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On Thursday, April 6, the Ministry of Electronics and Information Technology (MeitY) officially announced that it had notified the final rules to regulate the online gaming industry. The rules bring amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.
The key amendments include that MeitY will appoint multiple Self-Regulatory Organisations (SRO) to decide which online games are permissible and which are not. Before hosting or publishing an online game, gaming companies must ensure that it is registered with and approved by an SRO. Online games or sites involving wagering will be banned entirely, including advertising, and KYC verification for all online gamers will be mandatory.
The Minister of State (Mos) for MeitY, Rajeev Chandrasekhar, held a press conference at Electronics Niketan, CGO Complex, Delhi, at 4 PM today to make the announcement. Addressing the scribes, Chandrasekhar said, “We are only regulating real money games that involve wagering. By process of exclusion, all other kinds of games will be permissible.”
“These rules don’t deal with all the nuances and sophistication of the games of chance and games of skill – we bypass that and lay out a basic principle that, the moment an online gaming trespasses into involving betting and wagering, regardless of the core content of the game, then it falls foul of these rules. The Institutional framework that will determine permissibility will be SROs. There will be multiple SROs.
“It basically deals with the real issues of real money gaming. There are other aspects of the rules that talk about KYC when money is involved to address the issue of money laundering. There are many online gaming platforms, while masquerading as gaming, that seem to be involved in money laundering,” he added.
He underlined, “I want to say this, we have put in all this effort because we consider the online gaming ecosystem as a very important and integral part of the digital-economy goals of 1 Trillion Digital Economy that the Prime Minister has laid out. In the innovation ecosystem, online gaming represents a huge opportunity for Indian startups, and we have seen over the last several months, many startups running afoul of state laws, state regulations, and young companies, young entrepreneurs having to deal with this very ambiguous and often confusing legal framework.”
“We hope that these rules will create a much more stable, consistent, predictable framework for all those startups interested in the online gaming ecosystem, considered a multi-billion opportunity.”
You can watch MoS IT Rajeev Chandrasekhar’s address to the media in the bytes, he shared on Twitter:
Online gaming innovation and startups will get a huge boost while #DigitalNagriks will be protected from online betting. #OnlineGaming rules will act as a key catalyst for the online gaming startup ecosystem while ensuring safety of gamers including children, and unambiguously… pic.twitter.com/ykyGyLo5mH
— Rajeev Chandrasekhar ???????? (@Rajeev_GoI) April 6, 2023
It is relevant to point out that only a day back, the Union government declined to respond to a question in the Lok Sabha on the legal status of gambling applications currently being actively promoted by celebrities on social media electronic platforms. MoS Chandrasekhar, in a written response, stated, “As per the provisions of article 162, matters related to betting and gambling lie within the executive power of the States.”
The response also referred to Article 246, under which powers are bifurcated between states and the union government.
Following the press conference, MeitY scheduled an invite-only consultation meeting with the gaming industry stakeholders on Friday, 11 AM. The ministry called the senior management officials of gaming companies to be present at the meeting.
The New Rules – At a Glance
MoS IT, Rajeev Chandrasekhar said the rules have been designed to ensure that the country’s internet was “open and safe, trusted and accountable.”
Here is a quick look at what the new rules dictate:
> Government to permit self-regulation in online gaming by appointing multiple SROs
> Government to notify an organization that will be the fact-checker for all aspects of online content and all intermediaries related to the government
> Appointed SROs to declare the online games permissible basis whether games offer wagering
> New rules define an online game as a game that is offered on the internet and is accessible by a user through a computer resource or an intermediary
> Wagering and betting are prohibited, so online games or websites that involve wagering will be banned completely
> Real money gaming is permitted, but it will become non-permissible when money is put into the outcome of the game, and any SRO permitting such games will be violating the rules.
> Fantasy games like Dream11 are permitted, but additional obligations have been placed.
> Fantasy game developers will have to display a mark of verification decided by the SRO on such games and clearly inform their users of the withdrawal policy and refund of deposits, how winnings are determined and distributed, fees, and other applicable charges.
> Fantasy gaming developers cannot give credit or enable third-party financing to users.
> Under Rule 3, intermediaries are not obligated to host, publish or share any online game that can cause the user harm or that which has not been verified as a permissible online game by an online gaming self-regulatory body/ bodies designated by the Union government.
> Before hosting or publishing an online game, all gaming companies have to ensure that such a game is registered with and approved by an SRO
> Mandatory KYC verification of all online gamers
SROs – Playing a Vital Role
Through the new rules, MeitY will appoint multiple Self-Regulatory Organisations (SRO) to decide which online games are permitted and which are not.
Initially, three SROs will be notified. The SROs will include industry representatives, gamers, and other stakeholders. The SROs should also include an educationist, a psychology or mental health expert, anyone from an organization dealing with the protection of child rights, etc. The SROs can be denotified if they’re found not following the rules set out by the government.
The SROs will have to publish a framework for safeguarding users against the risk of gaming addiction, financial losses, and fraud. This framework will include repeated warning messages at a higher frequency beyond a reasonable duration for a gaming session. They will also allow for excluding a user once they reach a user-defined limit for time or money spent. Parental controls will also be imposed.
Gaming Industry Reacts
Commenting on the new rules, Sai Srinivas, CEO and co-founder of Mobile Premier League, said the notified rules are a watershed moment for the industry.
“The rules will go a long way in helping us realize Prime Minister Narendra Modi’s vision for India to become a global leader in gaming and contribute to the continued success of Brand India and Create in India.”
CEO of All India Gaming Federation (AIGF), Roland Landers, welcomed the government’s move towards regulating the gaming sector. In an official press statement, Landers said, “We believe this is a decisive first step for comprehensive regulation for online gaming and will propel the industry to compete globally, as envisioned by the Hon’ble Prime Minister. We are especially grateful that the government recognized the industry demands and provided light touch but comprehensive regulations, which will support innovation, boost Create in India and Brand India, and propel India’s Techade.”
He pointed out, “These rules will go a long way in promoting consumer interest while helping the industry grow responsibly and transparently and will also help in curbing the menace of anti-national and illegal offshore gambling sites, which have been proliferating in the last few years. The government has maintained a very open and transparent approach throughout this process and heard various stakeholders across the online gaming eco-system since May 2022. At AIGF are committed to continue our engagement and provide complete support to the government in making online gaming a cornerstone of the $1 trillion digital Indian economy.”
Asish Philip Abraham, Partner, Lakshmikumaran & Sridharan Attorneys, commenting on the new development, said, “Trust shown by the government in the self-regulatory mechanism will boost innovation and competition in the sector. With the introduction of the IT Intermediary Amendment Rules 2023, the onus will be on SROs to determine whether a gaming company’s games entail wagering on any outcome. SROs will have to ensure that the assessment of the same is based on existing jurisprudence as laid down by the Supreme Court of India on the determination of games of skill from games involving wagering and betting. It will also be interesting to see the enforcement approach for gaming companies operating outside the SRO framework.”
He added, “New definitions of online real money gaming have been introduced based on the stakeholder consultation, and this has brought about much-needed clarity in the IT Amendment Rules and will help in ongoing GST litigations. The introduction of diligence requirement of content not causing “user harm” will require further clarification on the ministry level to bring parity in the understanding amongst SROs and Gaming Companies. “
The new online gaming rules have been drafted following consultations with the relevant stakeholders. Clearly, the new online gaming rules aim to address the challenges plaguing India`s fast-growing online gaming industry.
This is a developing story. Keep following PokerGuru for all the latest updates!
NOTE: This report was updated at 6 PM on April 7, 2023.
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