4 January 2023

Table of Contents

Online gaming draft rules: No betting, self-regulatory body

GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Recently, the Ministry of Electronics and Information Technology (MeitY) has released draft amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 for public consultation. The amendment suggests draft rules for online gaming and is aimed at safeguarding users against potential harm from skill-based games, growing the online gaming sector and encouraging innovation.

Key features of the draft rules

• Regulating online gaming platforms as online gaming intermediaries.

• Any intermediary which offers at least one online game is considered an “online gaming intermediary” and will thus be governed by the IT ministry.

• Setting up industry-led self-regulatory bodies and require all online games to register with any self-regulatory body approved by the Ministry. 
• Covers only risk involving online games where a user makes a cash or in-kind payment to participate in an online game with the expectation of earning winnings.

• It does not cover casual games such as Candy Crush.

• An online gaming intermediary is required to ensure that no game that allows “gambling or betting” is allowed on the platform.

• In addition, the game must not contain anything that is not in the interest of India’s sovereignty and integrity, defence, security, friendly relations with foreign states, public order, or that incites the commission of any cognisable offence.

• Any game that allows or permits wagering on its outcome will be effectively prohibited online.
• Allow the ministry to include any game – irrespective of whether or not they involve real money – within its regulatory ambit if children can potentially get addicted to them.
• An online gaming intermediary also has to ensure that children under the age of 18 cannot enter any contracts online.
• Online gaming intermediaries will have three months to comply after the amendments are notified. 

Self-regulatory body

• Online games will have to register with a self-regulatory body, and only games that are cleared by the body will be allowed to legally operate in India.
• The body will have a board of directors with five members from diverse fields including online gaming, public policy, IT, psychology and medicine.
• The union government is allowed to nominate one person to the self-regulatory body’s board of directors or governing body, who specialises in public policy, public administration, law enforcement or public finance.
• This body must be registered as either a company under section 8 of the Companies Act, 2013 or a society under the Societies Registration Act, 1860.
• Obligations:

• To register all online gaming intermediaries and online games
• Evolve a framework to protect interests, test and verify whether the online games conform to such a framework, and update and evolve this framework. 
• This framework must include – 

• parameters to adjudge the content of online games
• Safeguards against harm, including self-harm 
• Measures to safeguard children
• Measures to safeguard users against the risk of gaming addiction and financial loss
• Safeguards against risk of financial frauds

Grievance Redressal Mechanism

• On similar lines to social media and e-commerce companies, online gaming platforms will also have to appoint a compliance officer.
• Functions:

• Ensure that the platform is following norms.
• Act as a liaison official with the government and assist law enforcement agencies.
• Act as a grievance officer who will resolve user complaints.

• If a user is unhappy with the resolution of a grievance by an intermediary’s grievance officer, they may escalate it to the self-regulatory body, which can be further escalated to the government-appointed grievance appellate committee.

Penalties

• At present, no financial penalties have been proposed under the amendments.
• In case of non-compliance intermediaries stand to lose their safe harbour (granted by section 79(2) of the IT Act), determined by the courts after case is filed.
• Note: Three key stakeholders – 1) online gamers, 2) gaming start-ups, and 3) bigger gaming companies and investors.

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The online gaming market in India, and proposed rules to regulate it

GS-1: Effects of Globalization on Indian society.

 With an aim to have a nodal agency to address all issues related to online gaming, including introducing a uniform law to determine what forms of online gaming are legally allowed, the Ministry of Electronics and Information Technology (MeitY) set up an inter-ministerial task force in May, 2022 to propose guidelines of a national-level legislation to regulate online gaming. Recently, the task force have submitted a final report of its recommendations.

Need of gaming legislation

• At present, there is no regulatory framework to govern various aspects of online gaming companies such as –  
• Having a grievance redressal mechanism
• Implementing player protection measures
• Protection of data and intellectual property rights
• Prohibiting misleading advertisements such as
• Some of offshore betting and gambling websites are widely advertised in Indian newspapers and TV channels despite being based outside India.
• Even though, these websites are illegal in India, they have become very popular among Indian users, which is a raising cause of concern.

Classification of online games

• Online gaming can be broadly classified into two categories – 
• ‘Games of chance’ where the outcome is predominantly driven by luck, which can be considered ‘gambling’.
• ‘Games of skill’ where the success depends principally upon the knowledge, training, expertise and experience of the player. 

• Online gaming is a state subject but the state government find it extremely difficult to enforce certain rules like geo-blocking certain apps or websites within the territory of their state.
• The state governments do not have enough blocking powers like the Centre to issue blocking orders for offshore betting sites.
• Moreover, there are uncertainty and inconsistency in uniform applicability of rules across India because rules passed in one state are not applicable in another.

• The proliferation of online games in the country, resulted in humungous number of reported incidents of people losing large sums of money on online games, led to suicides in various parts of the country.

• MeitY – Regulate online gaming (only games of skill category), except for the e-sports category 
• Department of Sports – E-sports category gaming
• Information and Broadcasting Ministry – various aspects of online gaming such as advertisements, code of ethics relating to content classifications etc. 
• Consumer Affairs Ministry – unfair trade practices in the gaming industry.
• Games of chance, gambling websites or apps being played online will be prohibited under the proposed Digital India Act.

Online gaming Industry

• The revenue of the Indian mobile gaming industry is expected to exceed $1.5 billion in 2022, and is estimated to reach $5 billion in 2025.
• According to a report by EY and FICCI, transaction-based games’ revenues grew 26% in India.
• India’s percentage of New Paying Users (NPUs) in gaming has been the fastest growing in the world for two consecutive years – at 40% in 2020 and reaching 50% in 2021.

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Fact File