Online gaming intermediaries and legal consulting firms on Tuesday expressed concerns over increase in compliance burden and stringent know-your-customer (KYC) norms with the implementation of the new rules being framed by the ministry of electronics and IT (MeitY) for online gaming.
As part of the consultation process with the government, some industry stakeholders said mandatory requirements for companies to appoint a compliance officer, nodal officer and grievance officer will unnecessarily increase the cost burden on online gaming companies, especially startups. Besides, mandatory requirement to follow the Reserve Bank of India‘s directions for identification and verification of a customer at the commencement of an user account will in a way make it difficult to onboard users on the gaming platforms.
While the government’s approach with a complete KYC requirement is driven with the aim to keep track of the financial transactions of any nature and spending of users, the gaming intermediaries believe that there should be a graded KYC approach for them to onboard users, people aware of the matter said.
“Collection of KYC may be burdensome for gaming operators and users. It is already collected by banks during account set-up. Instead, a simplified approach for tracking spendings and winnings can be adopted, like introducing spending limits,” said Prashant Daga, associate at BTG Legal.
According to Daga, the government can introduce a weekly/monthly cap on transactions for users. Other industry stakeholders proposed that the gaming companies be allowed to onboard the users through a one-time password (OTP) only.
In response to the industry’s demand for a graded KYC, minister of state for electronics and IT Rajeev Chandrasekhar asked the stakeholders to come up with a convincing model for the government to consider.
In a bid to put a blanket ban on betting in online gaming, MeitY on January 2 notified draft amendments to the IT rules, which once enacted will enable self-regulatory framework and additional due diligence by online gaming companies.
In the meeting, the industry also sought clarity on the framework and governing body of SROs (self-regulatory organisations), concerns on conflict between the state law and regulations of IT Act on online gaming rules, differentiation between video games and online games, among other things.
The online gaming companies want the government to include members from the judiciary in the SRO governing body as these will work as adjudicating organisations. In response, Chandrasekhar said the government will notify the code of conduct, do’s and don’ts for SROs in due course of time. The government is aiming to finalise the new rules related to online gaming by the end of this month.
The new gaming rules will give power to SROs to verify the games before they are published or hosted or advertised by online gaming intermediaries, introduce a framework to define the content of an online game in a view to safeguard users against harm, ensure that online gaming companies are taking measures to safeguard children, 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 taking measures to safeguard against the risk of financial frauds.
Besides, currently several states have different regulations related to online gaming such as fantasy sports with elements of monetary risk. “The government has not clarified what will happen in case a state government challenges compliance under the IT rules or SRO framework,” an industry representative said, adding that the minister said that anyone is free to challenge the rules and that will subject to legal scrutiny.
Through the amendments to the IT rules, the government’s idea is to ensure that online gaming companies comply with the Indian laws and that the users of such games be safeguarded against potential harm largely from betting or gambling related outcomes in the games.
