New Delhi: The draft rules for online gaming in India, released Monday by the Ministry of Electronics and Information Technology (MEITY), have resurrected some of the issues the gaming industry has been facing for quite some time, such as the distinction between ‘games of skill’ and ‘games of chance’, and whether the industry should be regulated by the Union government or the states.
The ‘Draft Amendments to the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021’, released by Minister of State, MEITY, Rajeev Chandrasekhar, propose a ban on betting and wagering in online games.
According to the draft rules, an online game is one 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”. An “online gaming intermediary” means an intermediary that offers one or more than one online game (on the internet)”.
The rules propose setting up a self-regulatory body for grievance redressal and mandating know-your-customer (KYC) rules for gamers and online gaming intermediaries. The self-regulatory body will comprise five members from diverse fields such as medicine, online gaming, public policy, IT and psychology.
“Online gaming is an important piece of the innovation and startup ecosystem that we are seeing develop around the world,” Chandrasekhar said in a press brief on Monday. “Online game betting and online game advertisements have been brought into the rules as a prohibition. The self-regulatory body that has been designed and built into the rules will be responsible for determining and certifying what is the permitted online gaming intermediary on the internet.”
Consultations with stakeholders will begin next week and the ministry intends to come up with something more concrete by February. Discussions will be held with startups, investors, gamers and thinktanks from within the sector.
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States or Centre?
The online gaming segment was handed over to the IT ministry in December last year. This came after an inter-ministerial task force submitted its report on online gaming regulation proposals to the Union Cabinet.
Until this development, online gaming was considered to be under the purview of the states.
State governments in Assam, Meghalaya, Nagaland and Tamil Nadu, among others, were active in regulating gaming. A law commission report of 2018 on online betting and gambling also specifically mentioned that gaming (including online gaming) will remain with the states to regulate.
Chandrasekhar, however, said during Monday’s press briefing that “everything internet comes under MEITY and all intermediaries on the internet are regulated by the IT Act”.
“The states can do whatever they want to do vis-a-vis gambling and betting,” he added. “Our job and duty are to regulate the internet and to prescribe rules for the safe and trusted functioning of the internet. We are not policing; our intention is that online gaming in India has tremendous potential in terms of startups and investments. Our intention is that more and more startups in the sector (should) grow.”
According to Jay Sayta, a technology and gaming lawyer, the matter of whether the online gaming segment should remain with the states or Union government is still unresolved, and “the introduction of draft rules without consultation and consensus among states is not appropriate”.
“The issue of whether online gaming can be regulated by the Centre or states has not been resolved and is pending before the Supreme Court in appeals filed by the Tamil Nadu and Karnataka governments,” Sayta told ThePrint.
He added that the central government “has consistently claimed — in affidavits before high courts and in written replies in Parliament — that the power to legislate on the subject rests solely with states”.
Similar views were iterated by Vidushpat Singhania, managing partner in Krida Legal — a firm dealing with gaming laws in India.
He also said the draft online gaming rules could invite pushback from states.
“I think states like Sikkim, Meghalaya and Nagaland are likely to have their reservations, as these earn revenue by licensing gaming activities. Other states might object as well, since they may assume that betting and gambling have traditionally been a state subject, where states have regulated it. The Tamil Nadu government is also likely to push back, as it had put forth an ordinance to ban certain kinds of online gaming,” Singhania said.
Game of skill & game of chance
Another prickly issue is the definition of ‘game of skill’ and ‘game of chance’, which the draft rules does not specify.
According to Chandrasekhar, the ministry has not yet defined the two but has laid down the core principles of online gaming and “wagering”.
He said: “We are not getting into the ‘game of skill’ and ‘game of chance’ question, because that is not what the rules regulate. The rules regulate betting. It is not a question of game of skill or game of chance; it is basically a prohibition of wagering in any game.”
Some experts have pointed to this lack of distinction as a problem.
According to Akash Karmakar, partner with the Law Offices of Panag & Babu, “with allegations of gambling and wagering being rife, games of skill need to have a clearly defined safe harbour to operate in. The rules in the current form miss an opportunity to provide enabling language to provide a safe harbour for games of skill (which are constantly challenged as being games of chance)”.
He further explained that the rules have “merely reiterated” that online gaming must be in conformity with the laws in force in India, but “conspicuous by its absence is the definition of what is a ‘game of skill’, which would be accorded protection against allegations of wagering or gambling”.
Due diligence & KYC norms
An additional layer of due diligence is expected from online gaming intermediaries.
According to the draft rules, “the online gaming intermediary shall display a demonstrable and visible mark of registration on all online games registered by the self-regulatory body”.
Platforms will have to ensure that they display all their “regulations, privacy policy, terms of service and user agreements” prominently, including “policy related to withdrawal or refund of the deposit made with the expectation of earning winnings”, and information pertaining to risk of financial losses.
The online game intermediary will also have to follow a stringent know-your-customer procedure and “prominently publish on its website, mobile-based application or both, a random number generation certificate and a no-bot certificate from a reputed certifying body for each online game offered by it, along with relevant details of the same”.
Even identity verification of gaming “users” will be mandatory.
When asked about the reason for this, Chandrasekhar said “precautionary measures” are necessary.
“There will be some KYC for gaming users, especially when we are going to charge a licence fee, and they should not be anonymous. These are normal precautions,” he told reporters.
Referring to the “crypto issue” in the context, he said: “Part of the problem with crypto was that there were exchanges and platforms that were created that had zero KYC and so money was being deposited, transferred, exchanged, etc. We don’t want that anywhere on the internet (in India) in the future. That is why we are talking about an open and safe environment.”
Online gaming intermediaries, just like social media intermediaries, will need a chief compliance officer as well as a “nodal contact person for 24×7 coordination with law enforcement agencies and officers”.
(Edited by Nida Fatima Siddiqui)
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