Online Gaming Draft Rules

In News

• Recently, the Ministry of Electronics and Information Technology (MeitY) proposed an amendment to bring online gaming under the ambit of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.

About Draft Rules

• Dispute resolution mechanism:
  • A three-tier dispute resolution mechanism, similar to that prescribed under the Information Technology Rules, 2021 for online streaming services, consisting of: 
    • A grievance redressal system at the gaming platform level, 
    • Self regulatory body of the industry, and 
    • An oversight committee led by the government.
• A 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 self-regulatory body will have a board of directors with five members from diverse fields including online gaming, public policy, IT, psychology and medicine. 
  • It must 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.
  • There could be more than one self-regulatory body and all of them will have to inform the Centre about the online games they have registered, along with a report detailing the criteria for registering a certain game. 
• Mandatory know-your-customer norms for verification (KYC)
• Online gaming companies will not be allowed to engage in betting on the outcome of games, as per the proposed rules.

Online Gaming in India 

• The country is the biggest market for fantasy sports globally, with over 13 crore users playing across over 200 platforms.
• The government noted that the number of people involved in playing online rummy are on rise.
• India mainly puts the games into two broad categories to differentiate them. 
• The two categories are that the game is either a Game of Chance or a Game of Skill.
  • Game of chance (Gambling): Games of chance are all those games that are played randomly. These games are based on luck. A person can play these games without prior knowledge or understanding. For instance, dice games, picking a number, etc. Such games are considered illegal in India.
  • Game of skill (Gaming): Games of skill are all those games that are played based on a person’s prior knowledge or experience of the game. A person will require skills such as analytical decision-making, logical thinking, capability, etc. Some games might also require some initial training to win. Such games are considered legal by most of the Indian states.

Need for such Rules in India

• Safeguarding the Users:
  • Safeguarding users against potential harm from skill-based games. 
  • The attempt is to regulate online gaming platforms as intermediaries and place due diligence requirements on them.
  • It will promote the online gaming sector and encourage innovation.
• Safety of Women: 
  • Around 40 to 45 percent of the gamers in India are women, and therefore it was all the more important to keep the gaming ecosystem safe.
• Revenue generating, so need to be regulated: 
  • 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. 
  • The industry grew at a CAGR (compound annual growth rate) of 38 percent in India between 2017-2020, as opposed to 8 percent in China and 10 percent in the US. 
  • It is expected to grow at a CAGR of 15 percent to reach Rs 153 billion in revenue by 2024.
• Transparency & Credibility: 
  • This framework will boost the legitimate domestic online gaming industry, ensuring greater transparency, consumer protection and investor confidence.
• Encouraging Startups:
  • Online gaming is a very important piece of the start-up ecosystem and a part of the goal of the 1-trillion dollar economy.

Issues with Online Gaming

• Addiction issues:
  • Many social activists, government officials and those in law enforcement believe that online games like rummy and poker are addictive in nature; and when played with monetary stakes may lead to other issues.
  • Some people are losing money and falling into a debt trap. Some of the victims took their own lives.
  • The study shows that online games are addictive whether these games really involve skill or mere tricks.
• Social Risks:
  • Reportedly, there have been a few instances where youngsters, faced with mounting debts due to losses in online games have committed other crimes like theft and murder.
• Loss of revenue:
  • Shifting of users to grey or illegal offshore online gaming apps not only results in loss of tax revenue for the State and job opportunities for locals but results in users being unable to avail remedies for any unfair behaviour or refusal to pay out winnings.
• Manipulative websites:
  • Some experts also believe that online games are susceptible to manipulation by the websites operating such games.
  • There is a possibility that users are not playing such games against other players, but against automatic machines or ‘bots’, wherein there is no fair opportunity for an ordinary user to win the game.

Legality of Online Games in India

• Gaming:
  • Law laid down by the Supreme Court in 1957 (Chamarbaugwala cases) — competitive games of skill are business activities protected under Article 19 (1) (g) of the Constitution.
  • Rummy and horse racing have been classified by the courts as games of skill that do not come under the purview of gaming laws
• Betting and Gambling: 
  • Gambling is a non-cognisable and bailable offence in India.
  • Betting and gambling can be found in Part II of the State list.
  • They have been mentioned in detail in the seventh schedule of the Indian Constitution.
  • In other words, this simply means that the state government can exercise full control over betting and gambling practices in their state.
  • They can also formulate their state-specific laws.
• Others: 
  • Any online gaming platform – domestic or foreign– offering real money online games to Indian users will need to be a legal entity incorporated under Indian law. 
  • These platforms will also be treated as ‘reporting entities’ under the Prevention of Money Laundering Act, 2002.
  • They will be required to report suspicious transactions to the Financial Intelligence Unit-India.

Way Ahead

• 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 the 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.
• The government will work hard to ensure all opportunities are provided to Indian start-ups.
• 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 also have to get a “no bot certificate” from a reputed certifying body.

Source: TH + IE