Indian sports companies want to distance themselves from fantasy sports

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For more than a decade, real-money gaming companies and fantasy sports startups have presented themselves as video game companies. But as these businesses face increasing regulatory scrutiny, a coalition of more than 70 legitimate video game companies in India is urging the government to make a clear distinction between their industries.

In a letter to Prime Minister Narendra Modi and the Ministry of Information and Broadcasting, the alliance urged the government to drop the term “online games” and include separate categories: “video games” and “real money games” as part of a broader request to boost the country’s digital entertainment sector.

This effort for clear definitions comes in the wake of recent tax amendments that put real money games in the 28% tax slab while video games were put at 18%. Video game firms argued that the lack of a clear distinction has led to unintended consequences for video game companies.

“Video game companies have faced multiple show-cause notices and tax raids, and banks and payment gateway companies are also refusing to provide services,” reads the letter, a copy of which was reviewed by TechCrunch. Signatories to the letter include Gamemonks, Newgen, Leela Games, Dot9 Games, and the Esports Federation of India.

In some cases, local police have raided video game parlors, mistaking them for gambling dens. The confusion has also complicated transactions with international investors. Indian video game companies have repeatedly had to clarify that the new rules are not aimed at video games, but at real-money games – a process that has slowed investment deals.

Calls for differentiation in the industry are also rising as fantasy sports startups are dominating the traditional video gaming sector. Due to this dominance, genuine concerns and policy proposals from legitimate video game companies are largely being ignored by lawmakers, further emphasising the need for differentiation between the two industries.

To address these issues, the association is seeking clear, specific definitions in the Indian policy framework. They define video games as digital entertainment products that are played solely for entertainment or learning, without any monetary stakes. In real money games, users wager money to participate in competitions with the possibility of winning or losing real currency.

The group is also requesting that the Ministry of Information and Broadcasting ban media outlets from using images of video games when reporting on real money games or gambling, to prevent misconceptions. The document emphasises that “for an entertainment medium to grow, it must be well accepted and celebrated by the general public.” The document underlines the importance of public perception.

In the broader regulatory context, the video games industry is advocating for the Ministry of Information and Broadcasting to be designated as their nodal agency, thereby aligning them more closely with other entertainment and media verticals. This is in contrast to the real money gaming sector, which falls under a separate regulatory purview.

While India has solidified its position as one of the world’s leading startup ecosystems and is fast emerging as a global manufacturing hub for tech giants, its video game industry remains underdeveloped. This disparity underscores the urgent need to address the sector’s challenges.

Other key proposals include the establishment of a Catalyst Fund to provide financial support to startups and MSMEs, an initiative to encourage banks to recognise digital IP as collateral for business loans, and measures to improve higher education in game development. The association is also seeking a reduction in GST on video games from 18% to 12% and is advocating for corporate tax holidays to attract investments and support the sustainability of the industry.

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