What Should India’s Gambling Regulation Look Like?

Svilen profile picture 7JP Head of Research

Industry Researcher, Svilen Madjov

Last updated on 25th November 2021

Published: 25/11/2021

Categories: Research Articles

Gaming companies and consumer groups often stress the mounting evidence in favor of a license-based gambling market in India. Media reports and industry experts tend to list the benefits of strong national regulation and arguments against illegal offshore gambling.

Global best practices show that government-mandated standards eliminate many of the dangers associated with playing at unlicensed platforms and apps. A national regulation leads to:

  • More user safety (e.g. payment, privacy, fraud prevention);
  • Better customer support (with problem gambling, protection of minors);
  • Improved overall reliability (business climate, tax collection) and much more.

Key Regulation Aspects

Firstly, gaming companies incorporated in a given State will have to pay taxes and abide bylocal laws. Offshore gambling is a vulnerable sector, with cashless payments stimulating tax evasion, while a regulated market provides transparency and ensures direct and indirect (GST) tax collection.

India’s unique Aadhar ID makes digital identification much easier. More than proof of identity, it could help with age verification (for minors), outreach to problem gamblers, and online abuse prevention.

Self-regulation is an important aspect in mature gaming markets. Establishing customer profiles (beyond Aadhar ID) can help with self-exclusion and limitation mechanisms for problem gamblers. Sensitive (yet anonymous) national registers help government authorities monitor gambling activity and prevent fraud against and on behalf of players.

Digital tools also facilitate the introduction of many safety nets considered standard in developed markets – play-speed limits (e.g., 3-second spin stops), obscuring “false wins” (when the wager was bigger than the win), or banning reverse withdrawals (immediate re-gambling of one’s winnings). Pop-up warnings and Responsible Gaming (RG) disclosures are also much easier to implement.

Responsible marketing is also a major issue, with licensing requirements at the base of honest advertising. Offers and promotions will need to have full Terms and Conditions and complete transparency. More importantly, giving licensed operators a chance to advertise raises awareness and safer use, setting legal platforms apart from shady and unregulated websites.

Protecting minors is a must for any responsible society. Restrictions on player profiles, game types, location, content, and user targeting are effective in avoiding such negative social effects. Safeguarding minors also passes through education and awareness programs, required through licensing schemes and funded by state or national Gambling Regulator incomes.

Learning from the Best

Some of the case studies in the research paper illustrate regulation scenarios that are compatible with the desi market. Many of those come from so-called mature gambling markets, well-calibrated and regulated.

Sweden has a long gambling tradition, initially through offshore site access. State monopoly was dropped in 2019, imposing a licensing regime through a Gaming Authority. Key elements enforce RG and consumer protection, effectively providing access to the local market in exchange for a responsible business practice. The regulator imposes weekly deposit limits, anti-cheating measures, and forbids gaming on credit. Digital monitoring allows authorities to block payments to unlicensed operators while ISPs send warning pop-up messages when AI detects such a site.

Malta, interestingly enough, is often considered an offshore jurisdiction while still part of the European Union. This is because, historically, the Malta Gaming Authority had low licensing fees and tax rates. But it has always granted a first-rate international gambling permit. In 2018 a new Gaming Act was adopted, making licensing requirements flexible and simple as a response to digital evolution.

Despite that, highly reliable licensing procedures require around six months of processing, and a more detailed list of fees. Applications need a business plan, site policies, and complete game certificates, i.e., Random-Number Generator (RNG) algorithms, among others. Authorities also require proof of origin for company funds as an anti-money laundering measure.

Stringent requirements and flexible public-private collaborations have brought the gaming industry to contribute as much as 12% of Malta’s GDP over the years, with over 300 licensed online operators currently registered there.

Denmark also formally regulated online gambling in 2017. The Gambling Authority requires separate licenses for remote casinos, poker, and sports betting. Lotteries, bingo, and scratch cards remain a State monopoly, much like in India. All of those are available online.

Denmark shares many of the good practices seen in Sweden since the Swedes drafted their national regulations with the most successful Danish policies in mind. An example: both countries maintain national registers for voluntarily self-excluded players.

It was only in 2020 that Germany adopted a national licensing regime for online sports betting. The German states also agreed on a reform that imposed a licensing scheme on online slot and poker operators. Application requirements include deposit limits, maximum wagers, and advertisement restrictions.

Online casinos are also separately regulated by State jurisdictions. A national Supervisory Authority was established, allowing some state differences on specific games but keeping common standards under a Unified framework.

Striking a Balance between Control and Player Freedom

One thing is certain – over-regulation is never an option, just as a blanket ban isn’t. Examples abound even in India: when classic horse-racing betting was allowed online and over intranet terminals, company revenues and State tax incomes rose sharply. When GST was imposed nationally in 2017 (and raised to unsustainable levels later on), many regular players moved over to black-market bookmakers and international races.

Likewise, Sweden, given as an example above, also saw a growth in unlicensed casinos when too many gambling limits were imposed on licensed operators. Spin-stops and spending limits became a few too many, leaving the market vulnerable to offshore sites unwilling to observe requirements on deposits, timing, and data sharing that are the foundation of secure gaming environments.

Simpler solutions need to be less intrusive: a UK case study reveals how some games can be made available only in logged-in mode.

The Dangers of Playing at an Unlicensed Online Casino

The list of risks that unregulated gambling poses to consumers and the public interest is practically unlimited. Exposure to negligence, fraud, and other criminal activity is only one side of the coin.

From a player perspective, poor service quality and no gameplay transparency often lead to unfair losses (payment fraud), odds tampering (RNG or Return-to-Player, RTP), and even real-world event manipulation such as match-fixing.

From a government perspective, the social impacts of unregulated markets are predictably negative – ranging from unchecked access by minors to increased problem gaming (addiction). Economic impacts cannot be ignored either, as unlicensed and offshore operations deprive the public of tax income that can be directed towards several welfare programs.

In the end, the absence of consistent player protection, responsible gaming, and anti-money-laundering policies are all a direct consequence of unlicensed operations.

Consumer Protection

Well-regulated markets have started moving from simple data protection to gambler security, particularly important in online operations. Safeguarding consumers means preventing exposure of minors, limiting data collection for commercial purposes, and strong privacy protection (see Europe’s GDPR).

Gambling Regulators can rarely respond to consumer complaints, yet they promote guidelines, procedures, and agencies, including NGOs, professional public mediators, and help channels. Emerging technologies make it easier for websites and authorities to monitor standards and work together on improving customer protection.

Responsible Gaming

Problem gaming is a sensitive topic. It involves both mandatory player protection and self-control tools. Examples of leading RG practices include:

  • Self-exclusion as a cornerstone of RG – easy enlisting, accessible registers, efficient time-outs;
  • Operator obligations to protect problem gamers – verify digital identities; avoid sending them commercial offers; Transaction limits, login times, and other limitations are also widely used;
  • Black lists for those excluded by law (e.g., for fraud or bankruptcy), for professional gambling, or other criminal offenses. Blacklists go either way, with companies possibly ending up in one.

The Bottom Line

Online casinos, lotteries, and betting sites have been keen to align with a formal government regulation. When an industry the size and importance of Indian gaming is exposed to risks, it is in the public interest to require legitimate companies to follow high operational standards.

With benefits ranging from consumer protection to taxation and job creation, bringing more transparency into the sector will stimulate investor interest and produce spillover benefits for society at large.

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