Level Up Law: The Need to Skilfully Regulate Online Gaming

India's online gaming industry has experienced a remarkable surge in recent years, propelled by the increasing reach of the internet, the affordability of smartphones, and a burgeoning youth population. It is interesting to note the penetration and adoption of online gaming across various groups, including strong adoption by women. India is a mobile-first gaming market with the 2nd largest user base globally. What was once a niche pastime has now evolved into a mainstream sensation, captivating millions of users nationwide. The fusion of state-of-the-art technology, captivating content, and a thriving gaming community has catapulted this sector to unprecedented heights, promising a bright future for the industry.

While online gaming offers many benefits, including entertainment, cognitive development, and social connections, it also presents significant risks that cannot be overlooked. On the positive side, gaming can foster problem-solving skills, analytical skills, and strategic thinking while providing a platform for socialising and building communities. Beyond its potential for improving cognitive performance among users, online gaming also holds tremendous opportunities in terms of revenue to the exchequer, inflow of investments, and employment generation. However, the potential risks associated with excessive gaming, such as addiction, exposure to inappropriate content, cyberbullying, and financial losses from overspending, are equally concerning.

As the industry continues to expand, the importance of striking a balance between promoting the benefits of online gaming and mitigating its potential risks through responsible gaming practices cannot be overstated. This article aims to delve into the current state of online gaming in India, explore global best practices for promoting responsible gaming, and outline the roles and responsibilities of various stakeholders in fostering a safe and sustainable online gaming environment, thereby ensuring the well-being and safety of all players.

Current State of Online Gaming in India 

India's online gaming industry has experienced exponential growth, driven by increasing smartphone and internet penetration. There are various classifications and subclassifications of gaming. According to a report by EY India, the Indian online gaming market is expected to reach INR 33,243 crore by FY28. India had 568 million gamers as of 2023, which is the second-largest gamer user base exceeded only by China. The most dominant format of online gaming is real money gaming at 83% of revenues, followed by casual gaming. This growth is fueled by the ever-expanding middle class, rising disposable incomes, and a young, tech-savvy population.

Despite the industry's rapid expansion, the legal and regulatory landscape surrounding online gaming in India remains complex and evolving. While some states have embraced and regulated certain forms of online gaming, others have imposed outright bans or restrictions. This patchwork of regulations has created ambiguity and challenges for both players and gaming companies operating in the country.

The lack of a comprehensive regulatory framework has led to concerns about consumer protection, taxation, and responsible gaming practices. The government must play a crucial role in addressing these concerns by formulating and implementing regulations that protect consumers, ensure fair taxation, and promote responsible gaming practices. Additionally, the lack of clarity between online gaming and gambling has further complicated the legal landscape, with ongoing debates about the classification and legality of certain game formats.

As the online gaming industry in India continues to grow, so do the concerns surrounding player well-being and safety. One of the most significant issues is the potential for gaming addiction, particularly among younger audiences. Excessive gaming can lead to negative impacts on mental health, academic performance, financial well-being, and social development.

Underage access to age-inappropriate content and games is another area of concern. Without proper age verification and parental control mechanisms, minors may be exposed to mature themes, violence, or predatory behaviour online.

Financial risks, such as overspending or engaging in illegal gambling platforms, are also prevalent. Many online games, especially those that involve in-app purchases, employ tactics like 'loot boxes, ' which are virtual containers that can be purchased with real or in-game currency and contain in-game assets (such as rare weapons or character skins) and 'microtransactions, ' which are small, often inexpensive, in-game purchases. These tactics can lead to impulsive spending, which cumulatively results in high-value spending and financial losses for players, especially those with addictive tendencies.

Other issues include cyberbullying, data privacy concerns, and the potential for online gaming to be used as a platform for illicit activities like money laundering. These risks highlight the importance of responsible gaming practices and the need for stakeholders to collaborate in addressing them. The potential for online gaming to be exploited for such activities underscores the need for robust regulatory oversight and proactive measures to prevent misuse.

