Online Gaming News, Draft Rules and Industry

Context: Ministry of Electronics and IT (MeitY) has released Draft amendments to the IT (Intermediary Guidelines & Digital Media Ethics Code) Rules, 2021 in relation to Online Gaming.

Online Gaming News Articles

• Ministry of Electronics and IT (MeitY) is the nodal ministry for online gaming related concerns.
• According to Department of legal affairs, gambling and betting are state subjects.
• Central government has recently recognised e-sports along with mainline sports in the country.
• An Inter-ministerial Task Force (IMTF) was set by Government of India up to explore new regulations for online gaming.
  • It has recommended central legislation to govern online gaming.
  • It called for repealing Public Gambling Act of 1867, which currently covers it, incapable of covering/defending/dealing with digital-based activities and the emerging technologies associated with it.
  • Public Gambling Act (PGA) is a pre-internet era law and acts as a model law state governments may or may not adopt.
• NITI Aayog backed a central law to bolster economic growth and innovation in the online gaming industry.
  • It called for the development of a regulatory framework to quickly address grievances for online gamers involving money.
• Potential of Gaming Industry: 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.
  • The industry grew at a CAGR (compound annual growth rate) of 38 per cent in India between 2017-2020, as opposed to 8 per cent in China and 10 per cent in the US.
  • It is expected to grow at a CAGR of 15 per cent to reach Rs 153 billion in revenue by 2024.

Highlights of Draft Rules Online Gaming

• Aim: Safeguarding users against potential harm from skill-based games.
• Objective: To regulate online gaming platforms as intermediaries and place due diligence requirements on them.
  • To grow the online gaming sector and encourage innovation
• Definition: Online game is a game that is offered on the Internet and is accessible by a user through a computer resource if he makes a deposit with the expectation of earning winnings.
• Games of Skill: It allows only “games of skill” to operate legally in India.
  • Games of skill have been defined through various court rulings in India and include games like rummy and the Dream11 model of online fantasy sports.
• Coverage: Law will cover games involving real money or a deposit of any value, and the rules go on to clarify that this will not cover activity that can be classified under gambling laws, which falls under states’ purview.
• Self-regulatory mechanism: Self-regulatory bodies will be registered with the ministry.
  • Composition of self-regulatory body: It will have a board of directors with five members from diverse fields including online gaming, public policy, IT, psychology and medicine.
  • All online gaming companies will have to register with the self-regulatory body that will decide on the action required to be taken as per the rules.
  • Self-regulatory body will ensure that the registered games don’t have anything “which is not in the interest of sovereignty and integrity of India, defence of India, security of the state, friendly relations with foreign states or public order, or incites the commission of any cognizable offence relating to the aforesaid”.
  • Body will resolve complaints through a grievance redressal mechanism.
• Content Regulation: Government may also regulate the content of online gaming, and “ensure that the games do not have violent, addictive or sexual content.
  • Around 40 to 45 percent of the gamers in India are women, and therefore it was all more important to keep the gaming ecosystem safe.
• Duties of Gaming Firms: Due diligence to be observed by gaming firms, including publishing measures taken to protect user deposits and informing the user about the risks of financial loss and addiction associated with online games.
  • KYC of users, transparent withdrawal and refund of money, and a fair distribution of winnings.
  • For KYC, they will have to follow norms that are laid down for entities regulated by the Reserve Bank of India (RBI).
• Appointment of a compliance officer: To ensure that the gaming platform is following the norms.
  • The nodal officer will act as a liaison official with the government and assist law enforcement agencies, and a grievance officer who will resolve user complaints.
• Registration mark of the self-regulatory body: Online games must display a registration mark issued by Self-regulatory body.
  • Only firms that acquire the mark will be allowed to advertise on social media, like Google or Facebook.
• Protection to Gaming Firms: Adhering to the guidelines in the IT Rules will give gaming firms safe harbour protections defined under Section 79 of the IT Act.
  • These rules protect intermediaries from being prosecuted for misuse of the platforms by third parties.

Need of Online Gaming Legislation

• Bring Uniformity: Some state governments follow Public Gambling Act and allow real money games of skill while others have sought to prohibit both games of skill and chance even as Supreme Court recognised the fundamental right to trade for games of skill.
  • There is no central law to tackle offshore illegal gambling sites.
  • Online gaming platform must not allow or facilitate transactions through unauthorised payment systems and encourage or facilitate money laundering activities financing terrorism activities or transactions in violation of the Foreign Exchange Management Act, etc.
• Issues with state laws: Lack of a uniform regulatory approach for online gaming in state laws.
• Health Effects: World Health Organization declared “gaming disorder” as a behavioural addiction in 2019.
  • National Commission for Protection of Child Rights in 2021 outlined the harms faced by the children affected by the disorder.

Draft Rules Online Gaming Significance

• Regulation: All India Gaming Federation (AIGF) welcomed the draft amendment, as it is a first step for comprehensive regulation for online gaming.
  • It will hopefully reduce the State-wise regulatory fragmentation that was a big challenge for the industry.
• Protection: Regulation would help them grow responsibly without fear of frequent bans from states, even though it will increase the compliance cost.
• Promote domestic companies: It could hurt foreign betting firms while boosting the business of Indian fantasy sports and other gaming companies

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