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The Indian skill-based gaming industry is set to face significant changes with the introduction of the new Digital Personal Data Protection (DPDP) Rules, according to the Indian Governance and Policy Project (IGAP), as reported by AGB. These rules, part of the Digital Personal Data Protection Act, 2023, were released in draft form earlier this year for public consultation.
While the DPDP Act was passed over a year ago, the enforcement provisions required for its implementation have been under development and are now being finalized. The Act establishes a legal framework for “data fiduciaries” — entities responsible for collecting personal data from “data principals” or users — to ensure protection against misuse and impose penalties on firms that violate data protection principles.
“This new legislation is set to establish a comprehensive privacy framework for India, marking a significant shift in how personal data is managed in the digital landscape,” IGAP stated. The organization further described the release of the draft rules for stakeholder suggestions as “a positive step towards their effective implementation.”
The draft rules will have a particularly pronounced impact on the gaming industry, IGAP noted, due to stringent compliance requirements for data fiduciaries under the DPDP framework. These measures are significantly stricter compared to those under the Information Technology Act, 2000. The rules are expected to affect video games and money games that rely predominantly on skill.
In India, the legal distinction between a game of skill and a game of chance is pivotal. The Supreme Court of India has clarified that “mere skill” refers to games where success depends more on skill than chance, excluding them from being classified as gambling. Such distinctions are typically assessed on a state-by-state basis, with most states allowing real-money online gaming.
India’s gaming industry, which includes real-money gaming (RMG) and casual gaming, is on a growth trajectory, projected to double its revenues over the next four years. A PwC India report estimates the industry’s current base of Rs33,000 crore ($396 million) will grow at a compounded annual growth rate (CAGR) of 14.5 percent between 2023 and 2028.
The draft rules also emphasize enhanced privacy protections for children. According to IGAP, the measures impose strict limitations on behavioral tracking of minors and mandate verifiable parental consent before processing their personal data. “Seamless and cost-effective age verification mechanisms are expected to play a key role in executing these compliances,” a spokesperson for IGAP explained, highlighting the industry’s need for innovative data management solutions.
Gaming companies will be required to adjust their data processing practices under the new rules. “Processing will need to be limited to personal data that is essential while also providing users the rights to access, correct, or erase their data,” IGAP said. These measures aim to safeguard user privacy while maintaining operational transparency.
Adding to the regulatory complexities, the gaming industry is embroiled in a dispute over the applicability of Goods and Services Tax (GST). The government has argued for a 28 percent GST on the total entry fee for contests, effectively taxing the entire prize pool. Gaming companies, however, contend that GST should only apply to platform fees or commissions, as many games are skill-based rather than reliant on chance.
In response to this dispute, the Supreme Court of India recently issued a temporary halt on GST show-cause notices amounting to Rs1.12 trillion ($13.5 billion) issued to online gaming companies, following multiple appeals from operators, including land-based gaming companies such as Delta Corp.
The evolving regulatory landscape, driven by the DPDP Rules and GST disputes, underscores the transformative phase the Indian skill-based gaming industry is currently undergoing.
By fLEXI tEAM
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