InvestorQ : What is the Tamil Nadu ban on gaming sites and portals and is that the reason Nazara Technologies stock has been falling so sharply?
NISHA Nayak made post

What is the Tamil Nadu ban on gaming sites and portals and is that the reason Nazara Technologies stock has been falling so sharply?

Priyanka N answered.
2 months ago

Nazara stock has not bene having the greatest time in the stock markets. It is down about 15% in the last 3 months and it is down nearly 42% in the last 1 year. What has gone wrong with this gaming and online contest app supported even by the late Rakesh Jhunjhunwala. You would recollect that gaming sites and online games have come in for a lot of flak in recent times with calls to regulate games, tax them and even subject them to higher levels of compliance. The central government is yet to commit on this subject but Tamil Nadu has taken the lead in announcing a ban on such skill based gambling sites and apps.

No less a person than the Chief Minister, MK Stalin, had himself piloted this ordinance to ban all sorts of stakes based online games in Tamil Nadu. This needs the assent of the governor to be promulgated, but it may be tough for the governor to reject the demand. The urgency is not surprising. South India remains one of the largest markets for such skill based gambling games and apps in India. Even the game franchise owners admit that the South remains their most lucrative and sought after market. However, if Tamil Nadu has its way, it could put the nascent industry in a lot of trouble.

There is an interesting history to ban online skill based gambling games in the South. Earlier, Kerala, Karnataka, Tamil Nadu, AP and Telangana had tried to ban these online games. Even for the state of Tamil Nadu, this is the second attempt by the state government to ban online games. AIADMK government had imposed a ban on all such online games in late 2020 which involved transfer of money. However, the Madras High Court had then struck down the ban as being unconstitutional. After that, the Tamil Nadu government had approached Supreme Court to quash the High Court order and the final judgement is pending.

It was Stalin who had revived this issue in May 2021 by appointing a 4-member committee under Justice Chandru to evaluate negative effects of these games and recommend a new law prohibiting "online gambling games". The fear is that such online games were addictive for young people. Also, these gaming sites were using celebrities to endorse games, which gave legitimacy. Chandru Committee had submitted its report recommending total ban on these games and also a ban on advertisements luring people. That is the basis for this legislative ordinance put up by the Tamil Nadu government on 26th September.

Not surprisingly, the gaming industry is up in arms. After all the Real money gaming (RMG) segment is estimated at Rs10,100 crore and growing at a frenetic pace. These include popular skill based games like Rummy. The AIGF is far from happy and they feel participating in such games is a matter of choice. AIGF is open to checks and balances, but not outright ban. But real worry for companies like Nazara is that there is likely to be central legislation soon and the government wants to keep its clean image with the youth. That is not too encouraging for Nazara.