Online gaming is a vast and rapidly expanding industry, with millions of people around the world participating in a wide variety of games on a daily basis. With the user base of online games rising in India, there is a growing need to ensure that such games are offered in conformity with Indian laws, and that the users of such games are safeguarded against potential harm. In a bid to facilitate consideration of issues related to online gaming, the Government of India has assigned matters related to online gaming to the Ministry of Electronics and Information Technology (MeitY). Against this backdrop, after taking into account inputs received from the various ministries/departments concerned as well as other stakeholders, MeitY has recently released the draft Online Gaming Rules through amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.
The rules aim to address this need, while enabling the growth of the online gaming industry in a responsible manner. The draft amendments envisage that an online gaming intermediary shall observe the due diligence required under the rules while discharging its duties, including reasonable efforts to prevent its users from hosting, displaying, uploading, publishing, transmitting or sharing an online game not in conformity with Indian law, including any law on gambling or betting. Moreover, it shall observe additional due diligence by displaying a registration mark on all online games registered by a self-regulatory body, and informing its users on a game’s policy related to withdrawal or refund of deposit, manner of determination and distribution of winnings, fees and other charges payable, as well as the know-your-customer (KYC) procedure for user account registration. Moreover, as per the draft amendments, self-regulatory bodies will be registered with the ministry and may register the online games of the online gaming intermediaries that are its members, and which meet certain criteria. Such bodies will also resolve complaints through a grievance redressal mechanism.
Key provisions
A three-tier dispute resolution mechanism has been provided in the draft amendments, which includes a grievance redressal system at the gaming platform level, a self-regulatory body of the industry and an oversight committee led by the government. Online games will have to register with the self-regulatory body, and only games cleared by the body will be allowed to legally operate in India. In addition, online gaming companies will not be allowed to engage in betting on the outcome of games. The draft amendments require the self-regulatory body to have a board of directors with five members from diverse fields, including online gaming, public policy, IT, psychology and medicine. That said, the self-regulatory body must also ensure that the registered games do not have anything that is not in the interest of the sovereignty and integrity of the country, the defence of India, the security of the state, friendly relations with foreign states, or public order; and do not incite the commission of any cognisable offence relating to the aforesaid.
Further, the draft rules provide the freedom to have more than one self-regulatory body. That said, all such bodies will have to inform the central government about the games they have registered, along with a report detailing the criteria for registering. Additionally, the draft amendments provide that the government may also regulate the content of online gaming, and ensure that the games do not have violent, addictive or sexual content. Moreover, the intermediary shall, before hosting or publishing or advertising an online game for consideration, ascertain from the online gaming intermediary and verify from the concerned self-regulatory body whether the game has been registered with such a body, and shall display on its website, mobile-based application, or both, the fact of such registration.
Like the intermediary, online gaming firms will be required to undertake additional due diligence, including KYC of users, transparent withdrawal and refunding of money, and fair distribution of winnings. For KYC, they will have to follow the norms for entities regulated by the Reserve Bank of India. Gaming companies will also have to secure a random number generation certificate, which is typically used by platforms that offer card games to ensure that game outputs are statistically random and unpredictable. They will have to get a “no bot certificate” from a reputed certifying body. Similar to social media and e-commerce companies, online gaming platforms will also have to appoint a compliance officer who will ensure that the platform is following norms, a nodal officer who will act as a liaison official with the government and assist law enforcement agencies, and a grievance officer who will resolve user complaints.
Potential impact
The proposed regulations will potentially provide greater opportunities for the development and growth of the online gaming industry in India. As of now, a large chunk of Indian players are participating in unregulated or offshore online gaming sites, which can be risky and unreliable. Legalisation and regulation will allow for the establishment of reputable and trustworthy online gaming sites within India, which will be subject to oversight and regulation by the government. This could give players greater confidence in the safety and security of the sites they use, and could lead to an increase in the number of players participating in online gaming activities.
Another potential benefit of the legalisation and regulation of online gaming is the increased consumer protection it will provide. Currently, players who participate in unregulated or offshore online gaming sites have little recourse if they experience issues such as fraud, or disputes with site related to deposit or withdrawal of their money. In the draft regulations, the adoption of clear norms and standards for the operation of online gaming sites, as well as systems for resolving disputes and addressing player complaints, have been recommended as possible solutions. According to the regulations, every online gaming intermediary must be equipped with a grievance redressal mechanism and a grievance officer in order to effectively address and resolve the concerns and complaints of their users. In addition, every self-regulatory body is required to establish a mechanism for the time-bound resolution of user complaints that have not been resolved or addressed by the grievance redressal mechanism of its affiliated online gaming intermediary. The method must be able to address concerns that have not been handled within a reasonable amount of time. The move could potentially boost the confidence of players in the fairness and integrity of the online gaming industry, and could significantly raise the number of players participating in these activities.
Meanwhile, as per MeitY, the regulation of online games will help in the expansion and growth of the digital economy. The ministry believes that the rules are simple, could expand and grow the online gaming ecosystem, and be an important catalyst to India’s goal of a $1 trillion digital economy by 2025-26. Additionally, the growth of the online gaming industry could lead to the creation of new jobs and business opportunities within the sector, contributing to the overall growth of the digital economy. The regulation of online gaming will also help increase government revenue through taxes and licensing fees, and attract more players. This revenue could be used to fund various initiatives and programmes aimed at promoting the growth of the digital economy, including investments in infrastructure, education, and research and development.
Outlook
The draft has the long-term potential to generate huge revenues for the national exchequer, leading to a surge in demand for 5G, and an increase in broadband traffic and penetration, while inculcating a renewed sense of responsibility with accountability among gaming intermediaries towards their users. The draft rules have strict provisions against betting and wagering.
However, there are some important considerations highlighted by industry players that need to be addressed. For instance, members of the Internet and Mobile Association of India have suggested the government reconsider the definition of gaming, regulated entities and the scope of self-regulatory bodies proposed under the policy on online gaming. The members of the association feel that the definition of online gaming is too broad and vague and would unnecessarily bring under regulation – and expensive compliance – a set of firms that do not need to be regulated, or need to be regulated very lightly. It remains to be seen whether the government considers these suggestions and incorporates them into the final act.
Anand Kumar Sah
