High taxes and policy uncertainty drive Real Money Gaming operators offshore

With uncertain regulatory policies surrounding Real Money Gaming (RMG) platforms in India, many operators are extending their operations to the Middle East and Latin America. Experts believe that the new 28% tax structure challenges profitability in India, pushing operators offshore and potentially reducing India’s long-term economic benefits.

Real Money Gaming (RMG) was the largest contributor to the gaming sector in India, comprising 83-84% of overall revenue in FY22, according to a report by Grant Thornton Bharat titled Guardians of Safe Play: Ethical Gaming for Vibrant Bharat. Despite regulatory challenges, the report states that RMG attracts around 100 million daily online gamers in India, with 90 million paying to play and an average user spending 8.5 hours per week.

Krishan Arora and Shalabh Saxena, Partners at Grant Thornton Bharat, commented, “If India’s regulatory landscape remains unpredictable or becomes more stringent, it could pose serious challenges for RMG companies, including higher compliance costs, legal risks, and operational obstacles. These factors may make India a less attractive market for continued operations.”

They further noted, “While some RMG companies are expanding into markets like the Middle East and Latin America, it’s unlikely that most will completely exit India in the immediate future. India’s large and growing user base remains highly lucrative. However, regulatory uncertainties and high GST rates may drive some companies to focus on international markets or limit their exposure in India.”

A leading RMG operator in India, speaking anonymously, shared that “Smaller players struggle to reach profitability and are expanding offshore to support their operations in India. If policy uncertainty persists, RMG operators may shift focus fully to international markets.”

Brazil, the fifth-largest gaming market globally by player numbers, is among the fastest-growing in Latin America, according to NewZoo research. In 2022, Brazil ranked tenth in worldwide gaming revenue, generating $2.7 billion. India remains the largest consumer of mobile games globally, with 15 billion downloads annually, followed by the United States and China. Brazil ranks fourth, with 5 billion downloads.

WinZo, which appointed Mahendra Singh Dhoni as its brand ambassador, has expanded into Brazil and is valued at approximately $336 million, according to Tracxn data.

Roland Landers, CEO of the All India Gaming Federation (AIGF), explained, “The lack of clarity around IT rules, combined with the GST hike, has driven further expansion into other regions, where companies are exploring new growth opportunities. However, India’s market remains strategically important and a top priority for most companies.”

Landers also mentioned, “As the market matures, consolidation is expected, especially with recent GST impacts affecting MSMEs more than larger players. The industry has already seen mergers and acquisitions (M&A), a trend likely to continue as companies adapt. Larger RMG firms may diversify their portfolios or adopt hybrid models—balancing international expansions with a sustained focus on India.”

Recently, the Open Network for Digital Commerce (ONDC) onboarded RMG platforms to its network, creating a mutually beneficial situation. ONDC aims to boost the RMG industry by offering a wide range of products and services listed on its network. This initiative is expected to enhance user confidence and trust in these pay-to-play platforms, as they are affiliated with ONDC, a government-backed entity. Experts believe that this initiative is expected to boost the RMG sector in the country.