Gaming industry lauds draft amendments to IT Rules; demands more clarity

The Ministry of Electronics and Information Technology has released draft amendments to the IT intermediary rules 2021, with regard to online gaming for public consultations. 

The draft aims to safeguard users of online games against potential harm and ensure that the gaming companies adhere to Indian laws. The rules propose verification of users and measures to safeguard users against the risk of gaming addiction and financial loss.

Recently, the government notified the designation of MeitY as the nodal ministry for online gaming-related concerns. 

The gaming industry and the experts have lauded the government’s efforts in this regard. 

The government has proposed self-regulatory bodies for online gaming companies operating in India in a draft amendment to IT rules, but will not allow betting.

Minister of State for Electronics and IT Rajeev Chandrasekhar said that he has learnt that 40-45% of gamers are women and the feedback that the government has received shows that there is a considerable amount of work that needs to be done to make online gaming safe for women.

He said the draft has proposed a self-regulatory mechanism which, in future, may also regulate the content of online gaming and ensure that the games do not have violent, addictive or sexual content.

He said as per the draft rules, even casual gaming entities need to register with SROs but the final call will be taken based on the feedback during the consultation process.

"We hope that by early February, we will have final rules," Chandrasekhar said.

As per Nitish Mittersain - Founder and CEO, Nazara Technologies, there are a number of recommendations which will ensure the safety of players and responsible gaming. In addition, it lays down a process by which the industry will self-regulate itself under the guidance of MeitY.

He opined, “There are a lot of details which we will need to study in more depth. There's a one-month consultation period during which we will provide our input to the government. However, on behalf of the Indian gaming industry as well as Nazara, our sincere thanks to MeitY and Rajeev Chandrashekhar for taking this important step forward we think this can catalyse a lot of growth for the industry, which will in turn result in significant job creation as well as accelerate India's position on the global gaming map.”

During a briefing on the rules proposed, Chandrasekhar said that self-regulatory organisations will develop filters and tests required to decide permissible gaming, be it a game of chance or game of skills or anything else.

"...the intermediary shall, before hosting or publishing or advertising an online game for a consideration, ascertain from the online gaming intermediary and verify from the concerned self-regulatory body," the draft rules said.

E-Gaming Federation CEO Sameer Barde said the amendments emphasise the constitution of a self-regulatory body with a focus on light-touch regulation.

"The SRO would ensure a robust time-bound grievance redressal mechanism, registration of online gaming intermediaries, promoting responsible gaming through the age verification, and rigorous KYC process, and undertake safeguard measures against addiction, financial distress, etc. Overall, we feel, these moves will eventually help the government establish a regulated and sustainable industry while promoting responsible gaming," Barde said.

Reacting to the draft rules, WinZO Games Co-Founder Saumya Singh Rathore said the central framework would also put a pause on the knee-jerk blanket bans by states.

"A more predictable environment would attract increased investments, creating jobs and a new generation of the export industry from India. 

Ranjana Adhikari, Partner, Technology Media and Telecommunications, IndusLaw, commented, “The central government needs to be lauded for prioritising the regulation of this sunrise industry and recognising the importance of its contribution to India’s digital economy. The light-touch approach and the self-regulatory mechanism proposed by the central government is progressive and keep the law nimble for a fast-paced and evolving industry.”

Prashanth Rao, Partner, Deloitte India, believes that elements such as clear-cut definitions, guidelines on do’s and don’t’s, self-regulation mechanisms, simplified KYC norms etc. should provide transparency of operations while enabling a safe and secure gaming environment.

“Clearly defined regulations will help remove ambiguity, build customer trust, gain investor confidence and have consistent pan-India operations,” he added.  

Although, Rathor expects more clarity on GST in the sector. He said, “The sector, however, awaits GST clarity, which stands as the biggest survival threat for the entire industry. The sector has over 1,000 companies that are less than 24 months old and in the early revenue stages.”

According to Adhikari, certain aspects of the draft rules might need to be analysed closely to assess their practical impact on the industry and their feasibility for implementation, such as the requirement of KYC to be at par with RBI standards and the KYC being required to be carried out at the time of user account opening itself even where the player may not, in many instances, be depositing money. 

She further said, “Even though the draft rules partially solve the issue of multiplicity of regulators for online gaming, they may not fully resolve the centre-state tussle on which games are permitted and which aren’t.”

In response to a question on the impact of rules on the laws passed by some states, the minister said that the centre wants online gaming to grow without any contradiction to local or state laws.

"We are not policing. Online gaming is a $200 billion industry. India has a tremendous amount of potential in terms of startups and investments. Our goal is that more and more investment comes in for start-ups in the gaming segment to grow.

"We want the year 2023 (to be) a year where online gaming rapidly explodes and expands with investments and new platforms develop," Chandrasekhar said.

The draft amendments envisage that an online gaming intermediary shall observe the due diligence required under the rules while discharging its duties, including reasonable efforts to cause its users not to host, display, upload, publish, transmit or share an online game not in conformity with Indian law, including any law on gambling or betting.

Chandrasekhar said online gaming companies will not be allowed to engage in betting on the outcome of games under the principle laid in draft rules.

"As per the principles laid under the rule, wagering on the outcome of the game will not be allowed. All online gaming companies will have to register with the self-regulatory body that will decide on the action required to be taken as per the rules.”

"If you bet on an outcome of the game, it is prohibited. The self-regulatory organisations will develop filters and tests required to decide permissible gaming, be it a game of chance or game of skills or anything else," he said.

The draft rules suggest additional due diligence for companies by displaying a registration mark on all online games registered by a self-regulatory organisation (SRO) and informing its users regarding its policy related to withdrawal or refund of the deposit, manner of determination and distribution of winnings, fees and other charges payable and KYC procedure for user account registration.

On the verification requirement of children, the minister said the finer details will emerge after the consultation is over.

It has also proposed the appointment of key managerial personnel or a senior employee of the gaming firm, who should be an Indian resident, as Chief Compliance Officer and the online gaming platform to have a physical contact address in India published on its website or mobile-based application.

The Ministry of Electronics and IT has invited comments on the draft by January 17.

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