Addressing these concerns through responsible gaming practices, regulatory oversight, and stakeholder collaboration is crucial for the sustainable growth and ethical development of the online gaming industry in India. This collaboration should involve not only gaming companies and the government but also parents, educators, and players themselves, as they all have a role to play in promoting responsible gaming and ensuring the safety and well-being of players.

Promoting Responsible Gaming Practices - A Global Overview  

As the online gaming industry thrives worldwide, various countries and organisations have implemented responsible gaming practices to mitigate potential risks and promote a safer, more ethical gaming environment. These practices aim to strike a balance between the enjoyment and benefits of gaming while addressing concerns such as addiction, underage access, and financial risks.

One of the most widely adopted responsible gaming practices is the implementation of parental controls and age restrictions. Many gaming platforms and services offer features that allow parents or guardians to monitor and limit their children's gaming activities, including setting time limits, restricting access to certain games or content, and controlling in-game purchases.

Age ratings and restrictions are also commonly used to ensure that minors are not exposed to age-inappropriate content or games. Rating systems, such as the Entertainment Software Rating Board (ESRB) in North America and the Pan European Game Information (PEGI) in Europe, provide guidance to parents and consumers about the suitability of games for different age groups.

Let's look at some country-specific regulations around online gaming:

• USA: Online games of all formats and durations must comply with the relevant laws of the specific states in which they operate and applicable federal laws, such as the Unlawful Internet Gambling Enforcement Act of 2006 and the Interstate Wire Act of 1961. In addition to these, there are several state-specific requirements on responsible gaming that operators must abide by.  

• UK: The main legislation that governs betting, gaming, and participating in a lottery is the Gambling Act, 2005. However, recently, the Gambling Commission announced widespread changes that are meant to increase safety and customer choice. These changes are consistent with the UK Government's white paper on gambling reform. The aforementioned changes include reducing the intensity of online games, means to improve consumer choice when it comes to users receiving gambling marketing, financial vulnerability checks, and tightening processes that will support in-premise checks on age verification. These changes are meant to be implemented in four stages: in Aug 2024, Nov 2024, Jan 2025, and Feb 2025. There is increased emphasis on financial risk profiling of users in the UK. The idea is to customise the responsible play framework as per the individual's playing behaviour.

• Germany: Earlier, 16 separate regulators were responsible for licensing activities in the country. However, since 2023, a Joint Gambling Supervisory Authority ("JGA") has replaced these regulators and is solely responsible for all licensing activities. The JGA has enforcement powers such as issuing prohibition orders, ISP blocking, and payment blocking.

• Australia: The regulation of nationwide gaming and gambling is decentralised, with rules applicable at territory, state, and federal levels. With more than 53 laws applicable, each of the eight mainland states and territories in Australia independently oversee and regulate gambling activities within their jurisdiction. in addition to this, specific aspects of gambling activity in the country are addressed by a series of federal statutes. Specifically, online gambling is regulated by the Interactive Gambling Act 2001 at the federal level. Australia has also introduced a national self-exclusion register that lets users exclude themselves from all Australian licensed online and phone wagering services in a single step.

   

Some gaming companies and platforms have introduced 'self-exclusion tools' to address issues of addiction and overspending. These tools allow players to set limits on their gaming time or spending habits, and they can be powerful tools in promoting responsible gaming. These voluntary measures empower individuals to take control of their gaming habits and prevent excessive engagement or financial losses. Moreover, user-defined limits are more efficient than hard limits that might be defined by a particular gaming platform. After all, users who might be addicted to gaming or prone to overspending may easily move to a different gaming platform upon exhausting any hard limits set by the platform. Furthermore, a universal hard limit might not be practical for the entire user base of a particular gaming platform since the user base will typically be very diverse and are likely to come from different socio-economic backgrounds.

