Regulation of Online Gaming: IT Amendment Rules Vis-à-Vis India’s Federal Structure

  • August 17, 2023
  • Sanjana Sreenath

This article explores whether the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023  dilute the country’s federal structure and also examines the basis of the distribution of power in the constitution, the existing state legislations regulating online gaming, and the scope of the new amendment rules with respect to the regulation of online gaming.

Recently, a writ petition was filed by a Noida-based NGO, Social Organization for Creating Humanity (SOCH) before the Delhi High Court challenging the provisions of the amendment rules which regulate online gaming[1].

In this case, the petitioner contends that the power to enact laws in matters pertaining to betting and gambling lies solely with the State Governments as per the Constitution[2] and the amendment rules, in so far as they regulate online gaming, are beyond the Central Government’s legislative competence. Further, it is argued that this move has resulted in a dual set of laws, causing significant confusion in the domain of online gaming.

India’s Federal Structure – Overview

In the case of Dharam Dutt v. Union of India[3], the Hon’ble Supreme Court opined that the distribution of power is the most important characteristic of a federal constitution. The origins of this federal structure date back to the Government of India Act, 1935, from which the Constitution derives its federal framework. To bring out this federal structure in the Constitution, Part XI was enacted, which deals with the distribution of legislative power. Article 246 gives exclusive power to the Centre and States to legislate on the subjects enumerated under the Seventh Schedule.

This distribution of power between the Centre and the States does not carry a fixed formula and usually depends on whether the concerned matters are of national importance or local importance. Accordingly, there are three Lists under the said Schedule – List I (Union List with 100 entries), List II (State List with 61 entries) and List III (Concurrent List with 51 entries).

State Legislations on Online Gaming

States are empowered to legislate on subjects such as sports, entertainment & amusements, and betting and gambling under entries 33 and 34 of the State List. In the exercise of these powers, various laws pertaining to sports, gambling and betting have been enacted by state legislatures. Likewise, there are state laws in place for regulating online gaming.

The Sikkim Online Gaming (Regulation) Act, 2008 regulates online games, specifically digital casinos offering games like blackjack, etc. by imposing licensing and other requirements. Similarly, in Meghalaya, the gaming law allows for the operation of digital casinos once licensed[4], and in Nagaland, games of skill such as poker are permitted[5]. In the State of Tamil Nadu, the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022 has been enacted. The same received the governor’s assent on April 7, 2023, and prohibits online gambling and online games of chance played for money or other stakes, including Rummy and Poker.

The amendment to the Telangana Gaming Act, 1974 banned all forms of online games without distinguishing between games of skill and games of chance. And in Rajasthan, a draft of the Rajasthan Virtual Online Sports (Regulation) Bill, 2022 was introduced, which proposes a licensing regime to regulate fantasy sports and e-sports. Other skill-based games such as virtual poker, stock exchange, quiz games etc. have not been expressly included in the Bill and can reasonably be construed as allowed.

On the other hand, an attempt was made to ban all forms of online games by amending the Karnataka Police Act, 1963. However, this amendment was struck down by the Karnataka High Court in the case of All India Gaming Federation v. State of Karnataka & Ors.[6], as they were held to be ultra-vires the Constitution. The State of Kerala too issued a notification removing the exemption from general prohibition for online rummy citing reasons such as increased suicide rates, cheating, theft, etc. in the State[7]. This was also struck down by the Kerala High Court in September 2021. In these cases, the blanket ban on online gaming and banning games of skill were held to be violative of Article 19(1)(g) as it restricted the right to trade and profession. It was determined by the Courts that though the legislatures had the competence to enact said laws, they couldn’t pass such legislations which were violative of fundamental rights.

Regulation of Online Gaming under the IT Amendment Rules

The amendment rules seek to regulate online gaming, by way of self-regulation, by imposing due-diligence obligations on a new category of online gaming intermediaries and setting up a new body called the online gaming self-regulatory body. The amendments made with respect to online gaming intermediaries are discussed herein.

