The Ministry of Electronics and Information Technology (MeitY) has made amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (IT Rules 2021) to regulate online gaming in India. The Amendment proposes a self-regulatory structure for the online gaming industry. The key takeaways are:
Online games that are considered permissible for real money may be offered in India. The permissibility of these games will be verified by Self-Regulatory bodies (SRBs) recognized by MeitY, and they are meant to weed out games considered betting and gambling.
Online games that are not considered permissible run the risk of being blocked in India. Companies that enable access to online real money games will have to disclose information about their policies and practices, such as protecting users' deposits, to their users, and comply with obligations including responding to law enforcement requests and conducting know-your-customer (KYC) before accepting deposits.
Self-regulatory bodies will create frameworks to verify online games, in accordance with the baseline set out in the Amendment. These frameworks have to factor in preventing harm to users, such as through gaming content oversight and measures to prevent financial loss or addiction.
MeitY has powers to exercise oversight in various ways, including nominating a member to the board of directors of self-regulatory bodies, blocking access to non-compliant online games played for real money, and extending the applicability of the Amendment to online games played without real money.
The obligations related to online games will come into force three months after at least three self-regulatory bodies are notified by MeitY unless MeitY notifies the application of the rules beforehand.
In addition to regulating online gaming, MeitY has also brought changes to curtail misinformation. MeitY now has the power to notify a fact-checking unit of the central government to identify fake, false, or misleading information pertaining to any central government business. Intermediaries will be expected to take down content flagged as false or misleading.
Key definitions and explanations:
'Online game' refers to a game offered on the internet and accessible by a user through a computer resource or an intermediary.
'Online real money game' means an online game where a user makes a deposit in cash or kind with the expectation of earning winnings on that deposit.
'Online gaming intermediary' (OGI) refers to any intermediary that enables users of its computer resource to access one or more online games, regardless of whether it involves real money or not.
'Online gaming self-regulatory body' (SRB) means a body notified as an SRB under the Amendment. The SRB will be responsible for verifying an online real money game as a permissible online real money game.
'Permissible online game' refers to a permissible online real money game or any other online game that is not an online real money game.
'Permissible online real money game' means an online real money game that an SRB has verified according to the Amendment.
Compliance for OGIs under the Amendment:
Obligations for all OGIs: All OGIs, regardless of the game format, must comply with intermediaries' obligations under rule 3 in the IT Rules 2021, including not offering games that cause user harm and desisting from advertising or surrogate advertising of online real money games that are not permitted. Compliance may be challenging due to the lack of a clear uniform understanding of what may be considered detrimental, and relatively benign games may be considered harmful and subjected to compliance under the Amendment based on subjective views of harm.
OGIs that offer real money online games have additional responsibilities under Rule 4(5) - (13):
a. OGIs cannot provide financing, either on their own or through a third party, for users to play games on their platform (Rule 4(13)). In early 2023, MeitY and the Ministry of Home Affairs banned 138 loan and betting apps that were allegedly linked to China. These apps were reported to be offering users loan facilities to gamble online. The requirement not to offer self-financing or links to third-party applications seems to be aimed at addressing such activities.
b. OGIs must register and display all permissible online real money games with SRB (Rule 4(10)).
c. OGIs must inform users about their KYC procedure, SRB framework for verification of online real money games as permissible, policies for refund/withdrawal/deposit, and methods to secure users' deposits (Rule 4(11)).
d. OGIs must follow KYC norms as per RBI guidelines (proviso to Rule 4(12)) and verify users' identities before accepting deposits from them (Rule 4(12)). The draft amendments to the IT Rules 2021 released in January 2023 (January 2023 Version) required KYC to be done at the time of commencement of a user's account. This has been changed to conducting KYC before accepting deposits from users. The Amendment has retained the requirement to follow KYC norms set out by the RBI, but only for OGIs offering permissible real money online games.
e. OGIs must appoint a Resident Grievance Officer (RGO) (Rule 4(1)(c)), a Chief Compliance Officer (CCO) who is a managerial/senior employee residing in India (Rule 4(1)(a)), and a nodal contact person, other than the CCO and RGO, residing in India, to ensure 24x7 coordination with law enforcement (Rule 4(1)(b)).
f. OGIs must have a physical contact address in India (Rule 4(5)). This requirement appears to be aimed at exercising oversight on online gaming companies offering real money games in India, even if they are not physically located in India, and to weed out bad actors such as companies that offer offshore betting and gambling.
g. OGIs must inform users of any changes to user agreements, terms, and privacy policies within 24 hours of the change coming into effect (Rule 3(1)(f)). The IT Rules 2021 require that all intermediaries, except OGIs offering real money games, inform users of policy changes periodically, and at least once a year. OGIs offering real money games have to do so within 24 hours of the change coming into effect. The reduced time given to these OGIs is likely due to the fact that if these changes are not communicated promptly, they could negatively impact the user's ability to engage with the online game safely.
h. OGIs must comply with law enforcement requests for information related to offences arising from online games within 24 hours, which is less time compared to the 72 hours given to other intermediaries (Rule 3(1)(j)).
MeitY has the power to extend the obligations to online games that are not played for real money:
MeitY can enforce compliance on online gaming intermediaries with additional due diligence requirements under the Amendment, even for online games played without real money, if such games can create a risk of harm to the sovereignty and integrity of India, security of the State or friendly relations with foreign States, public order, or may cause user harm (Rule 4C). These games must comply with the obligations of intermediaries and must be verified by SRBs
Oversight of Online Games by MeitY and Verification by SRBs:
a. MeitY can investigate complaints or take action on its own if it believes that an online game involving real money does not comply with the Amendment. After giving the SRB a chance to respond, MeitY can communicate the non-compliance to the SRB and ask it to rectify the issue [Rule 4A(12)].
b. MeitY can consider the documentation and reasoning provided by the SRB while blocking access to an online real money game using its powers under section 69A of the Information Technology Act 2000 [Rule 4A(10)].
c. MeitY has the authority to suspend or revoke the notification of an SRB after providing the SRB with notice and an opportunity to be heard [Rule 4A(13)]. MeitY can also issue orders to protect users' interests or take other necessary actions while the matter is being decided [Proviso to rule 4A(13)].
Conclusion
The recent amendments made by the Ministry of Electronics and Information Technology (MeitY) to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (IT Rules 2021) mark a significant step towards regulating online gaming in India. The introduction of a self-regulatory structure for the online gaming industry through recognized Self-Regulatory Bodies (SRBs) aims to ensure that online games played for real money are permissible and do not involve betting or gambling.
The amendments impose obligations on online gaming intermediaries (OGIs) to comply with rules related to user protection, disclosure of policies and practices, KYC norms, appointment of grievance officers and compliance officers, and maintaining a physical contact address in India. These measures are designed to prevent harm to users, such as financial loss or addiction, and to promote responsible gaming practices.
MeitY also has the authority to exercise oversight through various means, including nominating a member to the board of directors of SRBs, blocking access to non-compliant online games, and extending the applicability of the amendments to online games played without real money.
In addition to regulating online gaming, MeitY has also taken steps to curb misinformation by empowering a fact-checking unit of the central government and requiring intermediaries to take down false or misleading content.
Overall, the amendments to IT Rules 2021 represent a proactive approach by the Indian government to regulate online gaming and promote responsible gaming practices. The introduction of self-regulation through SRBs, coupled with the obligations imposed on OGIs, is expected to create a safer and more transparent environment for online gaming in India.
