India’s Union Ministry of Electronics and Information Technology (“MeitY”) on 6 April 2023 provided some (long-awaited) regulatory clarity to the online skill gaming industry, by bringing in a central regime for online gaming by amending the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021(“IT Rules 2021”). These amendments (“Online Gaming Rules” or “Rules”) are a culmination of events that started with the Central Government realising that the burgeoning online skill gaming industry needs a uniform, contemporary and clear law; not only for the benefit of the industry but also to safeguard consumer interests.
The Online Gaming Rules propose a light-touch, co-regulatory legal framework with MeitY-recognised self-regulatory bodies (“SRB”) leading the regulation of online games, and the emphasis being on enhancing ease of doing business for the industry. While the Rules are a significant development, they leave much to be desired on issues such as ‘centre vs. state’ legislative competence. In fact, soon after the Rules were notified, the southern State of Tamil Nadu implemented a new online gaming law of its own with a separate set of regulations and prohibitions. Currently, it is not clear whether the Online Gaming Rules will override State laws and if so, to what extent.
At the time of going to press, there are still quite a few ambiguities in the Online Gaming Rules and domestic operators are seeking clarity on various aspects from the Central Government.It is anticipated that official clarifications will make the scope of the Rules clearer forspeedy implementation.
Background
In December of 2022, MeitY was notified as the nodal central ministry for ‘matters relating to online gaming.’ On 2 January 2023, MeitY released a draft of the proposed amendments to the IT Rules 2021 for online gaming, for public consultation. After an intense series of consultations involving inputs from diverse stakeholders, MeitY notified the Online Gaming Rules on 6 April 2023.
The Online Gaming Rules
In this section, we attempt to provide a brief overview of the framework put in place by the Online Gaming Rules by presenting crisp answers to some basic queries.
How do the Online Gaming Rules regulate online gaming platforms?
The Online Gaming Rules attempt to regulate online gaming platforms through the lens of intermediary due diligence obligations. An ‘online gaming intermediary’ (“OGI”) is at the centre of these Rules and is defined as “any intermediary that enables the users of itscomputer resource to access one or more online games.”
What kind of online games are permitted under the Online Gaming Rules?
An online game can become ‘permissible’ in two scenarios. First, if it is not an ‘online real money game’ i.e., it is a free-to-play online game. Second, if it is regulated as an ‘online real money game’ but its compliance with applicable laws is ‘verified’ by a MeitY-recognised SRB as per the criteria prescribed by the Rules.
What are some of the due diligence obligations of an OGI?
An OGI must adhere to certain general and specific due diligence obligations prescribed under the Online Gaming Rules. If an OGI fails to do so, it risks losing the ‘safe harbour’ which is available to an intermediary under India’s Information Technology Act 2000, and consequently become directly liable for any third-party content that is hosted on its platform. Some of these due diligence obligations include:
- Publishing its terms of use, privacy policy, and other user agreements on its platform and inform its users of certain prohibitions in relation to content.
- Offering only those online games that are permissible and do not violate any existing law.
- Providing necessary information to authorised law enforcement agencies.
- Informing users about changes to its terms of use, privacy policy, etc. within 24 hours.
- Informing users about policies governing deposit, refund, withdrawal of winnings and process to determine winners.
- Displaying a demonstrable and visible mark of verification provided by the SRB.
- Appointing a Resident Grievance Officer, a Chief Compliance Officer, and a nodal contact person, as well having a physical contact address in India.
- Verifying its users before accepting any deposits as per the KYC procedure provided by India’s central bank.
- Prohibiting providing users with credit by itself or through a third party.
How can an OGI apply for verification of an online real-money game?
The OGI needs to become a member of a recognised SRB as perits membership process and then apply to such SRB to ‘verify’ its online real money game(s).
"An OGI must adhere to certain general and specific due diligence obligations prescribed under the Online Gaming Rules"
What is the role of the SRBs under the Online Gaming Rules?
The self-regulatory mechanism, first introduced for online content publishers in February 2021 in the IT Rules 2021, is a light-touch approach to regulate tech-driven industries. The tech sector is fast evolving, and requires flexible and agile regulations – something traditional lawmaking cannot always provide.
The independent SRBs will be recognised by MeitY and will be tasked to verify an ‘online real money game’ as a ‘permissible online game’ as per the baseline criteria prescribed in the Rules. The Rules also prescribe what an entity should do to be eligible to apply to MeitY, to be an SRB. While MeitY can appoint as many SRBs as it considers necessary, minimum three SRBs need to be registered for the Online Gaming Rules to apply to any OGI. The Online Gaming Rules do not provide any strict timeline for an SRB to make an application and be recognised by MeitY.
What is the baseline criteria prescribed by the Rules for verification of an online real money game?
Though the Online Gaming Rules give flexibility to SRBs to formulate their verification processes, the Rules stipulate that SRBs should ensure that the online real money game being verified does not “involve wagering on any outcome.” Also, the online real-money game seeking verification should have responsible gaming mechanisms, should not be offered to minors and should have safeguards to protect against user harm.
How can an entity register itself as an SRB?
To become a registered SRB, the entity has to be a not-for-profit company under India’s Companies Act 2013. Its Board of Directors should comprise of at least seven individuals from different fields with no conflict of interest. Some of the criteria for registration of an SRB are slightly vague and subjective in nature and may require an SRB to build its case before MeitY on how it meets those requirements.
Once an SRB is registered with MeitY, it will be allowed to grant/revoke/suspend the verification of an ‘online real-money game’ as a ‘permissible online game.’ Other than the guidance provided in the Online Gaming Rules, the process of verification and suspension/revocation will mostly be as per SRB’s discretion. Among its other duties, an SRB also needs to appoint a Grievance Officer and frame a grievance redressal framework, as well as ensure that its member OGIs and the ‘permissible online game(s)’ verified by it followall due diligence requirements under the Rules.
What is the Grievance Redressal Mechanism under the Online Gaming Rules?
The Online Gaming Rules provide for grievance redressal between OGIs and users, and between OGI and SRB through therespective Grievance Officers of an OGI or an SRB. While OGIs and SRBs have been provided with separate grievance redressal mechanisms, the resolution window for an OGI is very limited in certain matters depending on its sensitivity. Any person aggrieved by the order of the Grievance Officer may file an appeal before the Central Government-appointed Grievance Appellate Committees (“GAC”).
In lieu of a conclusion
The Online Gaming Rules are India’s maiden attempt at a central online gaming law. While the Rules attempt to promote ease of doing business by putting in place a uniform regulation for online gaming, they do not directly address the thorny issue of legislative competence of the central and the state governments which may lead to multiplicity of conflicting laws, unnecessary litigation and instability in policy making. While the interplay of state laws with the Online Gaming Rules will be debated (and may even be adjudicated by courts) over the coming months, online skill gaming operators will have a stronger case to present before their investors, financial service intermediaries and marketeers; and instil greater consumer confidence.
“IT Rules 2021, is a light-touch approach to regulate tech-driven industries. The tech sector is fast-evolving and requires flexible and agile regulations – something traditional lawmaking cannot always provide”