  • Firstly, the amendment has added the phrase “or an online game that causes user harm” to Rule 3(b)(ii), which enumerates the due diligence requirements to be followed by the three intermediaries – social, significant social, and online gaming intermediaries. This mandates intermediaries to take down those games which are causing user harm. The definition of user harm is limited to any effect that is harmful or detrimental to a user or child.
  • Secondly, the amendment has added Rule 4A, empowering the online gaming self-regulatory body to disallow such online real money games whose outcome depends on wagering.
  • Thirdly, under Rule 3(b)(xi), the general obligation of all three classes of intermediaries including online gaming intermediaries is to ensure that the information (or an online game in the case of an online gaming intermediary) does not contravene any laws in force in the country.

Overlapping of Powers and Resulting Conflict

By interpretation, it can be said that Rule 3(b)(xi) allows for the harmonious existence of the Central and State enactments. And mandating that the intermediaries have to ensure compliance with state laws does not restrict the power of the States. By such an imposition, the States are free to decide on what kind of online games they wish to allow/ disallow.

However, the amendment to Rule 3(b)(ii) and the introduction of Rule 4A, directly restrict the State governments’ power to decide the category of games it wishes to allow/ disallow and does not allow for the harmonious functioning of the legislations. Rule 4A restricts games that allow wagering or games that cause user harm. Here, the subject of wagering is purely within the purview of the States’ competence to legislate.

The Centre may argue that entry 31 under the Union List grants the Central Government the power to enact laws for forms of communication such as wireless, telecom and broadcasting. While the parliament has the legislative competence to enact laws for internet intermediaries under this entry, the pith and substance of the part of the amendment are to restrict online games that involve real money whose outcome depends upon wagering. The amendment, to this extent, is stepping into the powers of the States. Under the guise of the internet and entry 31, the Centre is trying to colourably exercise its powers which are in the exclusive domain of the state legislature.

It may also be contended that a Centrally controlled law for an all-encompassing medium such as the Internet is better than individual States legislating. However, with growing technology, it is not an impossibility to block content for a particular State. Geo-blocking may be used by different State Governments to disallow certain online games. It has already been used by intermediaries in States such as Tamil Nadu where a legislation has already been passed banning certain types of online games.

Implications

The distribution of power between the Centre and States is the backbone of the country’s federal structure. The dilution of such a power by holding the internet as a façade will only increase the risk of centralisation of power. With techniques such as geo-blocking available, there is no reason for the Centre to step into the powers of the State to bring in regulation in the sphere of online gaming. Such a circumvention of the Seventh Schedule of the Constitution creates a bad precedent and could be held unconstitutional as well.

References:

[1] Social Organization for Creating Humanity v. Union of India [WP(C) 8946/2023].

[2] Entry 34, List II of the Seventh Schedule.

[3] AIR 1974 SC 669.

[4] The Meghalaya Regulation of Gaming Act, 2021.

[5] The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016.

[6] MANU/KA/0345/2022.

[7] Jay Saytha, Kerala Issues Notification Banning Online Rummy, But Will It Withstand Legal Scrutiny?, Outlook (28 Feb, 2021).

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Photo by aliaksandrbarysenka: https://www.canva.com/photos/MAE3yBrJGHQ-computer-game-workplace-in-dark-room/

The Centre may argue that entry 31 under the Union List grants the Central Government the power to enact laws for forms of communication such as wireless, telecom and broadcasting. While the parliament has the legislative competence to enact laws for internet intermediaries under this entry, the pith and substance of the part of the amendment are to restrict online games that involve real money whose outcome depends upon wagering. The amendment, to this extent, is stepping into the powers of the States. Under the guise of the internet and entry 31, the Centre is trying to colourably exercise its powers which are in the exclusive domain of the state legislature.

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Intermediaries' Obligation to Pursue Complaints Against Infringers: Analysing the Latest Interpretation

The recent interim order dated March 1, 2023, issued by the Delhi High Court in Samridhi Enterprises vs. Flipkart Internet Private Ltd.[1] had sparked a lot of debate and confusion among the public concerning the liability of an intermediary. As per the order of the High Court, an intermediary is not obligated to take action in cases of infringement reported by their users. The Hon’ble Court delved deeply into the interpretation of Rule 3 of the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, on the question of whether there exists an obligation on the part of intermediaries to act on complaints against infringers.   

Facts

The plaintiff was in the business of manufacturing and selling car covers under the marks “UK Blue” and “Autofact” and had been selling them on Flipkart since 2018. The plaintiff happened to notice that some other entities started to copy their designs, looks and marketing strategies on the Flipkart platform itself. Apart from the fact that the covers were identical, the infringers also sold these covers in a fashion similar to that of the plaintiff’s company to create confusion and boost their sales.

