Online games that involve money will need approval from self-regulatory organisations (SROs), according to the final rules framed by the ministry of electronics and IT (MeitY). But companies that do not deal in money-related games won’t need any such approval. With this move, MeitY has steered clear of the earlier nomenclature, which categorised online games into games of skill and games of chance.
Simply put, multiple SROs, not the government, will determine whether a real-money game is permitted to operate or not. Terming the regulations ‘light touch’, the online gaming industry welcomed the rules for providing much-needed clarity.
An online real-money game is where a user makes a deposit in cash or kind with the expectation of earning on that deposit. “These rules don’t deal with all the nuances and the sophistication of games of chance and games of skill. We have bypassed that and laid out a basic principle that the moment an online gaming trespasses into involving betting and wagering regardless of the core content of the game, then it falls foul of these rules,” said Rajeev Chandrasekhar, minister of state for electronics and IT.
“You don’t have to go to SRO if you are only a gaming company, but only when there is money involved in the game,” he said. Chandrasekhar said they will initially start by notifying three SROs with more to be notified later.
The structure of SROs will involve government-approved entities, including people with experience in online gaming, an educationist, an expert in the field of psychology, individuals dealing with protection of child rights, among others.
Upon application by an online real-money gaming company, the SRO will have to declare them as a permissible for a period not exceeding three months based on the information provided by them. The body can then carry further inquiry and take a decision accordingly with regard to certification.
“Given that all the online gaming intermediaries have been classified as an intermediary and therefore granted protection under Section 79 of the Information Technology Act, that protection or safe harbour is contingent upon the exercise of due diligence within three months by SRBs (self-regulatory bodies),” said Paavan Nanda, co-founder of Winzo games.
“The notification of MeitY rules marks a pivotal moment for the online gaming industry in India. It is expected to put an end to the ambiguities that the industry was grappling with and lay the foundation for sustainable and responsible growth of the industry,” Joy Bhattacharjya, director-general, Federation of Indian Fantasy Sports, said.
“We believe this is a decisive first step for comprehensive regulation for online gaming and will propel the industry to compete globally, as envisioned by the prime minister,” All India Gaming Federation (AIGF) CEO Roland Landers said. “We are grateful that the government recognised the industry demands and provided light touch, but comprehensive regulations, which will support innovation, boost create in India and brand India, and propel India’s Techade,” he said.
The SROs will have to come up with a framework to define the content of an online game with a view to safeguard users against harm, ensure that online gaming companies are taking measures to safeguard children, companies are mandatorily specifying risk of gaming addiction and financial loss through repeated warning messages at higher frequency beyond a reasonable duration for a gaming session etc, and measures to safeguard against the risk of financial frauds.
“SROs will be accountable to the public, to the government in ensuring that the gaming ecosystem grows in an orderly manner, in a manner that does not create any harm,” Chandrashekhar said.
The online gaming companies will also have to display a mark of verification by the self-regulatory body on such games, inform their users of the policy for withdrawal or refund of deposit, manner of determination and distribution of winnings, fees and other charges payable, obtain the KYC details of the users, and not giving credit or enabling financing by third parties to the users.
“The clarity in the definition of online gaming, including specific permissible online real-money games, will ensure there is a clear distinction of online gaming platforms from betting and gambling, which will not be permitted,” said Trivikraman Thampy, co-founder of Games24x7.
“The amended rules will help clear up state-level ambiguity, promoting uniformity and standardisation across the country,” Thampy added.
Besides, the online gaming intermediaries will have to mandatorily appoint a chief compliance officer, a nodal contact person for coordination with law enforcement agencies and officers, and must have a physical contact address in India published on its website.
“The government has enough powers to intervene in case SROs don’t do their jobs. Measures like periodic audit reports from SROs will be prescribed over time,” Chandrashekhar had told FE.
On failure to comply with the framework, the online gaming intermediaries will be liable to punitive punishments as per the IT act.
Online gaming industry generates an yearly revenue of around $2.6 billion and is expected to expand at a compound annual growth rate of 27% to $8.6 billion by FY27, according to gaming and interactive media venture fund Lumikai.