EXPLAINED | From Draft IT Rules To Self-Regulatory Body: State Of Online Gaming In India

The Draft IT Rules are not yet in force. They are a set of proposed amendments to the IT Rules as they currently exist. Read on for a closer look.

Game like PUBG Mobile — which is a medal event at the Asian Games — have been banned as they were deemed a threat to national security.

Source : Getty

In India, anyone who plays any format of an online game — regularly or not — for leisure, passion, hobby, or livelihood must have at some point had to pass the hurdle of legality. 

Recently, several states have taken a legal step forward to regulate online gaming — be it proposing a ban on chance-based gaming for money (like Chhattisgarh) or banning some skill-based pay-to-play games (Tamil Nadu). These developments have taken shape despite a high court ruling against states having the power to make rules on online gaming. As per the 2021 case of All India Gaming Federation (AIGF) v. State of Karnataka, states only have the power to regulate gambling. 

So, the ask of the hour is simply this: why does the Centre not devise a better way to resolve this situation, instead of leaving it to states and to the mercy of multiple litigations? Perhaps, at this point, this is what they are precisely attempting to do. 

What is Allocation of Business Rules?

The Centre runs its day-to-day business and regulatory duties by the powers granted to it under the Government of India (Allocation of Business) Rules, 1961. Each ministry/department can make rules regarding the subjects allocated and looked after by them. The term "Business" here includes a list of subjects that are dealt with by the ministry.

The Business Rules has witnessed 370 amendments so far. It is a dated legislation which often tries to counter innovation. Some recent examples of the amendment to these rules include the addition of OTT platforms under the Ministry of Information and Broadcasting in November 2020 and the inclusion of medium and small-scale Industries as a separate category of doing business in 2016.

Online gaming, with a recent increase in user base aided by Covid, an expansion of game formats with the emergence of tech, and a boost in user base owing to mobile-first gaming, stands at a strength of 120 million users, as per industry reports.
 
This sector is expected to grow at a cumulative growth rate of 27 percent by 2027. According to Lumikai’s "State of India Gaming Report, 2022" the Indian online gaming market has reached $2.6 billion, and Indian gaming companies are on track to raise $513 million in investments before FY22 ends. 

Therefore. online gaming has garnered a growing interest from the Centre. Recently, games including PUBG Mobile — which is a medal event at the Asian Games — have been banned as they were deemed a threat to national security.

In the recent amendment to the Business Rules last week, matters relating to online gaming have been brought under the Ministry of Electronics and Information Technology (MeitY) and Esports is now a part of multi-sports events under the Department of Sports, which shall fall under the Ministry of Youth Affairs and Sports (MYAS).

What does this mean for gamers and gaming companies?

Esports

While it is a significant first step, the accreditation of esports as a 'sport' and/or the set-up of a national sports federation is undecided. All that the law of the land prescribes right now is that MYAS shall have the authority to undertake this business in a constitutionally prescribed manner.

Online gaming

MeitY has taken some quick steps in matters relating to online gaming, involving with online gamers and gaming companies since July 2022 in repeated stakeholder discussions. On January 3 this year, MeitY proposed amendments to the Draft Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (also referred to as Draft IT Rules).

What does a 'proposed amendment to Draft IT Rules' mean, and what does it cover?

The Draft IT Rules are not yet in force. They are a set of proposed amendments to the IT Rules as they currently exist. MeitY has called for stakeholders' input, opened the discussion on online gaming to the public, and invited stakeholder comments.

So, what is the current legal landscape of online gaming in India?

The Centre has notified ministries that can adjudicate online gaming and esports through the Business Rules amendment. States govern online gambling through their respective Gambling/ Police Acts — but have often taken the step of adjudicating gaming as well, whether it is a multi-play battle game, a AAA game, a fantasy title, or even a casual game for money.

Different states have taken different regulatory approaches to online gaming in India. A user playing chess for money is categorised as a criminal in Gujarat, and the same person is considered an online gamer in Delhi. 

A user paying to make a team on FIFA was categorised as a criminal in Karnataka not very long ago through a new amendment to its Police Act in 2021 but was overturned by the state’s high court. 

Some formats of games have been adjudicated by courts of law as well. Indian courts have repeatedly pronounced judgments and have stated that 'preponderance of skill' is required to be established for a game to be an exception to gambling and thus outside the state jurisdiction.

Jurisprudence in this regard dates back 70 years, starting from R.M.D. Chamarbaugwalla v. Union of India, 1957, which established the doctrine of severability and the test of preponderance of skill to Avinash Mehrotra v. The State of Rajasthan & Others, 2020, wherein fantasy as a format adopted by Dream 11 was accorded the status of skill gaming by courts.

