Guest Article - The silver bullet we’re ignoring: The case for scientific regulation of online gaming
Despite explosive growth, the gaming sector faces a 28 percent tax blow, regulatory confusion, and investor jitters, writes Prof. Amir Ullah Khan.
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By Prof. Amir Ullah Khan
India, meet your newest identity crisis: we are the world’s second-largest gaming market, home to 591 million gamers, projected to hit ₹388 billion by 2026, and yet, the industry navigates a labyrinth of regulatory ambiguity with no clear path forward.
The industry is sailing on impressive tailwinds: a young, mobile-first population, smartphones in every pocket, women gamers joining the leaderboard, and real money gaming (RMG) pumping in 86 percent of the revenue. The sector is adding jobs, drawing global investors, and building the bedrock for India's next digital unicorns.
And yet, instead of building a conducive framework to match this growth, the government has responded with a regulatory vacuum creating market uncertainty.
A flat 28 percent GST on all deposits, irrespective of what you play, whether it is legally recognised ‘games of skill’ like chess, rummy, bridge, or poker, or pure ‘games of chance’ like baccarat, roulette, slots, or craps. No nuance is applied, and no distinctions are drawn; just a blanket financial penalty swung at an entire ecosystem.
The impact has been profound and has reverberated universally, affecting gamers, platforms and investors alike. Faced with an unfavourable 28 percent GST, Indian gamers are walking straight into the welcoming arms of offshore apps to capitalise on GST arbitrage, causing a $2.5 billion annual revenue loss to the Indian exchequer.
Like salt in the wound, this user migration has cracked open deep systemic vulnerabilities. Offshore gaming platforms pose a competitive threat to legitimate Indian platforms while potentially creating blindspots for money laundering, presenting immediate, invasive, and escalating threats.
These unregulated international platforms operate beyond the reach of Indian oversight, and could create perfect environments for illicit financial flows to be disguised as routine gameplay transactions. A misfire punishing legitimate operators while enabling illicit actors to innovate and exploit regulatory gaps.
A regulatory power play: MEITY’s moment
At the centre of India’s online gaming regulatory puzzle sits MEITY. Empowered under the IT Rules (2021) and their 2023 amendments, the ministry was tasked to designate Self-Regulatory Bodies (SRBs). They were to verify "permissible" skill games while classifying chance games as “permissible” or “non-permissible”, based on individual state regulations. This was intended as a foundational step in overriding security threats of money laundering.
Despite opening doors to applications, no SRB has yet been approved. The result: a regulatory vacuum, with no credible, independent body to verify or monitor games.
While a standalone gaming act would be ideal, it could take two years or more to develop. In this regulatory purgatory, MEITY has the power to approve credible SRBs with enhanced safeguards—such as including government representatives on SRB panels or establishing a direct governmental oversight, which would expedite in closing the current regulatory vacuum.
In the meantime, this path safeguards autonomy while standing as a bold testament to unwavering fairness. By addressing concerns that disqualified previous applicants with industry ties, it would establish the urgently needed verification mechanism the gaming ecosystem requires.
Consequently, the core distinction between games of skill and games of chance still hinges on subjective interpretation, not empirical proof, which undermines investor confidence and platform innovation. In this context, a robust, government-led classification mechanism is one of the many essential solutions. Among these, the Prof. Bimal Roy statistical framework offers a particularly credible path forward rooted in mathematical objectivity.
The Bimal Roy model: A scientific solution waiting for use
Far from being theoretical, The Bimal Roy Model evaluates key indicators such as outcome consistency across multiple sessions, measurable performance differentials between high-skill and low-skill players, and statistical variance patterns over time. Games where skilled players consistently perform better than others can be empirically validated as skill-based, qualifying them as "permissible" under Indian regulations.
Integrating the Roy framework would enable objective game verification, create tiered compliance obligations, and develop scalable oversight systems free from subjective interpretation. In a sector defined by fast evolution, this is the kind of adaptive, precision-led policy India urgently needs.
Smart regulation is not soft regulation
It is a fallacy to equate smart, precision-focused regulation with leniency. In fact, the opposite is true.
A statistically validated classification of games empowers regulators to clearly delineate between skill-based games and games of chance, enabling them to tailor compliance requirements accordingly. This strengthens Know Your Customer (KYC) norms and Anti-Money Laundering (AML) protocols where necessary, without indiscriminately punishing legitimate platforms.
Just as importantly, replacing the current deposit-based tax regime with a Gross Gaming Revenue (GGR)-based model would align India with global best practices. GGR taxation ensures platforms are taxed on actual earnings, not user deposits, reducing GST arbitrage and making compliance viable.
Such intelligent regulation protects users while sowing trust in the system and discourages migration to offshore alternatives. A dual strategy of statistical verification and financial oversight creates a tightly woven net, one that is precise enough to catch wrongdoing but flexible enough to let innovation flourish.
Prof. Amir Ullah Khan is an economist and professor at MCR HRDI. Disclaimer: Views expressed above are the author's own and do not reflect the official position or policy of Storyboard18.
