A November 2022 report by Boston Consulting Group (BCG) came up with some startling facts and figures on India’s gaming industry. While the country is heading towards a forecasted $1-trillion digital economy, the BCG Report vis-à-vis gaming industry predicts that it should go up to $8 billion to $11 billion (at an average CAGR of 16-19 percent) from its current mark of $2.5 billion. It would still be a premature stage of growth for the gaming sector, and even with that it is expected that as of today there are over 15,000 gamers catering to 22-25 percent of the Indian population with an average time spent of around 2.3 hours (3.2–3.4 hours for the US and China) and with an average spending of $3 to $10.
The Ministry of Electronics and Information Technology (MeitY) recently came up with certain amendments to IT Rules, 2021, whereby certain proposals have been made seeking feedback from stakeholders.
The move by the Ministry is an exceptional step in the gaming sector, which was eagerly waiting for the enactment of certain laws which can bring overall certainty, predictability, and credibility to the sector by having a soft touch regulation and also help in weeding out an illicit, non-serious player or fly by night operators.
The proposed law defines “online game” and “online game intermediary”, or “OGIs”. The essential ingredients have also been identified, including the making of “deposits” and “expectations of winnings” in cash or kind.
It could be argued that there should be a linkage between “deposits” and “winnings” from the “pool of money” collected. The rules also provide for KYC procedures almost equating the gaming industry with the banking sector, observance of due diligence, establishment of grievance redressal mechanism, prominent publishing of rules and regulations, privacy policy, user agreements, and so on.
The user has to be well informed and also must be given confidence before engaging with the presence of a demonstrable and visible mark establishing the fact of registration by self-regulatory bodies (SRBs).
Gamers should also be made well aware of the policy of withdrawal/refund, manner and distribution of winnings, fees and other charges payable, risk of financial loss associated with addictions, measures taken for the protection of deposits, etc. The gaming companies are also required to obtain Random Number Generation (RNG) and No-Bot Certificate from certified bodies. Clearly, a proposed road map for the overall growth of the gaming industry is necessary.
Additional compliance burdens have also been fastened like requiring the appointment of Chief Compliance Officers (CCOs), who would be held accountable in case a gaming company falters in compliance or fails to observe due diligence. Appointment of a Nodal Officer for 24x7 coordination with law enforcement agencies. The rules also cast more onerous 24-hour timelines for OGI as against the 72-hour timeline for a social media intermediary for the provision of certain information.
MeitY appears to have mistakenly equated gaming intermediaries with social media intermediaries since the purpose and object there was to counter misinformation, child pornography, hate speech, etc. Such concerns may not necessarily exist for gaming companies.
The rules also provide for an arms-length self-regulatory body (SRB) and create multiple employment opportunities for eminent persons in various fields of entertainment, online gaming, sports, psychology, medicine, consumer education, public administration, law enforcement, ICT, etc.
The SRBs would also be responsible for the grant of recognition and registration and the development of a framework for the grant of legitimacy and sanctity basis established principles.
Lastly, the Ministry has reserved its power to bring within the ambit such games which without making any deposit have the potential to create risk or harm to the sovereignty and integrity of the country.
While the timeline to submit comments stand extended till January 25, 2023, MeitY also introduced certain unrelated and unconnected insertions related to a different set of stakeholders like digital news media and social media and giving sweeping powers to PIB or such other agency authorised by the Centre, to determine and declare and have a final say on fact checks or correctness of the news.
This could become the basis or should we say a mandate for social media intermediaries to take down content which is identified to be troublesome or fake in the opinion of PIB. The question that arises is whether it will be tantamount to unreasonable restrictions on the freedom of press media.
Interestingly, the timeline to submit comments on this new insertion is seven days (which essentially was an extension given for gaming-related amendments).
The above is also in the backdrop when the earlier amendments of 2021 have already been the subject matter of various challenges as also passing of interim orders by various High Courts and thus expansion of the earlier set of powers under this amendment is unlikely to escape criticism, concerns and another set of challenges on constitutional, transparency and natural justice grounds.
The Ministry must therefore tread this path on a cautious note and by taking advance measures and by filling all the gaps that may arise since there could be a possibility of challenge on various grounds. These may include grounds like rules being ultra vires the IT Act, outsourcing regulatory functions to private organisations, the competency of the Centre to enact laws in areas reserved for State (also being an admitted position on Affidavit by Central Govt.), stringent due diligence measures, lack of transparency, etc.
While the above is likely to take its own twists and turns, let’s also get on with certain concerns that the gaming industry is likely to face.
First and foremost, the Centre must attempt to remove ambiguities in and around the definition of ‘online gaming’ and must bring in more clarity on what is included and what is excluded by accounting for the type of games that exist namely ‘casual gaming’, ‘real money gaming’, ‘online fantasy sports’, ‘e-sports’, ‘in-app purchases’ and may be many more.
The Ministry must also be futuristic in its thought and approach by factoring in all possible situations and types of gaming that may arise. It would also be necessary to have clarity on the definition of ‘online gaming intermediary’ especially when various acts of intermediaries like ‘publishing’, ‘hosting’, and ‘advertising’ can have the potential to fasten compliance burden on unintended stakeholders.
This can be done by way of expressing illustrative exclusions or defining criteria and guiding principles for the same. It would also be advisable to define what is intended by the word “kind” for both “deposits” and “winnings”, as in the absence thereof it may lead to the inclusion of a wide range of unintended participant stakeholders of the gaming industry or otherwise.
The same also needs to be addressed keeping in mind the presence of virtual goods/services in the gaming ecosystem and also considering the various types of gaming detailed elsewhere in this article. Concerns have already started erupting from the video gaming industry who expect themselves to be treated differently from real money games. The new terminology which also emerges is the collective name of i-gaming which represents both real money and fantasy sports.
In so far as video games are concerned, the demand appears to be regulated through an India-specific age and content rating mechanism, similar to the framework in the EU and North America.
The issue that also emerges is whether it would be right to equate the gaming industry to the banking industry since many of the transactions involved may be of low value and also already routed through banking channels.
Also whether similar KYC norms may result in creating an imbalance and contradiction with the proposed ongoing Privacy legislation discussion. An ideal scenario would be to rely more on SMS verifications, and avoid KYC at the entry level since the same may act as a roadblock and unwarranted gate-keeping of the gamers discouraging and demotivating them from playing and also creating overall user fatigue at a pre-gaming stage itself.
Even otherwise, most of the gamers start on a free note or for negligible amounts and thus relaxed KYC norms at the withdrawal stage of substantial pre-identified amounts are likely to serve the purpose.
The SRB creation must go a long way to bring credibility and sanctity to the gaming industry and also to certify post-examination the games of skill vs chance or to examine the aspect of the predominance of skill using simulator techniques, quantitative methods and basis established test laid down in judicial precedents.
The Ministry may consider bringing maximum certainty and legitimacy to the entire gaming sector by facilitating rules which enable and empower the gaming entities to commence and operationalise basis intimations to SRBs and apply in the meantime for validation/legitimacy.
The Rules must also be able to address to ensure that tech giants treat gaming platforms in a non-discriminatory manner and must host them upon production of proof of registration. The Rules may also require clarity on pre-existing penalty provisions as also repeal related aspects and ensure overall consistency with the existing set of laws.
The Ministry may also facilitate bringing in kids/children who can be encouraged to enjoy the fruits of a skill-based game and wherein the child can be encouraged to participate like in the game of chess or for that matter in any international e-game tournament. It goes without saying that the legislation must definitely address leaving scope for self-regulation on addiction-related issues, responsible gaming with particular emphasis on the responsibility of the safety of women and children, exposure to in-app purchases, age-inappropriate content or online harm.
It all now depends on how the Ministry plays it by selecting the right set of rules, sequencing them in the right order and rolling the dice to get the winning number for both the gamers and the gaming companies.
It should make a “show” to the stakeholders leaving no scope for any attempted procrastination or delay in bringing predictability and certainty to the gaming sector and making it attractive and viable enough to attract foreign investments.
(With inputs from Tejas Pradeep Vaidya)
Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt Ltd.