However, many game formats never get to see the test of judicial merits. When Tamil Nadu banned online gaming for money in 2020, it also banned chess players from playing tournaments as it required a token fee to be paid.

This multiplicity of judgement, state action, and the lack of clarity around which ministry will eventually govern this sector has led to the proposed amendments to the Draft IT Rules, which are currently open for public discussion.

Does the proposed change to the Draft IT rules benefit users?

The proposed changes to the Draft IT Rules that benefit users are:

Firstly, Section 2 (qa) defines "online gaming" as a game that is offered on the Internet and is accessible by a user through a computer resource if he deposits with the expectation of earning from winnings.

This inclusive definition has left much scope for innovation by being future-proof. Various categories of games fit into it, thereby protecting users that use money as a token to play, a subject of grave concern even with the state governments in the past.

Secondly, an operator of a gaming company is suggested to be included as Online Gaming Intermediary.

Requirement of extra due diligence

To ensure that online gaming companies are safeguarding the interest of users, they must:

(a) Demonstrate certification of each game obtained by a self-regulatory body.
(b) Display its privacy policy and terms of service of each user agreement on its website.
(c) Educate users about the financial loss and addiction risks associated with the online game.
(d) Follow the RBI-mandated KYC guidelines while onboarding players for identification and verification.
(e) Obtain the no-bot certificates and take up appropriate measures for grievance redressal.

Issues around offshore gaming companies

To ensure that offshore gaming entities also abide by the above, the proposed rules provide that a compliance officer be appointed who will be an Indian resident and is responsible for ensuring compliance. Additionally, it also prescribes for appointment of a nodal contact person, ensuring there is a physical contact address of the company in India.

Some additional obligations these companies may have to face due to the rules are the requirements to ensure they:

(a) Prevent its users from publishing, transmitting, displaying, sharing, or uploading online games in violation of Indian law.
(b) Do not permit betting, gambling, or money laundering on the platform.
(c) Follow RBI KYC Guidelines upon registration of a user.
(d) Must inform users about updates to policies immediately after the change is affected.

And while these rules ensure user safety and protection, it also creates multiple regulatory burdens on OGIs, given that States still have opposing views on this subject.

Thirdly, the set-up of Self-Regulatory bodies (SRB).

What is an SRB?

A Self-regulatory body ("SRB") is a collection of members appointed by the government and industry, including experts, civil society members, and stakeholders. An SRB takes up the role of regulating sectors that are often like: the intersection of public interest and innovation.

In the case of online gaming, MeiTy has suggested the following to be on the board of directors of an SRB:
(i) An independent eminent person from the field of online gaming.
(ii) A players' representative.
(iii) An expert on psychology/medicine or consumer education.
(iv) A public policy individual (nominated by the Central Government).
(v) An individual from the field of information communication technology.

The SRBs will have members whom it shall grant the license to operate as well as adjudicate.

It seems that the rationale and purpose of having a joint regulatory body are to ensure regular checks and balances while ensuring that users' rights are protected. In practice, the NBF, Professional News Broadcasting Standards Authority for News Publishers, and IAMAI - Digital Publisher Content Grievances Council for OTT Platforms are a few examples that require user safety and protection.

Way forward

As they currently stand, the proposed rules have much scope for discussion and public participation. From the time the Draft IT Rules come in place, to the implementation of SRB rules, the draft provides for a period of three month, which at this stage seems like a very tight deadline. 

The rules and regulations of how the SRB will adjudicate the merits of each game, and ensure there is uniformity in the functioning of all SRBs are also not yet in place.
 
These are perhaps the next intelligible steps the government will have to work on for the execution and implementation of the rules it has suggested.

Sports, betting and gambling fall under the List II of the Seventh Schedule in the Constitution of India. The online gaming laws in India majorly revolved around "betting and gambling." 

Due to the lack of centralised rules regarding online gaming, various State Government authorities have adopted and modified the Public Gambling Act. They have also framed new rules and ordinances governing online gaming. This also spirals into issues of taxation and GST on online gaming, which are yet to be resolved.

Despite all the hurdles, an industry that has been functioning in a grey area and is yet flourishing, attributed to user increase and the technology race to create more online gaming formats, is finally seeing some steps towards steering out of the grey.

The recent changes and open dialogues are a significant first step to that.

[The author is a tech policy lawyer and the director of EWA Centre (eSports Players Welfare Association)]

Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal.