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India’s Karnataka state has reversed course and is preparing to regulate online skill gaming with stakes, placing the information technology (IT) hub at the vanguard of national gaming reform.
After years of hostility toward the gaming industry, Karnataka is changing course with pro-investment policies, apparently in anticipation of industry-friendly Supreme Court decisions on the legality of online gaming and the legality of the top goods and services tax (GST) rate being imposed on the industry.
Karnataka home minister G. Parameshwara on Wednesday (April 9) said the state government has formed a committee of officials and industry representatives to draft a law regulating online gaming and wagering platforms.
The move confirms a shift in reform momentum from a high-taxing central government focusing on enforcement to state governments looking to capitalise on high-tech investment and growth in legal and illegal gaming volume.
“I chaired a meeting regarding online betting and gambling along with the IT Minister [Priyank Kharge],” Parameshwara told the media in Mandya, southwest of the capital, Bengaluru.
“Representatives from the industry were called. There is nothing to regulate them so far. They have agreed to the introduction of a licence system and a regulation as per law,” the Hindustan Times quoted him as saying on Thursday.
IT minister Kharge said the government is going all-in with skill-based online gaming while ramping up prohibitions and penalties for online games of chance.
“The legitimate online skill-based gaming industry in India is a sunrise sector worth $4bn, contributing 12,000 crore rupees [$1.4bn] in taxes and creating over 150,000 jobs.
“Karnataka alone accounts for 25 percent of the market and contributes 1,350 crore rupees annually in taxes, making it a key hub,” Kharge said on his Twitter account (now known as X) on Wednesday.
Kharge said the legislation will also combat “a parallel underground market that is expanding rapidly, posing risks such as predatory money collection practices, dubious shell companies, financial fraud, data breaches and cybercrimes”.
The legislation will “curb online gambling/betting and games of chance and protect consumers from fraud, while supporting innovation and sustainable growth of the skill-based gaming industry”, he added.
Kharge said the online gaming industry’s three peak bodies have been involved in the turnaround in Karnataka’s approach to regulation, serving as consultants for the reforms.
The All India Gaming Federation, the Federation of Indian Fantasy Sports and the E-Gaming Federation recently patched up political differences amid the loss of self-regulatory powers and have now formed a lobbying alliance of real heft.
The groups have jointly produced an industry Code of Ethics and reached an agreement with the national advertising standards authority to campaign against illegal gambling promotions.
Karnataka’s role as India’s IT and biotechnology hub suggests that its about-face on the regulation of real-money gaming is of some consequence.
While other states such as Haryana and Andhra Pradesh have recently opened up similar space for reform for skill games with stakes, Karnataka’s centrality in industry development and investment networking could prove a boon for reform across India and a counterweight against influential, gaming-hostile states such as Tamil Nadu.
Karnataka was also the judicial trigger for Supreme Court hearings on both online gaming legality and GST applicability. The Karnataka High Court backed the gaming industry in both cases against an aggressive state government ban in 2022 and the central government’s tax enforcer in 2023, respectively.