The plaintiff had informed and reported to Flipkart about the infringement of their products by placing screenshots and other similar evidences of infringement committed by the infringer on record. The platform refused to take any action against the infringers and advised the plaintiff to approach a court of law for redressal of IPR disputes.

The plaintiff approached the Delhi High Court, citing that Flipkart cannot act as an intermediary if it fails to adhere to its obligations as an intermediary and to observe important due diligence mandated by Rule 3(2) of the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.

Law Involved

Rule 3(1)(b)(iv) requires intermediaries to inform their users of their privacy policy, rules and regulations and user agreement and shall make reasonable efforts to ensure that any information that infringes any patent, copyright, trademark, or other proprietary rights shall not be hosted, displayed, uploaded, modified, published, transmitted, stored, updated, or shared by the intermediary.

Rule 3(2)(a) of the IT rules requires the intermediary to publish on its website the details of the grievance officer and the mechanism by which a user could complain about any possible violations. Further, it requires the officer to acknowledge the complaint within 24 hours and resolve the issue within a period of 15 days.  

The plaintiff relied on these two sections to further their claim of infringement against Flipkart. 

Rule 3 (2)(1) (proviso) provides for intermediaries to acknowledge any complaint within 24 hours and resolve all such complaints within 15 days from their receipt. Moreover, the proviso also calls upon the intermediary to develop appropriate safeguards to avoid any misuse by users.

The Ruling

The Hon’ble Court was of the opinion that Rule 3(2)(a) only envisages complaints regarding violations of the obligation imposed on the intermediary under the rules. There is no scope for the intermediary to take any kind of action against the infringer upon receipt of the complaint. The same argument was also put forth by the court when the question surrounding Rule 3(1)(b)(iv) was raised, and the court clarified that the rule merely provides for intermediaries to inform users not to display or host infringing content. The rule does not mandate or require the intermediary to take any action upon receipt of the complaint of infringement.   

The Hon’ble Court stated that it cannot read into IT rules something that the rules do not contain expressly or by necessary implication. It further said that, “where the applicable statutory rules do not envisage action being taken by an intermediary merely on the complaint being made by an aggrieved victim or user regarding infringement of intellectual property rights, by content posted on the platform of the intermediary, the court cannot, by placing reliance on an internal policy of a particular intermediary, read into Clause 3 any such requirement, especially where such a provision existed in the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 and has consciously been omitted in the 2021 Rules”.  

The Hon’ble Court was of the opinion that the complaint against Flipkart that it is not taking action does not appear to be sustainable due to the above-mentioned reasons. However, a prima facie case of copyright violation was made out by the court and in order to protect the plaintiff from any further damages, an interlocutory injunction was granted against listing the alleged infringing content.

General Observations 

Though the Hon’ble Court did grant the injunction to protect the plaintiff from the ongoing infringement occurring on the platform, the main essence of the IT Act and rules was not taken into consideration while discharging Flipkart of any liability.

The plaintiff erred in not considering the many precedents laid by this very same court. For instance, in Super Cassettes Industries Ltd. vs. Myspace Inc. & Anr1, the court said that “I find that there is no impact of the provisions of Section 79 of the IT Act (as amended in 2009) on copyright infringements relating to internet wrongs where intermediaries are involved and the said provision cannot curtail the rights of the copyright owner by operation of the proviso of Section 81 which carves out an exception for cases relating to copyright or patent infringement”. 

The case witnessed that the Indian Copyright Act, 1957, overrode the provision of the safe harbour granted by the IT Act under Section 79. The Hon’ble Court relied on Section 81 of the IT Act, which provides for an exemption for people exercising their rights under the Copyright Act and the Patent Act. The Hon’ble Court should have recognised this precedent and acknowledged the obligation it posed to the intermediary to remove such infringing products from its platform.   

It doesn’t end here. The court should have considered in what instance the immunity available for intermediaries will be impacted under Section 79 of the IT Act. Section 79(3)(b) of the IT Act states that upon receiving actual knowledge of an unlawful act connected to the computer resource controlled by the intermediary, the intermediary shall expeditiously remove or disable access to such infringing material. If such action is not undertaken by the intermediary, it shall lose the safe harbour guaranteed by Section 79. If safe harbour protection is not available, then allowing an infringement to take place on their platform may constitute abetment and unlawful activity which in turn would make them liable under the law of the land.  

