Govt Proposes Self-Regulatory Mechanism For Online Gaming Firms

The Ministry of Electronics and Information Technology (MeitY) has proposed a self-regulatory mechanism for online gaming companies in the draft online gaming rules published on Monday (January 2).

The rules, published as draft amendments to the IT Rules, 2021, come nearly a week after the Centre appointed MeitY as the nodal ministry to oversee the online gaming industry.

“With the user base of online games growing in India, need has been felt to ensure that suchgames be offered in conformity with Indian laws and that the users of such games be safeguarded against potential harm,” MeitY said.

As per the draft amendments, online gaming intermediaries will have to observe the due diligence required under the rules while discharging their 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 laws, including any law on gambling or betting.

Minister of State for Electronics and IT Rajeev Chandrasekhar was cited as saying in a MoneyControl report, “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.”

“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(1)b under 10,” he added.

However, Chandrasekhar also said that online gaming is a very important piece of the startup ecosystem.

As per the draft rules, online gaming companies will have to observe additional due diligence by displaying a registration mark on all online games registered by a self-regulatory body and informing their users regarding their 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.

“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,” the ministry added.

The ministry has invited feedback from the public on the draft amendments by January 17, 2023.

Reacting to the draft rules, Roland Landers, CEO of All India Gaming Federation, said, “As the oldest, largest, and most diverse industry body for online gaming, which had set up the first Self-Regulatory Organisation (SRO) for the sector in India, we welcome the release of the amendments to Intermediary Guidelines Rules, which will now specifically also cover gaming intermediaries.”

Calling it a good first step for comprehensive regulation for online gaming, Landers said it is expected to reduce state-wise regulatory fragmentation which was a big challenge for the industry.

Earlier on Friday, the Internet and Mobile Association of India (IAMAI) said that it is most suited to form the proposed self-regulatory organisation (SRO) for online gaming. The industry body cited its experience of running a Ministry of Information and Broadcasting mandated and registered SRO for online curated content companies.

The developments come at a time when the online gaming industry has been calling for uniform centralised regulations. Regulatory instability has been plaguing the industry for the last two years as a number of states such as Telangana, Andhra Pradesh, Tamil Nadu, Karnataka, and Kerala have issued various notifications banning online gaming.

Indian gaming startups saw a huge 80% decline in funding in 2022 due to the regulatory uncertainty and macroeconomic headwinds. Indian gaming startups raised just $349 Mn in 2022 as compared to $1.74 Bn in 2021.

The online gaming industry has produced unicorns like Dream11, MPL, and Games24X7 in the country. Meanwhile, the number of gamers in the country rose 12% to 507 Mn by March 2022 (24% were paying users) from 450 Mn in March 2021, according to a report by gaming and interactive media-focused VC fund Lumikai.