Numerous organisations and initiatives have been established to raise awareness about the potential risks associated with online gaming, such as addiction, cyberbullying, and online safety. However, the role of parents and educators is equally crucial in promoting responsible gaming. They can play an active role in monitoring and guiding children's gaming activities, recognising the signs of problematic gaming behaviour, and seeking support when needed. These programs often involve educational campaigns, workshops, and resources for players, parents, and educators to recognise the signs of problematic gaming behaviour and seek support when needed.

In recent years, there has been a growing emphasis on ethical game design practices that avoid exploitative mechanisms that can lead to addiction or excessive spending. This includes minimising the use of loot boxes, pay-to-win models, and other tactics that may encourage compulsive or impulsive behaviour.

Instead, responsible game developers prioritise fair and transparent monetisation strategies, such as upfront pricing or optional cosmetic purchases, while ensuring that gameplay remains enjoyable and accessible to all players, regardless of their willingness to spend.

By adopting these globally responsible gaming practices, the online gaming industry can foster a safer and more sustainable environment for players, particularly in emerging markets like India, where proactive measures are crucial to mitigate potential risks and promote a responsible gaming culture.

Role of Industry, Government and Society 

Promoting responsible online gaming in India requires a concerted effort from multiple stakeholders, including the gaming industry, government, and society at large. Each of these entities plays a crucial role in fostering a safe, ethical, and sustainable gaming environment.

While external measures are essential, responsible gaming also starts with individual users taking accountability for their gaming habits. Self-regulation involves setting personal limits on gaming time and spending, prioritising real-life obligations, and recognising the signs of problematic behaviour. Users can leverage tools like parental controls, time-tracking apps, and self-exclusion features to maintain a healthy balance.

The government plays a pivotal role in establishing a robust legal framework that regulates the online gaming industry while promoting responsible practices. This includes clear laws and guidelines related to age ratings, consumer protection, data privacy, and preventing illicit activities like underage gambling or money laundering.

Effective enforcement and compliance mechanisms are essential to ensure that gaming companies adhere to these regulations, safeguarding the interests of players, particularly minors and vulnerable populations.

Raising awareness about responsible gaming is a shared responsibility that extends beyond the industry and government. Schools and local communities can play a vital role in educating parents, educators, and young people about the potential risks and benefits of online gaming.

Incorporating digital literacy and media education into school curricula can help students develop critical thinking skills and understand the importance of balanced gaming habits. Community-based initiatives, such as workshops and support groups, can also provide resources for individuals struggling with gaming addiction or related issues.

The gaming industry has a significant responsibility to promote responsible gaming through technological interventions at the platform and game levels. This includes implementing robust age verification systems, providing clear and transparent information about in-game purchases, and integrating features that encourage healthy gaming habits, such as time limits, cool-down periods, and self-exclusion options.

Additionally, game developers can prioritise ethical game design principles, avoiding exploitative mechanics like loot boxes or pay-to-win models that can lead to compulsive spending or unhealthy gaming behaviours.

By fostering collaboration and shared accountability among industry, government, and society, India can establish a robust framework for responsible online gaming, ensuring that the benefits of this rapidly growing industry are realised while mitigating potential risks and promoting a safe and sustainable gaming culture.

Conclusion

The online gaming industry in India stands at an inflection point, poised for remarkable growth while grappling with potential risks and challenges. As this sector continues to expand, embracing responsible gaming practices becomes paramount to unlocking its full potential while safeguarding the well-being of players and society.

By adopting global best practices, such as parental controls, age restrictions, self-exclusion tools, and ethical game design principles, India can cultivate a thriving gaming ecosystem that fosters entertainment, cognitive development, and economic opportunities while mitigating concerns around addiction, underage exposure, and financial risks.

Ultimately, promoting responsible online gaming requires a concerted effort from all stakeholders – the gaming industry, government, educational institutions, and society at large. Through collaborative efforts, robust regulations, educational initiatives, and technological interventions, India can pave the way for a safe, sustainable, and responsible gaming culture that benefits individuals, communities, and the nation as a whole.

The information in this article has been curated by Vandith Pamuru, Assistant Professor, Information Systems, Indian School of Business.