Strengthening Rules Of Online Gaming

INDIA ( May 12, 2023) — On 6 April, the Ministry of Electronics and Information Technology (Ministry), Government of India notified amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (Amendments). According to the Ministry, the “aim of these amendments is to enforce greater due diligence by online gaming and social media intermediaries in respect of online games & fake or false misleading information related to Government business.” The draft rules were first introduced in January 2023 and thereafter the amendments have been notified pursuant to widespread consultation with multiple stakeholders.

Gist of Amendments

In respect of the regulation of online gaming, the gist of the Amendments is as under:

1. The Amendments introduce the definitions of ‘online game’, ‘online gaming intermediary’, ‘online gaming self-regulatory body’, ‘online real money game’, ‘permissible online game’ and ‘permissible online real money game’.
2. ‘Online game’ is defined as “means a game that is offered on the Internet and is accessible by a user through a computer resource or an intermediary.”
3. In the rule in respect of due diligence by a social media intermediary (which now includes an online gaming intermediary), Rule 3 now additionally requires such intermediaries to inform the user of its computer resource, not to host, display, upload, modify, publish, transmit, store, update or share any information in respect of (i) an online game that causes the user ‘harm’, (ii) is in the nature of an online game that is not verified as a permissible online game and (iii) is in the nature of advertisement or surrogate advertisement or promotion of an online game that is not a permissible online game, or of any online gaming intermediary offering such an online game.
4. Rule 3(1)(f) earlier stated that the “intermediary shall periodically, and at least once in a year, inform its users of its rules and regulations, privacy policy or user agreement or any change in the rules and regulations, privacy policy or user agreement, as the case may be.” Pertinently, a proviso has now been added to the said rule stating that if an online gaming intermediary has enabled users to access any permissible online real money game, it will have to inform its users of such change as soon as possible, but not later than 24 hours such change is effected.
5. Rule 4 which deals with additional due diligence to be observed by social media intermediaries, is now amended to include within its fold, online gaming intermediaries who enable the users to access any permissible online real money game. Importantly, Rule 4 is amended to include a sub-rule which states that “An online gaming intermediary who enables access to its users to any permissible online real money game, shall display a demonstrable and visible mark of verification of such online game by an online gaming self-regulatory body on such permissible online real money game.” The Rule is also amended to include a verification process before accepting any deposit (cash or kind) from any user, by an online gaming intermediary.
6. Rule 4 is also amended to include additional information to be made available by the online gaming intermediary who enables the users to access any permissible online real money game, which includes information such as policy related to withdrawal, refund, and a deposit made with the expectation of earnings, manner of distribution of winnings, KYC procedure, measures for the protection of deposits made.
7. An interesting clause inserted in Rule 4 states that “An online gaming intermediary who enables the users to access any permissible online real money game shall not itself finance by way of credit or enable financing to be offered by a third party for the purpose of playing the such online game.”

Self-Regulatory Bodies (SRB)

The Amendments seek to formulate as many online gaming self-regulatory bodies, as considered necessary, as designated by the Ministry for the purposes of verifying an online real money game as a permissible online real money game. The Amendments provide criteria for entities to apply to the Ministry to be designated as SRBs. Some of the important criteria include, members being free from conflict, being a representation of the gaming industry, individuals who have special knowledge of the industry and have experience in promoting the interests of users of online games, experts in the field of psychology, mental health, information and communications technology, protection of child rights, etc.

Upon an application, the SRB can declare an online real money game as permissible, if it is satisfied that the online game does not involve wagering on any outcome, that the online gaming intermediary and the game comply with Rules 3 and 4, and that the requirements under law for being competent to enter into a contract. The Amendments also seek to comply with rules of natural justice and provide that after giving an opportunity for a hearing, the SRB may for reasons given in writing, suspend or revoke the verification if it is satisfied that the online real money game verified by it is not in compliance with the provisions of the Rules.

The Rules also require the SRB to upload on its website/mobile application, the framework for verification of an online real money game, which amongst others includes safeguards against user harm, including self-harm and psychological harm, measures to safeguard children through parental controls, age-rating mechanisms, and measures to safeguard users against the risk of gaming addiction, financial loss and financial fraud. The Rules also require the SRBs to publish on their website grievance mechanisms for parties who are aggrieved by the verification results of the SRBs. Further, the Ministry has an over-arching role and the Amendments provide that where the Ministry is of the view that any verification of a permissible online real money game by an online gaming self-regulatory body is not in conformity with the Rules, it may, after giving such body an opportunity of being heard, communicate, in writing, the fact of such non-conformity to that SRB and direct it to take measures to rectify the same. The new rules will come into effect after the appointment of three SRBs for the gaming industry.

Conclusion

The Amendments are a watershed moment for the online gaming industry and the intention of the Amendments as far as the online gaming industry is concerned, seems to be to protect users from ‘harm’ and wagering addiction. However, the definitions of ‘harm’ and ‘wager’ seem vague and whether a mere financial loss to a user would qualify as ‘harm’, is unclear. What also remains unclear is the scope of SRBs, since it seems to allow online gaming platforms forum shopping for verification and may lead to biases.

Article By: Neha Naik and Madhavi Doshi

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SOURCES: Phoenix Legal – Lexology.