Another striking part of the order is that, even though the Hon’ble Court completely relied on the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, the court failed to read into Rule 3 (2) (1) of the IT Rules 2021. The proviso of the rule clearly stipulates that any complaint received from the user other than under Subclauses (i), (iv), and (ix) needs to be expeditiously resolved within 72 hours by the grievance officer. That does not take away the primary obligation of the intermediary to act within the 15 days mandated in the main provision in relation to such excluded matters, including cases of IP infringement. It is astonishing that the court or the parties gave more emphasis to the proviso than the main clause under Rule 3(2)(a)(i). 

Initially, Rule 3(2)(b) was worded as follows: “(i) acknowledge the complaint within twenty-four hours and dispose off such complaint within a period of fifteen days from the date of its receipt;  

(ii) receive and acknowledge any order, notice or direction issued by the Appropriate Government, any competent authority or a court of competent jurisdiction.”.   

On October 28, 2022, the government amended the above rule to read as follows: “acknowledge the complaint within twenty-four hours and resolve such complaint within a period of fifteen days from the date of its receipt: 

Provided that the complaint in the nature of request for removal of information or communication link relating to clause (b) of sub-rule (1) of rule 3, except sub-clauses (i), (iv) and (ix), shall be acted upon as expeditiously as possible and shall be resolved within seventy-two hours of such reporting;  

Provided further that appropriate safeguards may be developed by the intermediary to avoid any misuse by users;” 

The intention of this amendment is to prescribe faster action for certain kinds of wrongdoings and expect them to act within 72 hours. At the same time, for those others (sub-clauses (i), (iv) and (ix)) the original time frame of 15 days for taking action remains. Without a doubt, the goal of this amendment is not to encourage platform users to behave irresponsibly or complacently despite being aware that the platform is frequently used to violate intellectual property rights. It merely provides them with sufficient time and excludes the requirement of compliance within 72 hours.

The intermediary is still obligated to undertake the due diligence described in Rule 3(1)(b)(iv), and if they do not do so and do not take action within fifteen days even after becoming aware of the infringement, the immunity from liability specified in Section 79 will end. The safe harbour will be eliminated because the proviso to Section 81 of the IT Act clearly indicates that IP rights are to be expected to be protected by the intermediary.

Conclusion

The Hon’ble Court was right in granting the injunction in favour of the plaintiff to restrain Flipkart from allowing such infringing products on their platforms.

However, the Hon’ble Court erred by not making a harmonious reading of Rule 3 (2) (a) of the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, with Section 79 (3) (b) and the proviso to Section 81 of the IT Act. An isolated reading of the provision and discharging Flipkart of their liability under the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 seems to be an oversight.

The proviso appended to the said section provides that nothing contained in this act shall restrict the exercising of any right by any person under the Copyright Act. This, along with Section 79 (3) of the IT Act, mandates the intermediary not to conspire, abet or aid any infringement and to remove the infringing material on receiving actual knowledge of it.  

The above-referred order will only help the intermediaries and platforms to behave irresponsibly and indifferently even when an intellectual property owner notifies them of infringement on their platforms. It compels aggrieved intellectual property owners to initiate legal action for every infringement, which is expensive to carry out. IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, was primarily made to make the platforms more responsible and ethical. Allowing them to act irresponsibly through a limited interpretation of law is unconscionable.

References:

1. CS (COMM) 63/2023

The recent interim order dated March 1, 2023, issued by the Delhi High Court in Samridhi Enterprises vs. Flipkart Internet Private Ltd. (CS (COMM) 63/2023) had sparked a lot of debate and confusion among the public concerning the liability of an intermediary. Though the Hon’ble Court did grant the injunction to protect the plaintiff from the on-going infringement occurring on the platform, the main essence of the IT Act and rules was not taken into consideration while discharging Flipkart of any liability.

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Decoding IT Amendment Rules: The Hits and Misses

  • April 18, 2023
  • Padma Sinha
  • Sanjana Sreenath

On April 6, 2023, the Ministry of Electronics & Information Technology (MeitY) notified the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023 to amend the 2021 Rules. In this article, the important changes introduced to the Rules are highlighted.

