Draft Online Gaming Rules explained: How the Centre proposes to safeguard users from financial risks, addiction

The Central government has proposed the introduction of online gaming regulations in the form of amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021..While the regulations that are aimed at protecting user interests have been welcomed by some, there are others seeking a more robust mechanism in the form of a separate legislation..The apex body for online skill-based gaming in the country, the All India Gaming Federation, lauded the draft rules released by the Ministry of Electronics and Information Technology (MEITY) on Monday. The Federation’s CEO Roland Landers welcomed the move, saying,“We welcome the release of the amendments to Intermediary Guidelines Rules, which will now specifically also cover gaming intermediaries. We are grateful to the government for acknowledging the long-standing need of the gamers and the online gaming industry.".While releasing the draft rules, Minister of State in the MEITY Rajeev Chandrashekhar tweeted, “Online gaming innovators will be next big push for India's digital economy and start up ecosystem. Draft IT Rules for online gaming aims to promote vibrant innovation ecosystem, protect gamer’s rights and lay down guardrails against online wagering/betting.”.Here is a breakdown of how the amendments can be a gamechanger for the industry, so to speak..Self-regulatory body.Among the many highlights, the draft Rules define a gaming platform as an “online gaming intermediary” which will have the games registered with a “self-regulatory body” comprising a board of directors or the governing body. The Ministry will register the regulatory body upon an application made by it. The self-regulatory body will comprise, among others, an independent person from the field of online gaming, sports or entertainment; an individual from the field of psychology, medicine or consumer education; and an individual from the field of public policy, public administration, law enforcement or public finance, to be nominated by the Central government..The Rules require a gamer to be informed of all online games offered by the gaming intermediary, besides its policies relating to withdrawal or refund of the deposit made with the expectation of earning winnings; the manner of determination and distribution of such winnings; and the fees and other charges payable by the user for each of the games.More importantly, a user will also have to be informed about the financial risks involved and the potential addiction associated with each game. .Proposed safeguards.The self-regulatory body during the registration process of the games has to set up a criteria for its content in order to safeguard the gamer against any kind of harm, including self-harm.It won’t be out of place to mention the displeasure expressed recently by some courts on the “rising addiction” of online gaming among children and teenagers. The Madurai Bench of the Madras High Court recently took suo motu cognisance of the issue and said,“Playing of online games is very dangerous especially, to girl children and women also, since they get caught in the hands of the scandalous persons.".Perhaps in a bid to tackle the issue, the Rules require the self-regulatory body to have a framework of several safeguards, including repeated warnings "at a higher frequency” when a gamer has spent a reasonable duration playing a game. The game ought to also allow a gamer to disengage upon the “user-defined limits for time and money spent”..For the online gaming intermediary, its website or mobile application needs to “prominently” publish a “random number generation certificate and a no bot certificate” from a reputed certifying body for each online game it offers, in addition to other relevant details..Associate Partner at DSK Legal Nakul Batra said that like an IT intermediary, the online gaming intermediary will be required to undertake certain additional due diligence, KYC of the users, transparent withdrawal or refund of money, distribution of winnings, fee, and also registration with the Ministry, including appointment of grievance and nodal officers, and formal redressal mechanisms. “While such requirements are undoubtedly the need of the hour for the sector to thrive in the right manner and to manage the traffic on these platforms, the quantum of compliance may become a speed breaker to the gaming industry,” he felt..Intermediaries required to have physical address, 24x7 coordination.According to the Rules, intermediaries will also have to appoint a Chief Compliance officer, who, among other things, will coordinate with law enforcement agencies and ensure compliance in accordance with the existing laws. As part of the due diligence on the part of the intermediaries, they will have to appoint a nodal officer for a 24x7 coordination with law enforcement agencies.The proposed Rules also call for online gaming providers to publish a “physical contact address in India” on their websites or mobile-based applications, or both..Advocate Kritika Seth, Founding Partner at Victoriam Legalis, underscored that the amendments reflect the government’s overall intent to bring the online gaming industry under regulation. However, the narrowing down of the definition of online games to those involving deposits indicate that the government seeks to particularly cater to such online games in which users’ financial implications are likely to come into play. .“Online game” is defined under the draft Rules as a game that is offered on the internet and is accessible by a user through a computer resource if he makes a deposit with the expectation of earning winnings..Contradictions in the proposed Rules.Technology and gaming lawyer Jay Sayta argued that though the draft Rules define an online game as one having “deposits” and “winnings”, skill and chance games in the context of gambling and betting have not been defined. “Online gaming has been defined, but skill and chance games have not been defined. And in a different provision, they are saying online gambling and betting is banned…. But nowhere there is a definition of gambling and betting. But online gaming they are saying involves money deposit and winnings. This is completely contradictory. There is no clarity in the definition, unless they are only talking about skill games,” he said..According to Sayta, online gaming platforms are not intermediaries, as they are merely platforms and do not provide a facility where people can exchange content. Section 2(w) of the Information Technology Act, 2000 defines an "intermediary" as "any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, web-housing service providers, search engines, online payment sites, online auction sites, online market places and cyber cafes."Sayta also pointed out that the IT Rules, 2021 have already been challenged before several High Courts and a related petition was pending before the Supreme Court. “They have been partly stayed by two different High Courts, if I am not mistaken. Till now, in Parliament and in affidavits before the courts also, the Centre has always said states have the power to regulate betting and gambling. So why this back-handed manner of regulating when they have already said states have the power and the issue of legislative competence is pending before the Supreme Court?”.[IT Rules 2021] Action under Rules 3, 7 will be subject to outcome of challenge: Madras High Court.Although the intention was “correct” in Sayta’s opinion, he said the same cannot be achieved through these Rules. "The Central government has to come out with a new legislation. States also have to be taken on board. Till now, it has been discussed as a state subject,” he added..Read the draft Rules