Govt issues IT rules for gaming, industry seeks more clarity

The Indian government today notified the amended Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023, adding online gaming firms as intermediaries. The draft version of the rules were first announced in January, and was under consultation since then.

The new rules will come into effect after the appointment of three self-regulatory bodies for the gaming industry. Experts, who requested anonymity, said that current industry bodies do not qualify under the criteria for forming these bodies as mentioned by the rules.

The rules disallow trust and for-profit organization from forming self-regulations, among other things. They also specify the kind of members who can join these bodies. The experts said that the process of forming these bodies could take six to eight months, and it’s likely that many will apply for MeitY’s recognition.

“I don’t expect it to happen tomorrow. I’m sure many of the current industry bodies will apply, but we have to wait and watch in what way, shape or form that will be,” one expert said.

Further, the new rules require intermediaries to ensure that their platform is not used to display or share misleading or fake information. 

Experts are of the view that this particular rule needs more clarification.

“The fact check addition through Rule 3 is not a robust form of regulation. Clarity on the process of classifying fake, false, or misleading news and safeguards or due process protections against arbitrary actions that may stifle free speech ought to have been built into the regulation,” said NS Nappinai, a Supreme Court lawyer and founder of Cyber Saathi.

In a January draft, MeitY had proposed that Press Information Bureau (PIB) and other government-authorized agencies would have the power to instruct intermediaries including online gaming companies to take down content they deem as inaccurate.

“The first draft of the rules gave expansive powers to multiple central government agencies to flag fake news. This has now been curtailed to only those fact-checking units of the central government that MeitY specifically notifies,” said Rahil Chatterjee, Associate at Ikigai Law. 

Chatterjee further added that the scope of the content has been restricted. “Earlier any content flagged by the PIB fact check would be deemed to be fake or false, now the scope is restricted only to news pertaining to the business of the central government.”

To be sure, the online gaming industry, which had expressed some concerns with the first draft in January, seems satisfied with the final rules.

“It is heartening to note that the public consultation and submissions on online gaming have been given due weightage as the much tighter draft of the notified version indicates,” said Nappinai.

Further, Sai Srinivas, CEO and co-founder of gaming unicorn Mobile Premier League (MPL), called the notification of the new rules a “watershed moment” for the industry. Srinivas said that it recognizes online gaming intermediaries and distinguishes them from gambling.

Industry bodies like the All India Gaming Federation (AIGF) and Federation of Indian Fantasy Sports (FIFS) have echoed positive sentiments too.

Joy Bhattacharjya, Director-General of the Federation of Indian Fantasy Sports (FIFS), a body that counts firms like Dream Sports among its members, expects the rules to put an end to the ambiguities that the industry was grappling with and pave the way for sustainable and responsible growth of the gaming industry.

To be sure, the rules only qualify gaming firms for intermediary protections granted by Section 79 of the IT Act. They do not inherently make online gaming or gambling legal in India. Gambling still remains a state subject in the country, and states have the power to regulate the same within their borders.

“These rules will go a long way in promoting consumer interest while helping the industry grow responsibly and transparently and will also help in curbing the menace of anti-national and illegal offshore gambling sites, which have been proliferating in the last few years,” claimed Roland Landers, CEO, AIGF.

Under the amended rules, online gaming intermediaries are required to follow certain practices which would make them more accountable and ensure responsible gaming behavior. For instance, gaming intermediaries are required to display a mark of verification from an online gaming self-regulatory body to indicate that the game has been verified.

Intermediaries are also required to inform users of its rules and regulations, privacy policy, terms of service, and user agreements. This information should include the policy for withdrawal or refund of deposits, the know-your-customer (KYC) procedure for verifying user identity, measures taken to protect user deposits, and the framework referred to in Rule 4A.

Rule 4A outlines the process for verification of online real-money games. For this purpose, MeitY will designate self-regulatory bodies to verify these games as permissible under the new rules. According to the new rules, bodies that are registered under the Companies Act, have members representing the gaming industry and have a board of directors with individuals of repute and no conflict of interest can apply to be designated as self-regulatory bodies.

Self-regulatory bodies will be required to publish and maintain a list of all its members and publish a framework for verifying online real money games and a framework for redressal of grievances along with the contact details of the grievance officer. These bodies will also have to publish an updated list of all permissible online real money games and details of the applicant, which includes the period of validity of the verification, along with the reasons for granting the verification or suspending it. Games that have not been verified will not be able to advertise anymore.

Jay Sayta, a gaming lawyer, said that the rules have simplified who can broadcast advertisements. “These rules clearly ban offshore betting ads or any questionable entities that may have sought to advertise themselves,” he added.

The rules also require intermediaries to verify the identity of users before taking any deposits from them. The procedure for verification should be in line with RBI norms on KYC.

Trivikraman Thampy, co-founder & co-CEO of Games24x7, said that the creation of multiple self-regulatory bodies will ensure all industry stakeholders with different operational models are “adequately represented”.

Thampy also said that the rules will help clear up state-level ambiguity, promoting uniformity and standardization across the country. Real money gaming platforms have faced bans in several states, many of which were later reversed by courts.

Sayta believes that the rules will pave the way for future standalone central government legislation on this industry. “This can create the base for a central government-appointed board and bodies to regulate the space,” he added.

Despite the overall positive sentiment, the industry has flagged some parts of the new rules. For instance, Sayta feels that there are still some ambiguities.

“A significant one of which is what in a game can be approved, or not. The latter remains clearly in the hands of an SRB. There is also ambiguity in terms of what ‘wagering’ could imply,” added Sayta.

Some experts also said further clarity is required on KYC rules. “Earlier, KYCs had to be done at the time of registration. Now, this needs to be done at the time of depositing money. It does ask to follow RBI guidelines, but RBI itself has various KYC regulations for different products. So, this does not entirely clarify,” said a tech policy lawyer working with the industry.