Online Gaming to follow New IT Rules

On April 6, 2023, The Ministry of Electronics and Information Technology (MEITY) (notified as nodal ministry for all matters pertaining to online gaming industry and e-sports) notified amendment to the Existing IT Rules 2021 i.e. the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023 (“Amended Rules”) with aim to regulate online gaming.  

While Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 dated February 25, 2021 read with Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2022 dated October 28, 2022 (collectively, (“Existing IT Rules”)); had introduced the concept of “Intermediaries” (i.e. entities that store or transmit data on behalf of other persons and include telecom and internet service providers, online marketplaces, search engines and social media sites) and imposed greater due diligence with respect to the content on platforms with establishing grievance redressal mechanism, the Amended Rules brings online games and online gaming intermediaries within the ambit of the Existing IT Rules.

The Amended Rules also addresses the concerns showed by “online gaming companies” over last few months as same was in line with the feedback received from the public consultation and submissions on online gaming, acknowledging intermediaries in online gaming and differentiating them from gambling.  

Key Highlights of the Amended Rules are as follows: (i) self-regulatory structure for the online gaming industry; (ii) introduction of new definitions like ‘online games’, ‘online real money games’, ‘permissible online games’, and ‘permissible online real money games’; and (iii) fact checking unit as MEITY may notify in Official Gazette; for identifying false, deceiving or misleading information being hosted across any Intermediary.

1. By virtue of the Amended Rules, reference of “Intermediary(ies)” to include the “online gaming intermediary” to the Existing IT Rules and accordingly the definitions of ‘online game’, ‘online gaming intermediary’, ‘online gaming self-regulatory body’, ‘online real money game’, ‘permissible online game’ ‘permissible online real money game’ inserted by way of an amendment to the Existing IT Rules.

2. While the Existing IT Rules lists down the due diligence to be observed by the social media intermediary while discharging its duties; the Amended Rules imposes varying duties on ‘online gaming intermediary’ that provide online games for real money and those that offer other types of online games. Regardless of the game format, gaming intermediary are required to comply with following obligations as introduced in Part II of the Amended Rules–

   a. ‘online gaming intermediary’ to publish, host, share, transmit its rules & regulations, privacy policy or user agreement. (Rule 3 (1) (b))

   b. 'online gaming intermediary’ which enables the user to access any ‘permissible online real money game’’ it should inform its user changes to its rules & regulations, privacy policy or user agreement at the earliest and no later than 24 hours after the change is affected.  (Rule 3 (1) (f))

   c. ‘online gaming intermediary’ which enables the user to access any ‘permissible online real money game’’ to provide information or assistance to the Government Authority for the purpose of verification or identity no later than 24 hours from the receipt of the written order. (Rule 3 (1) (j))

   d. ‘online gaming intermediary’ is require to publish in a clearly visible manner on home page/home screen of the website /mobile application or on both, entire framework for redressal of grievances and the contact details of the Grievance Officer. (Rule 3 (2)).  

   It is further required to observe and adhere to additional due diligence process laid down in the Rule 4 of the Amended Rules.

3. Further, New Rule 4-A of the Amendment Rules also requires verification of online real money game:

   • The Ministry can designate as many online gaming self-regulatory bodies as it thinks is necessary for verifying an online real money game.

   • The regulatory authority, on their websites/ mobile based application, have to maintain the details of the applicants, dates and period of validity of verification, dates of acceptance as member, their corporate/ business related identity number, reasons of verification, details of suspension/ revocation.

   • Every online gaming self-regulatory body will prominently publish on its website/mobile based application, the framework for redressal of grievances and the contact details of the Grievance Officer.

   • Upon making an application, the self-regulatory authority, after conducting an inquiry declare such online real money game as a permissible online game if it is satisfied that:

   i. It does not involve wagering on any outcome; 

   ii. Is in compliance with provisions relating to the age at which an individual is competent to enter into a contract.

The Amended Rules will come into force only after expiry of 3 months of MEITY designating at least 3 self-regulatory bodies (unless such applicability is notified earlier).

The introduction of the Amended Rules recognizes existing jurisprudence laid down by the Supreme Court of India on the determination of games on preponderance of skill test.

The Amended Rules are expected to end the ambiguities and promote consumer interest by online gaming industry to be operate responsibly. The Amended Rules will surely help industry to flourish and establish a more organized online gaming businesses via self-regulatory organizations, promote fair play and improve user experience. Further, verification for online games for real money will generate user confidence as it will ensure that users do not become victim of online gaming scams.

Abha Shah is a Partner and Dipti Sevak is a Principal Associate at Naik Naik & Co.