Government wants gaming websites to operate independently

Government proposes self-regulation for gaming sites
Government proposes self-regulation for gaming sites

Indian Market
by 5paisa Research Team Last Updated: 2023-01-03T18:17:16+05:30

On Monday, the Ministry of Electronics and Information Technology (MEITY) published the published draft online gaming rules. This will be the umbrella legislation to regulate the online gaming industry in India, which is estimated to be worth mor than $2.5 billion in India and growing at a frenetic pace. The draft legislation will be placed before the public for comments and after all the stakeholders are taken into confidence, the government plans to announce the final regulatory framework for online gaming. State governments and gaming companies have been at loggerheads about regulation. The focus on self-regulation should actually keep the business side of online gaming relatively pleased.

However, self-regulation will be with adequate oversight and the entire onus of due diligence of the end user will be on the online gaming company. For instance, an intermediary offering one or more than one online games will be now required to observe due diligence. It has to ensure that the eventual users do not host, display, upload, publish, transmit or share an online game in a manner that is not in conformity with Indian law. This would include any relevant legislation on gambling and betting. The idea is to make the oversight as comprehensive as possible without making the legal framework too cumbersome and antithetical to the growth and development of the gaming industry.

As a mark of additional legislation, there will be display of registration mark on all online games registered by a self-regulatory body. The policies regarding withdrawal or refund of the deposit, fees and charges, manner of determination and distribution of winnings and the know your customer (KYC) process must be transparently made available to users. The government now proposes a mechanism that can be implemented through one or more self-regulatory bodies, registered with the Ministry of IT. The criterial will also be laid down for each game, although for now the draft legislation is silent on game of chance versus game of skill. Draft regulations call for a comprehensive grievance redressal mechanism.

Some of the greyer areas in the legislation pertaining to online games are proposed rules pertaining to online gaming intermediaries, with details of their physical contact address in India. In addition, the legislation also presupposes measures to safeguard users from the risk of addiction and financial loss. This is likely to be a grey area and hard to define in a very comprehensive manner. For now, the Ministry of IT is seeking feedback from the public on these draft rules until January 17th, 2023. As a measure of caution, the online gaming companies will not be allowed to bet on the outcome of the games.

The need for structured regulation came about after several online gaming platforms were found dealing with real money transactions. In the past, several south Indian states had made efforts to curb these real money gaming platforms. South has been a fertile ground for the proliferation of such games and there have been reports of increasing cases of addiction and financial risks. It needs to be seen how this legislation works in practice in the light of the Supreme Court of India ruling in favour of Dream11 stating that its fantasy sports were purely skill-based and did not tantamount to gambling. In a sense, self-regulation is the right step in such industries with a lot of grey areas; as online gaming currently is.

For the government and the online gaming industry, the first priority will be to create a larger framework for a responsible gaming environment in India. This should be the first step and should keep the stakeholders happy for now.


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