Explained: The legal considerations of blockchain gaming in India

What is the News?

The vast scope and potential of blockchain technology have attracted the gaming industry over the past few years. In India too, gaming industries are exploring this option.

What is Blockchain Gaming?

Blockchain Gaming are online video games that are developed by integrating blockchain technology into them.

It includes elements that use cryptography-based blockchain technologies like Cryptocurrency or Non-Fungible Tokens (NFTs).

These elements are used by players to buy, sell, or trade with other players, with the game publisher taking a fee from each transaction as a form of monetization.

Example of Blockchain Game: In 2017, Dapper Labs’ had developed the first-ever blockchain game called Crypto Kitties. In the game, people can virtually experience the joy of adopting and breeding a cat (CryptoKittie) without taking up the responsibility of bringing one home. Each CryptoKittie is a Non-Fungible Token (“NFT”).

Elements of Blockchain Gaming

NFTs: NFTs represent in-game virtual assets that can be owned by players, such as maps, armor or land.

– These NFTs act as asset tags, identifying ownership of the in-game assets, and are stored on the blockchain.

– Being on the blockchain allows the player to have a secure record of ownership of the in-game assets, and also gives the assets the ability to outlive the game itself.

– It also creates transparency, since ownership records can independently be verified by any third party as well.

– In doing so, it makes in-game assets marketable and creates a decentralized market, where they can be bought and sold by people.

What are the regulatory aspects related to Blockchain Gaming?

The legality of Blockchain Gaming: Since blockchain is merely the underlying technology, there is no express regulation in India. However, it would be relevant to explore the legality of the games from the lens of existing Indian gaming regulations.

Most Indian states regulate gaming on the basis of a distinction in law between ‘games of skill’ and ‘games of chance’. 

Where does Blockchain Gaming lie within this framework?

As the law currently stands, each blockchain game must first pass muster as a ‘game of skill’, as against a ‘game of chance’, to legally be made available in most Indian states.

In the past, the Supreme Court has rejected the notion of video games being ‘games of skill’. It held that the outcomes of these games could be manipulated by tampering with the machines used to play. Therefore, the element of skill of players could not be a dominant factor in the game.

Source: This post is based on the article “Explained: The legal considerations of blockchain gaming in India” published in Indian Express on 15th Mar 2022.