Introduction

Through the amendment, the Ministry intends to make a few changes to the intermediary eco-system by introducing new due-diligence requirements for intermediaries. It can be broadly summarised under two heads – partial censorship of digital media, and regulation of online gaming intermediaries. 

Partial censorship of digital media

The new amendment requires social media intermediaries, significant social media intermediaries and online gaming intermediaries to follow additional due diligence. It aims to regulate digital media by disallowing the publication of such information related to the business of the Central Government which is identified or declared as fake, false, or misleading by a fact-checking unit set up by the Central Government. This addition to the rules would make it mandatory for the intermediaries to take down (when given a notice by the user) any piece of information that is declared fake or misleading by the fact-checking authority. It is unclear from the amendment if the information checked by the already established fact-checking authority would warrant take-down, but with the available information, it would be reasonable to assume that any information fact-checked and deemed fake by the PIB fact-check mechanism would warrant takedown.

This part of the amendment has been challenged by a political satirist, Mr. Kunal Kamra. He filed a writ petition with the Bombay High Court with the averment that the amendment with respect to establishing a separate unit by the Central government to fact-check digital media is violative of Articles 14, 19(1)(a), and 19(1)(g) of the Indian Constitution and that it is ultra vires Section 79 of the Information Technology Act, 2000. The Bombay High Court has now directed MeitY to file its response within one week on why the IT Amendment Rules, 2023 should not be stayed, and also describe the factual background that necessitated the issuance of the amendments. The affidavit has been ordered to be filed by April 19, 2023, and the matter has been listed on April 21, 2023.

Regulation of online gaming intermediaries

Earlier, a draft of the amendment (pertaining to online gaming) to the 2021 Rules was released in January 2023; though the draft lacked clarity on the kind of online games it intended to regulate (click here to read more). Further, it did not delve into differentiating between games that are in the form of wagering/betting and those which are not. The current amendment attempts to overcome these shortcomings by providing for an ‘online gaming intermediary’ and stipulating the due-diligence requirements for such intermediaries.  

The amendment defines an online gaming intermediary as one that enables users to access one or more online games. It further defines an ‘online real money game’ that is played with real money, where the users are asked to deposit money. The amendment allows the online gaming intermediary to host only those games which are permissible online games and are certified by the online gaming self-regulatory body.

Disallowing online wagering and betting games.

As per the new amendment, social media intermediaries or online gaming intermediaries are not allowed to host an online game which is not verified as a ‘permissible online game’, or any information or content which is in the nature of an advertisement or a surrogate advertisement of such non-permissible online games. It also prohibits the hosting of such games that causes harm to the user.

Permissible online real money game

The amendment further clarifies that for a game to be certified as a permissible online real money game, any member of the online gaming self-regulatory body that enables online real money game can make an application to the online gaming self-regulatory body. The said private body is set up for the sole purpose of acting as an online-gaming self-regulatory body and is notified by the Central Government. It has the power to decide whether an online game is permissible or not. The regulatory body will inquire and ensure that the game does not involve any wagering and that the gaming intermediaries or the online game undertakes all the due diligence laid down in the Rules. Additionally, it shall also ensure that the permitted games are not against the interest of the country. It also has safeguards that protect users against harm, risk of addiction, financial loss, fraud, etc by providing repeated warnings or such. The body is required to adhere to the principles of natural justice. While the self-regulatory body has the power to certify an online game as a permissible one, the Central Government still reserves the right to suspend the certification if it believes that the said game is not in conformity with the Rules.

This is a private body set up for the sole purpose of acting as an online-gaming self-regulatory body and is notified by the Central Government. In brief, they have the power to decide whether an online game is permissible or not.

Due-diligence requirements

Previously, Rules 3 and 4 of the Rules stipulated the due-diligence requirements for social media intermediaries and significant social media intermediaries. With this amendment, such due-diligence requirements in Rules 3 and 4 are extended to online gaming intermediaries too.

Through these amendments, in addition to the existing due diligence requirements under Rules 3 and 4, the online gaming intermediaries that enable permissible real money games have certain additional due-diligence requirements like requiring to display a visible mark of verification, and inform the users about the policy related to the deposit and withdrawal of money, the KYC norms that they follow, the measures taken to protect the deposits made amongst others.  

Online games which are not real-money games do not have to follow the additional due-diligence requirements by default, the Central Government by notification may direct an intermediary to undertake certain due-diligence requirements.

Conclusion

The IT amendment rules are an improvement on the previously proposed amendment to the 2021 Rules. The definitional ambiguity is removed and a step is taken toward regulating online games that are based on wagering. It also makes the self-regulation of online gaming intermediaries more transparent by stipulating for disclosure of decision-making reasons, etc.