Online Gaming: Industry Bodies Cannot Be Self-Regulatory Organisations, Says MoS IT

In a clear message to online gaming players, Minister of State (MoS) for Electronics and Information Technology (MeitY) Rajeev Chandrasekhar on Tuesday (January 17) said that the self-regulatory organisations proposed under the draft rules have to be steered away from the dominance of major players. 

Industry bodies cannot be allowed to become self-regulatory organisations for the online gaming space, Chandrasekhar was quoted as saying by news agency PTI.

The statement came after the MoS held a meeting with top executives and founders of gaming companies on the recently-published draft rules for the industry. He also said that he expects the rules to be notified by January 31. 

At the meeting, the minister told the stakeholders that the Centre is looking to build one consolidated view on the online gaming industry to address concerns around divergent views of MeitY and the Ministry of Finance on the games of skill.  

The consolidated view will percolate to all ministries and state governments, the minister said, as per news agency IANS.

Meanwhile, the industry lauded the ministry for conducting consultations on the draft rules. “The meeting was fruitful, and we believe that both the government and industry have benefited from a clearer understanding of the future outlook for the gaming industry in light of the proposed rules,” Roland Landers, CEO of All India Gaming Federation, said.

According to Landers, the framework offered by MeitY will go a long way towards creating a balanced environment for online gaming that provides for innovation within the confines of strong consumer protection standards.

“MeitY has achieved a spectacular feat in drafting a comprehensive set of rules for the online gaming industry within a short period of time, and the process of consultation with key stakeholders including industry representatives is greatly welcomed,” Trivikraman Thampy cofounder and co-CEO of Games24x7, said.

Thampy added that the consultation with the ministry was very productive and the minister was receptive to the suggestions offered by the industry.

In December 2022, the Centre appointed MeitY as the nodal ministry to oversee the online gaming industry. The move came at a time when the online gaming industry had been calling for uniform regulations for the sector.

Earlier this month, MeitY published the draft online gaming rules as draft amendments to the IT Rules, 2021, under which it proposed a self-regulatory mechanism for the industry. 

As per the draft amendments, online gaming intermediaries will have to ensure due diligence while discharging their duties, including reasonable efforts to ensure users do not host, display, upload, publish, transmit or share an online game that does not conform to local laws, including any law on gambling or betting.

The government has now started extensive public consultations on the draft rules for online gaming. Last week, MeitY held discussions with key stakeholders including parents, students and educationists. 

Meanwhile, the decision on GST rate for online gaming remains pending. At its last meeting, the GST Council, chaired by Finance Minister Nirmala Sitharaman, once again deferred the decision on the GST levy rate for online gaming, horse racing and casinos.

Meanwhile, Central Board of Indirect Taxes (CBIC) chief Vivek Johri last month said that online games in which winning is dependent on a certain outcome would attract 28% GST on the full bet value. 

Amid regulatory uncertainty and an economic downturn, online gaming startups saw a sharp 80% year-on-year decline in funding raised in 2022. Indian gaming startups raised just $349 Mn last year as against $1.74 Bn in 2021, as per Inc42 data.

The Indian gaming startup ecosystem has produced unicorns such as Dream11, MPL, and Games24X7. Meanwhile, the number of gamers in the country grew 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.