Days after “online gaming” was formally brought under the purview of the Ministry of Electronics and Information Technology (“MEITY”) through the Government of India (Allocation of Business) Rules, 1961, MEITY has proposed amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“2021 Rules”), to create a novel co-regulatory framework to govern the operations of online gaming intermediaries (“Draft Gaming Rules”). The Ministry has invited public comments on the Draft Gaming Rules till January 17, 2023.
The Draft Gaming Rules propose an enabling co-regulatory compliance framework where fundamental compliance obligations, such as user validation and grievance redressal are prescribed under the Draft Gaming Rules themselves, while more granular and game specific operating frameworks, including validation for compliance with law, age gating, and protection against addiction, are left to be prescribed and administered by one or more registered self-regulatory bodies (“SRBs”).
Who is Regulated?
The Draft Gaming Rules largely prescribe regulations for a new category of online gaming intermediary (“OGI”), that offers one or more ‘online games’, i.e., games offered over the internet, playable after making a deposit, whether in cash or kind, with the expectation of winnings.
It will be interesting to see how:
(a) games that are typically free to play, but involve an element of payment to participate in tournaments (which involve prize money); and
(b) platforms (or games) that are largely free to play, but involve one or two pay to play elements,
will be treated. While the language here seems to indicate that the intent is to cover formats where amounts are staked, rather than formats involving player fees, participation fees or in game purchases, some clarification here may be ideal.
Free to play games can also be notified as Online Games, and entities offering them become OGIs, if MEITY is satisfied that they may present a risk of harm to the integrity and sovereignty of India, its security, friendly relations with other nations, or public order on account of causing addiction or other harm among children (“Public Order Criteria”).
The Draft Gaming Rules specify certain obligations on OGIs. These include:
(a) Carrying out User KYC prior to commencing an account-based relationship.While a process equivalent to that prescribed by the Reserve Bank of India for regulated entities is proposed, one hopes that some form of materiality threshold is created, given how onerous these norms are. OGIs must also offer users the option of voluntarily verifying their accounts and displaying such verified accounts. The overlap between this mandatory verification regime and voluntary user verification will be interesting to examine.
(c) Appointing a resident Chief Compliance Officer from the senior management who will bear responsibility for compliance. OGIs must also appoint a Nodal Contact Person for co-ordination with law enforcement. While these obligations are imposed on significant social media intermediaries under the 2021 Rules, the absence of a materiality threshold here may make this onerous for OGIs;
(d) Displaying a visible indication for online games registered with an SRB. This, combined with the obligations on app stores and advertising media detailed below, will likely create strong incentives to register games;
(e) Displaying ‘random number generator’ and ‘no bot’ certifications from reputed certifying agencies for each online game. It will be interesting to see how the latter will operate for e-sports and tournament play involving bots;
(g) Unlike other intermediaries who are required to inform users about updates to policies annually, OGIs must do so immediately after such change is effected. Similarly, OGIs must respond to law enforcement agencies within 24 (Twenty-Four) hours, as against other intermediaries who can do so in 72 (seventy-two) hours. It will be interesting to see which of these norms intermediaries, that operate platforms (such as app stores) offering some limited gaming content, will choose to comply with.
The Draft Gaming Rules also impose compliance obligations on intermediaries that may distribute or host online games, such as app stores. These intermediaries are now required to make reasonable efforts to cause users not to host, display or transmit online games that “are not in conformity with any law”, including those relating to “the age at which an individual is competent to contract”.
Similarly, intermediaries that enable advertising of an online game, like media entities, have the obligation to ascertain if the online game has been registered with an SRB and display the details of such registration.
Detailed frameworks under the Draft Gaming Rules are to be administered by one or more SRBs, which would either be societies registered under the Societies Registration Act, 1860, or companies under Section 8 of the Companies Act, 2013.
SRBs will be registered by MEITY based on appropriate criteria, including their membership, track record, reputation, lack of conflict of interest, presence of specified expertise in their governing body or board of directors, and technical capabilities to deploy technology for testing and verifying online games. They must develop frameworks to verify, register and monitor Online Games to protect interests, including Public Order Criteria, obligations under the IT Rules as amended by the Draft Gaming Rules, and laws of India including those related to betting or age of competence to contract.
SRBs are also required to set out a framework for constituent OGIs for: (a) safeguarding users from harm, including self-harm; (b) safeguarding children, (c) safeguarding against the risks of gaming addiction and financial loss (including through repeated warnings); and (d) safeguarding against financial frauds risk.
SRBs must establish a dispute resolution mechanism for time-bound resolution of complaints not resolved by member OGIs. Appeals from this mechanism will go to the Grievance Appellate Committee.
Where an SRB is not compliant with its responsibilities and has failed to rectify such non-compliance upon MEITY’s notice, MEITY can suspend or revoke the registration of such SRB after providing an opportunity of being heard. MEITY may also give necessary directions, in the interest of the users of the members of an SRB against whom such notice, suspension, or revocation order is issued.
Like the 2021 Rules, the Draft Gaming Rules are proposed to be issued under clauses (z) and (zg) of sub-section (2) of Section 87 of the Information Technology Act, 2000 (“IT Act”). This means, that by necessity, consequences under the Draft Gaming Rules will be centred around:
(a) The Safe Harbour that intermediaries enjoy under Section 79 of the IT Act; and
(b) The issuance of blocking orders under Section 69A of the IT Act (“Blocking Orders”)
While the former protection may be somewhat irrelevant for OGIs, particularly when they are publishers of the underlying online games, the certainty and predictability provided under the Draft Gaming Rules, and the soft requirement to examine the report of the relevant SRB before issuing a Blocking Order may provide OGIs with much needed incentive to make use of the SRB framework and the Draft Gaming Rules.
While several aspects of the Draft Gaming Rules may require additional clarity, and the long standing interplay with state legislation that has proscribed online gaming for stakes will continue to apply, the Draft Gaming Rules represent a step in the right direction to remove some of the regulatory grey areas that plague the gaming sector, creating a co-regulatory framework that will help combine nimble, business focussed self-regulatory frameworks, with hardcoded regulations for key areas.