in a prolonged legal battle to overturn the blanket ban is in no-one’s interest, and losing international contracts, clients and markets will be severely felt by the local economy sooner rather than later.