India is known as a country with vague laws regarding online casinos. But the recent ban in Karnataka might not be enough to discourage online casinos from operating. The ban by the Karnataka government shows little to no effect on the online gambling industry in India as a whole. Despite the efforts to eradicate the industry, online gambling proves to be a flourishing industry with skyrocketing revenue margins. Some online casinos in Karnataka are expecting 3x growth in 2022. But why is that? Why despite the ban is this industry growing rapidly?
Explaining the Karnataka Ban on Indian Online Casinos
Karnataka is a state in the southwest region of India. On September 31, the Karnataka government passed a bill that prohibits gambling in the state. The ban is aimed at companies who operate these establishments, companies who shelter these establishments, and people who engage in the activity. For clarity purposes, the ban involves only games of chance. Games of chance are games that do not require any skill to win. Such games include card games and dice games.
But the ban doesn’t take into consideration games of skills. Chess is one of the most popular skill-based games in India. Other games of skill include horse racing and rummy. So online casinos and gambling establishments are saying that their games fall under the category of “games of skill”, not games of chance. The bill also prohibits the use of electronic means and virtual currencies to fund these activities. Wagering and betting are also prohibited in the state of Karnataka per the Karnataka Police Ace of 2021.
Punishments for violating the act include a prison sentence of up to three years and hefty fines. So with such strict rules in place, what can online casinos startups do to maintain growth?
Online Casino Startups Shift Focus Away From Gambling
The State of Karnataka has been the crown jewel of the online gambling world in India. Being a hub for online gambling activities, many startups made Karnataka their headquarters. Not only that, celebrities have made a ton of money by advertising online gambling platforms. So in short, Karnataka was once the main online hub for gambling startups and advertisements.
Now with the ban, things are looking quite different for established companies and startups. The latter are hesitant to register in Karnataka, while online casinos are fighting a battle to defend their operations. Online casinos are calling their services “games of skill”. But the Indian Supreme Court isn’t budging. Thus, online gambling and online casino services are calling for a nationwide regulatory framework on the industry. They want the industry regulated at a central level, rather than on state level. They say it will make it easier if everyone follows the same rules rather than states making their own rules.
Despite the Ban, Online Casinos In Karnataka See No Impact
The Indian government makes no money from online casinos. While many are calling the ban an “unwise” decision by the government, very few think it will have a diminishing impact on the industry as a whole. The online casino industry is worth around $930 million in India. But India sees very little money from this potentially multi-billion dollar industry. What’s even more interesting is that projects are putting it three times its worth by 2022.
The industry is one of the few that are surviving the Covid-19 pandemic in India. While some industries have been completely decimated, the online gambling market continues to grow. It is a market that constantly delivers revenue for the country. As the younger population engages more in online gambling, the industry will grow despite Karnataka’s best effort to put a stop to it.
One of the more important factors as to why younger audiences engage in online gambling activities is the availability of games. India is home to more than 500 million internet uses are 750 million smartphone users. Since online casinos are making their games more accessible via smartphone, the industry has grown exponentially in the past few years. We also need to take into account the growing startup rate of online casinos in the country.
Even if one state completely bans online gambling, states like Goa and Sikkim are well within their rights to take over as India’s online gambling hubs. These states have made online casinos and games of chance legal within their jurisdictions. So as experts see it, the industry will grow by 3x despite the ban in Karnataka.
What’s the Legal Status of Online Gambling and Online Casinos in India?
If we look at gambling and casinos from a national level point of view, there is only one law that prohibits these activities. The law, which dates back to 1867, made it illegal for casinos to operate in India and for people to gamble. But the law was passed at a time where there was no such thing as online gambling and online casinos.
As such, many believe online gambling as an activity isn’t illegal in India. So is the case with online casinos. The lack of a legal framework has put the online gambling industry in a grey area. Since online gambling isn’t prohibited on a national level, the industry has grown exponentially over the past few years. There hasn’t been a single prosecuted case of online gambling in states that prohibit gambling online.
Some states, like Sikkim and Goa, have laws and regulations on online gambling and online casinos. People are free to gamble online and play their favorite games in these states.
Since online gambling can be of the most profitable revenue streams for the Indian government, it’s a no-brainer decision to make it legal rather than illegal. Currently, the Indian government sees no benefit from online casinos since companies register these casinos outside India. Even if states impose bans, experts are skeptical that it will have any effect on the industry as a whole. That’s precisely why the industry is predicted to grow up to 3x by 2022. If India legalizes online gambling, the country will benefit from it.
That’s precisely why many states are considering the option to legalize online gambling. Not only do these companies employ thousands of people, but they also attract investors. If a few more states legalize online casinos, many more will follow. This could have a positive effect on the economy and the industry as a whole. Despite the ban in Karnataka, the industry doesn’t seem to be impacted at all by the decision.