Karnataka’s ban on online gaming came into effect late on Tuesday (October 5), with Mobile Premier League (MPL) among the first gaming startups to begin blocking access to users.
The law bans online games involving betting and wagering, and “any act or risking money, or otherwise on the unknown result of an event including on a game of skill”.
The ban has intensified concerns that growing state regulations could hit the nascent but booming gaming sector in India.
According to a June 2021 EY-FICCI report titled ‘Esports in India’, the industry is expected to “grow at a 46% CAGR [compound annual growth rate] to grow over fourfold from ₹2.5 billion in 2021 to ₹11 billion by 2025 with the prize pool expected to reach ₹1 billion by 2025”. The report also says that the industry will generate more than ₹600 million of ancillary revenue between FY2021 and FY2025.
On Wednesday morning, the Sequoia Capital-funded MPL’s gaming app showed messages to users that said: “Sorry! The law in your state does not permit you to play Fantasy sports”, “fantasy games are locked” and “cash games are locked”.
The gaming app offers fantasy cricket and football games and allows real-money wagering on them.
India’s largest gaming platform, Dream11, the first Indian gaming company to become a unicorn – i.e. a privately held startup company valued at more than $1 billion – was still operational, but Paytm First Games was not.
Karnataka is home to 91 gaming firms that collectively employ about 4,000 people, according to data from Startup Business Academy. It is the latest state that has banned such online games after Telangana and Andhra Pradesh. Tamil Nadu had also imposed such bans, but its bill was struck down by the Madras High Court for being “unreasonable” and “irrational”.
These states account for roughly 20 per cent of the total business for companies, according to reports.
Roland Landers, the chief executive of the All India Gaming Federation, told Reuters the industry will seek legal recourse.
Two other industry sources said on Wednesday that gamers and some companies were planning to file court challenges against the new Karnataka law, which imposes hefty fines and prison terms on violaters.