Decoding India's Online Gaming Rules: An In-Depth Analysis

The Ministry of Electronics and Information Technology has recently notified amendments in the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (in short, “Intermediary Rules”) to address the need to regulate online gaming(“the 2023 amendments” or “the online gaming rules”). These amedments have been brought in primarily to regulate online real money games. However, there is one provision which deals with false information about business of Central Government.

Fact check unit of the Central Government. Section 3(1)(b)(v) of the Intermediary Rules has been amended to ensure that false or misleading information in respect of any business of the Central government is not displayed or shared through the platforms of the intermediaries. The government will notify a fact check unit to identify fake, false or misleading information in respect of the business of the Central Government.

The Background

The user base of online gaming has increased substantially in the recent past and is also forecasted to grow significantly in the near future. Despite this, the online gaming industry was, more or less, unregulated. This led to criticism regarding various aspects of certain online games including the targetting of vulnerable population like children. Moreover, certain games promoting gambling were also active due to the unregulated landscape. On account of these issues, various state governments made laws in respect of online games.

State Government’s power to enact laws on betting and gambling

The Entry 34 of the States list of Schedule VII of Constitution includes “betting and gambling” which implies that generally, only state governments can enact laws in relation to betting and gambling. However, the courts have interpreted that the term ”betting” in the Entry 34 can not cover the games of skill.

Game of skill vs Game of chance

There is a thin line difference between “game of skill” and “game of chance”. Generally speaking, a game of skill is the one in which the success depends, in whole or in part, on the skill of the player whereas in a game of chance, the success solely depends on the luck.

Uncertainty in regulatory landscape

The uncertainty in online gaming stemmed from the fact that various state governments have enacted laws in the past to completely ban online gaming. The uncertainty in regulatory landscape is often considered as a detriment to the growth of a particular industry. The new online gaming rules aim to address issues related to the industry and, most importantly, grant legitimacy to it.

The 2023 Amendments

The 2023 amendments primarily envisages a self-regulatory body to verify permissible real money online games.

The 2023 amendments define “online game” as a game that is offered on the Internet and is accessible by a user through a computer resource or an intermediary. An “online gaming intermediary” has been defined as an intermediary that enables the users of its computer resource to access one or more online games.

Distinction between online game and online real money game

The online gaming rules defined the online real money game and made it clear that the rules would only be applicable to the online real money games. However, the definition of real money game includes the words “deposit in cash or kind”, but the word “kind” has not been clearly explained.

Self Regulatory Body (SRB)

Under the online gaming rules, the government will designate inimum three (3) online gaming self-regulatory bodies. The board of directors of these bodies would consist of individuals from diverse fields like online gaming, psychology, information communication technology, public policy, etc.

These SRBs will be responsible for verifying the online real money games and to declare them as permissible online real money game if such online real money games do not involve wagering and comply with other provisions of the Intermediary Rules.

There would be overall supervision of the government over the self regulating bodies.

Due-diligence by online gaming intermediaries

The online gaming rules subject online gaming intermediaries to all the due-diligence requirements imposed on other intermediaries. However, an online gaming intermediary offering any permissible online real money game has to inform its users of any change in the rules and regulations, privacy policy or user agreement within twenty-four (24) hours after the change is effected.

KYC norms

The online gaming rules require online gaming intermediaries offering online real money games to identify the user and verify his identity at the time of commencement of a user account based relationship. The identification and verification has to be done as per the RBI norms applicable on financial entities.

Restriction on financing by online real money gaming intermediaries

Online gaming intermediaries that provide users access to permissible online real money games shall not itself finance by way of credit or enable financing to be offered by third party for the purpose of playing such online game.

Power to notify other game as online game

Under the online gaming rules, the government can notify any online game to be considered as permissible online real money game on the grounds of preventing user harm or in the interest of the sovereignty and integrity of India or security of the State or friendly relations with foreign States or public order.

Concluding Remarks

The introduction of the rules is a positive step in the right direction. However, there are certain loop holes which could have been addressed.

•Posted on 6 April 2023

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