‘Illegal betting apps hurt games of skill’

Offshore illegal betting companies have come under severe criticism from the founder of Head Digital Works Deepak Gullapalli for luring away a large number of users from the legal “games of skill” businesses.

Gullapalli, who is also the chief executive of Head Digital Works, which operates gaming apps such as rummy, carrom and pool, said these firms deliberately deceive customers by concealing their unlawful operations in India.

In an interview with Mint, Gullapalli said the success of these enterprises is due to their extensive advertising campaigns in the past two years, exploiting lack of user awareness on the illegality of the apps and tax evasion tactics.

In recent years, an alarming number of illegal gambling and betting apps with ties to China have emerged, prompting the Indian government to take action against many.

The executive of a legitimate skill-based gaming company said the incursion of unlawful apps has inflicted severe damage on the entire skill-based gaming industry.

“These illegitimate players have proliferated a lot over the last two years.

Customers are always free to play what they want but it is crucial for them to know the difference between legitimate operators and illegal ones.

Several of these firms put up hoardings and advertisements, and that confuses gamers as they appear to be legitimate.

The companies do not pay tax to the government because their operations are offshore, and they make money through ‘hawala’ operators.

They are hurting legitimate skill gaming businesses which are legally permissible,” he said.

As the gaming sector continues to see rapid growth, the executive hopes the government’s focus on promoting legitimate firms and advocating for increased compliance measures, including the establishment of self-regulatory bodies, will create opportunities and avenues for more business.

There are likely to be many more games added to the mix and not just games that have already been defined by the judiciary as games of skill,” he added.

Head Digital Works gained prominence through its highly profitable rummy app.

However, it is currently facing challenges as 80% of its rummy business, which traditionally originated in South India, has been disrupted.

At present, we do not operate in Tamil Nadu, Telangana, Kerala and Andhra Pradesh.

As a result, we have now started gaining share in newer markets like Gujarat, Maharashtra, Karnataka, Delhi-NCR, and West Bengal,” Gullapalli said.

Many state governments are interpreting gaming laws differently since it is a state subject.

Many legitimate firms offering real money games which technically are games of skill, have been banned because there is a lack of clarity on what constitutes “games of skill” and “games of chance”.

“Tamil Nadu came up with a law which is sub-judice to state that online rummy and poker are not games of skill.

But that is against the Supreme Court’s order.

In the past, too, Tamil Nadu courts have issued orders which have been overturned.

Online poker and rummy are no different from the offline versions of these games,” he added.

In the last two years, the company invested in rebranding itself from Ace23 to A23 and is now looking to add newer games to its business mix. Actor Shah Rukh Khan is its brand ambassador.

“Our unit economics have gotten a little better because of him being the face of our company.

We felt that the industry is growing very fast, and consumers must be reminded that it’s an entertainment industry and not a money making one. For this, we did a campaign around responsible gaming with Khan,” he added.

While the company has been profitable in 2012 and has never been an EBITDA negative, it did see a dip in revenue.

According to the Ministry of Corporate Affairs filings accessed via business intelligence platform Tofler, in FY22, the company reported a 13.5% decline in revenue from operations at ₹721.89 crore from ₹819.29 crore in the previous fiscal.

Its profit also saw a similar decline of about 18% at ₹17.8 crore in the last fiscal versus the ₹21 crore in the year before.

Bylivemint

insidesmarket.com