The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules 2023 introduced in India in April by the Ministry of Information Technology (MEITY) represent a significant shift in the approach to regulating online gaming in India. The Rules aim to provide a framework for responsible and ethical gaming practices and bring some order to the usually chaotic gaming laws and regulations in India. The revenue of the Indian mobile gaming industry is expected to reach $5 billion by 2025, reflecting a growth rate of a CAGR of 28-30 percent. Furthermore, the number of gamers in India is also expected to grow to 500 million by 2025.
Online Games Defined
One of the key changes introduced by these Rules is the classification of an online game as ‘permissible online real money game’ after verification of an ‘online real money game’ (ORM game) through an online gaming self-regulatory body (SRB).
SRBs are intended to be self-regulatory bodies approved by the MEITY and have the primary role of verifying ORM games as permissible ORM games. The Rules give the MEITY power to designate as many SRBs as it may consider necessary. The SRBs can be set up as not-for-profit entities under Section 8 of the Companies Act, 2013 with its members being representatives of the gaming industry.
The SRBs may categorise any ORM game as permissible ORM game upon an application made to it by its members and, based on its satisfaction that:
Ensuring Compliance
To comply with the above, online gaming intermediaries are required to appoint compliance officers who will be responsible for ensuring, the intermediary complies with the Rules. The permissible ORM games have to comply with the Rules and online gaming intermediaries will need to ensure that they do not host any ORM game which is not recognised as permissible ORM game by the SRBs. There is ambiguity in the definition of online gaming intermediaries, whether they will include publishers of the games or only platforms like app stores which host online games. However, looking at the intent of the Rules it can be assumed that the publishers of the online games will be considered online gaming intermediaries. This will give the government powers under the Information Technology Act to block any non-compliant gaming intermediaries.
It has to be kept in mind that, in India, the terms online gaming, gambling and betting are often used interchangeably. The Indian laws allow games of skill while prohibiting games of chance. However, there is no prescribed definition of either term, and there are a number of judgements of various high courts and the Supreme Court that shed some light on the issue. The Rules do not bring any clarity on the issue and it is the subjective discretion of SRBs to ascertain if an ORM game does not involve wagering, i.e., element of chance.
State Subject
Furthermore, gambling (whether offline or online) is a state subject (under Entry 34, List II ‘Gambling’ and ‘Betting’) as per the Constitution of India, which means that each state can make laws to regulate online gaming and those laws will supersede the Rules.
Most states follow the colonial era Public Gambling Act, 1867 but the states of Meghalaya, Nagaland and Sikkim have tried to bring a regulatory regime for online games. Tamil Nadu has recently banned real money online games and similarly, such games are prohibited in Telangana, Andhra Pradesh, Assam and Odisha. This means that under the present legal regime, different states can ban or restrict different online games especially real money games for being “games of chance” based on their own legislative wisdom.
Therefore, what might be a legal online game in one state could be illegal in another. Hence, even if a game is classified as a permissible ORM game, it will not be allowed in a particular state if the local legislation does not permit such a game. Lastly, India does not permit FDI in betting and gambling, hence lack of clarity in defining games of skill may hinder foreign investment in this sector.
Nevertheless, the Rules represent a significant shift in India's approach to regulating the online gaming sphere. They reflect the growing recognition of the need to promote responsible and ethical behaviour in the online gaming industry.
Rajat Prakash is Managing Partner and Siddharth Mahajan is Partner, Athena Legal. Views are personal, and do not represent the stand of this publication.