Online gaming rules: States cannot regulate internet, meaningless to enact own laws, says Rajeev Chandrasekhar

MeitY recently notified new online gaming rules, that will allow multiple SROs to determine whether a real-money game is permitted to operate in India or not.

Union Minister of State for Electronics and Information Technology Rajeev Chandrasekhar on April 14 said that the internet cannot be regulated by states, hence it is "meaningless" for a state government to try and legislate sectors such as online gaming.

The Union minister's remark, which was made in a Twitter Spaces session, comes days after the Tamil Nadu state notified its online gambling law on April 10 that included skill-based games such as online rummy and poker with stakes under its purview in the state.

This was a few weeks after the Tamil Nadu cabinet, led by Chief Minister MK Stalin, had passed the online gambling bill once again to prohibit these games in the state on March 23. Tamil Nadu governor RN Ravi had returned the previous bill on March 8 mentioning that the state government had “no legislative competence” to frame the bill.

The development came on the heels of the Ministry of Electronics and Information Technology (MeitY) notifying new gaming-related amendments to the IT Act 2021 on April 6, that will allow multiple self-regulatory organisations (SROs) to determine whether a real-money game, where the transfer of money is involved, is permitted to operate in India or not.

These rules essentially lay out a clear crystal framework for states, courts and gaming companies about what is permitted online and what is not. It also establishes principles and creates institutional capacity through SROs to further develop regulatory maturity and directions as we move forward, Chandrasekhar said during the session.

"The fundamental principle, which is consistent with our overall framework to make sure the internet is safe and trusted, and therefore to mitigate user harm, is that we have identified betting and wagering as user harm that will not be permitted on the internet, and is therefore a no-go area for platforms and intermediaries," he said.

'Regulatory minefield of uncertainty'

Chandrasekhar said the online gaming sector has been plagued with all kinds of legal interpretations for several months and years, with many states enacting their own rules and regulations, thereby creating a tremendous amount of confusion and a lot more complicated than it should be.

"As we saw recently, Tamil Nadu enacted its own law, essentially creating a regulatory minefield of uncertainty, ambiguity, confusion, etc," the junior IT minister said. "In my opinion and with no disrespect to the government of Tamil Nadu, the Tamil Nadu Act is really lost in a sense, because it's making all these complex nuances about games of chance and games of skill which is really not the issue today."

The minister said betting is defined by whether it is a wagering on the outcome of a game. "Whether that game is a game of skill, or a game of chance does not matter, you could still be playing chess, and if there is a provision to bet on the outcome of a game of chess, it is still betting, regardless of whether the underlying game is a game of skill," he said.

Apart from Tamil Nadu, several state governments including Andhra Pradesh, Telangana, Kerala, and Karnataka, have banned or tried to ban these skill-based games or real money games, bringing them under the purview of online gambling as gambling is a state subject.

Many of these bans were later challenged in state high courts by skill gaming startups and industry associations, and the suspensions were overturned, with the state courts declaring it unconstitutional.

Last year, the Tamil Nadu government had moved the Supreme Court challenging a Madras High Court decision that overturned the previous AIADMK-led government's November 2020 ban on online games involving the transfer of money. The case is still pending a hearing with the apex court.

Chandrasekhar said that even countries are having difficulties in regulating the internet because of the borderless nature of cyberspace. "Now certainly, it is clear even to somebody who's looking at this in a commonsensical manner that the internet is not a state subject and can never be regulated by a state," he said.

"These new rules, what they do is to say, what can be done on the internet and what cannot be done on it, that power rests with the Government of India, via the IT Act and in the future with its successor act, the Digital India Act," Chandrasekhar said.

However, he did mention that this is "not, in any way, an attempt to regulate betting and gambling as happening or has happened and is being regulated by the states and their law and order machinery".

"Now, if some state governments want to do something more than that. If they want to say like, look, as a gamer in the X state, we also don't want you to do ABCD and that will fall afoul of our local laws. They're free to do that," the Union minister said.

In terms of advertising, Chandrasekhar also stated that no advertising surrogate or otherwise of online gaming services that contravene the conditions of either wagering, addictive behaviour and/or harm would be permitted.

"If something is not permitted on the Indian internet, we certainly cannot have platforms domiciled in the British Virgin Islands or Cayman Islands, advertising those platforms on the Indian internet. For what purpose? If it's an illegal service, why would an illegal service want to advertise in India unless they say we will provide you a loophole to avail our services. It makes no sense," he said.