Govt releases draft online gaming rules for public consultation

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The government is set to commence public consultation for online gaming with a self regulatory body (SRO) responsible to certify what is permitted as an online game in the country, Union Minister of State for Electronics and IT Rajeev Chandrasekhar said in a press briefing on January 2, as the Centre released draft rules to regulate the nascent but growing sector.

This development comes less than a week after the government had designated the Ministry of Electronics and Information Technology (MeitY) as the nodal ministry for all online gaming related matters.

"The rules regulate betting. It is basically a prohibition of wagering on any game. The SRO will determine whether it is a permitted game or not,"  Chandrasekhar said. "The online games that offer winnings, any game that allows wagering on the outcome is effectively a no-go area. If you bet on the outcome of a game it is prohibited under 3(b) 10 of the IT rules"

Kids under the age of 18 will need parental consent for playing these games, he said.

These rules are expected to shape the future of the burgeoning online gaming industry in the country. "We hope that by early February, we will have the final rules," the minister said.

Online gaming "is a very important piece of the startup ecosystem and a part of the goal of the 1-trillion dollar economy," said Chandrasekhar, while adding that the government will work hard to make sure all opportunities are provided to Indian startups.

Revenue in the country's gaming sector increased from $2 billion in FY21 to $2.6 billion in FY22 and is expected to grow at a 27 percent CAGR (compound annual growth rate) to $8.6 billion in FY27, according to a report by gaming and interactive media venture fund Lumikai.

Additional due diligence

These rules will be introduced as draft amendments to the new IT rules that aims to safeguard users against potential harm of skill-based games and also ensure these games be offered in conformity with Indian laws.

As per the amendments, online gaming intermediaries shall observe additional due diligence by displaying a registration mark on all online games registered by a self-regulatory body and informing its users regarding its policy related to withdrawal or refund of deposit, manner of determination and distribution of winnings, fees and other charges payable and KYC procedure for user account registration.

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," as per a MeitY notice.

Self-regulatory bodies will be registered with the ministry and may register online games of such online gaming intermediaries who are its members and which meet certain criteria. Such bodies will also resolve complaints through a grievance redressal mechanism.

These draft regulations come at a time when India's gaming sector has seen unprecedented growth in terms of app downloads and revenue as a result of pandemic-induced home confinement in recent years, which has led to Indian consumers becoming more comfortable spending money on mobile games.

However, skill-based real money gaming, which accounts for more than half of the industry's revenue, has come under fire from several state governments, including Tamil Nadu, Andhra Pradesh, Telangana, Kerala, and Karnataka, which have banned or tried to ban it because gambling is a state subject.

Many of these bans were later challenged in state courts by skill gaming startups and industry associations, and the suspensions were overturned. In July 2021, the Supreme Court upheld fantasy sports as a skill-based game.

"We are grateful to the government for acknowledging the long-standing need of the gamers and the online gaming industry. We believe this is a great first step for comprehensive regulation for online gaming and will hopefully reduce the state-wise regulatory fragmentation that was a big challenge for the industry" said All India Gaming Federation (AIGF) CEO Roland Landers in a statement.

Landers also stated that these rules will be a start in "curbing the menace of anti-national and illegal offshore gambling platforms"

Nazara Technologies chief executive Nitish Mittersain said these draft recommendations will "help to catalyze 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”

Meanwhile, Mobile Premier League co-founder Sai Srinivas said these rules are a testament to the gaming industry, where "everyone worked together in engaging with the government, implementing user safeguards and requested for a uniform regulation"

"The rules will help in fulfilling the Hon’ble PM’s vision for India to be a global leader in online gaming" he said.