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.

Image Credits:

Photo by anyaberkut: https://www.canva.com/photos/MADCr_H7g_U-it-concept-information-technology-diagram/ 

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.

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Regulating Online Gaming Intermediaries - The Rules and their Implications

  • January 11, 2023
  • Padma Sinha
  • Ojasvi Agarwal

The Ministry of Electronics and Information Technology (MeitY) has released the draft Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules to bring online gaming intermediaries within the ambit of the IT Rules, 2021.

Background

Online gaming is one of the fastest-growing industries in India with the number of gamers expected to increase by 30 million from 2022 to 2023[1]. Following the increase in the number of users, it has become imperative that appropriate laws are introduced to regularize the online gaming industry. On January 02, 2023, the Ministry of Electronics and Information Technology (“MeitY”) proposed an amendment to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Rules”). The IT Rules, in its current structure, provide regulation for social media intermediaries and significant social media intermediaries. The Draft[2] “Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules” (the “Draft”), which is open for consultation from the public, proposes to extend its ambit to ‘online gaming intermediaries’ forming a part of Part II (that relates to other intermediaries).

The Draft defines “online gaming intermediaries” and “online games” but lacks to provide a clear distinction between “games of chance” and “games of skill”, which has been a sticky issue over the years. The Draft further proposes (inter alia) the following changes –

  • All online games would be required to be registered with a ministry-approved self-regulated body by creating a self-regulatory framework, to be registered with MeitY. The self-regulatory body will be responsible for reviewing and registering the online games offered by its members, subject to certain prescribed factors. Games approved by the self-regulatory body may be offered with a visible mark signifying their registration.
  • The proposed rules also mention certain compliances that need to be made by the social media firms such as checking the registration of the online gaming intermediary and consulting the self-regulatory officer before allowing any advertisement on their platform.
  • The online gaming intermediary shall comply with the requirement of due diligence and shall additionally ensure they do not host any online game that does not conform with Indian laws and shall make additional disclosures to the users including the refund and withdrawal policy, financial risks, and other risks associated with gaming, measures that are in place to ensure the safeguarding of deposits, etc.
  • In addition to the above, a new set of due diligence requires compliance with mandatory know-your-customer(KYC) norms for user verification as per Reserve Bank of India norms.
  • Similar to the requirement for social media intermediaries, requirements of appointment of a resident ‘compliance officer’ and ‘grievance officer’ have been mandated along with ‘nodal officers’ for round-the-clock coordination with law enforcement agencies and officers.
  • The online gaming intermediaries need to have a physical address in India and the same is required to be published on their website.

Purpose of the Draft

The purpose of the Draft, if it becomes the law, is to protect the interests of different stakeholders, ensure the safety of players and encourage responsible gaming.  The Draft is also put together to bring about uniformity of laws that online gaming intermediaries may be required to follow by reducing the burden of following state-specific gaming measures making it, not just easier for online gaming intermediaries to comply with the law, but also helps the enforcement agencies since it becomes difficult for the governments of different states to ensure geographical checks are in place. According to the ministry, the final amendments to the IT rules would be notified by April 2023.

Discussions & Implications

While the Draft seems to have been aiming at shaping a burgeoning gaming industry, the concerns around the Draft seem to be supplementing the already existing questions on the existing IT Rules.

At the outset, the question of whether ‘online gaming’ should remain a subject of the ‘States’ (as betting and gambling have traditionally been) or the ‘Centre’, remains unresolved. MeitY had earlier, in affidavits before the High Courts, consistently stated that is not within its purview and power to legislate on the subject and that rests solely on the states. Therefore, the introduction of the Draft without consultation and consensus amongst states seems not quite in line.

The ambiguity further extends to a lack of clarity on whether the Draft bans ‘gambling’. While IT Minister, Rajeev Chandrasekhar stated that “online games that allow wagering on the outcome are effectively a no-go area” there is no clear prohibition on ‘gambling’. The Rules only state, as a part of due diligence, online gaming intermediaries shall make reasonable efforts to ensure that online gaming platforms do not contravene any gambling or betting laws in India, which again differs from state to state.

An online game has been defined in the Draft as a “game that is offered on the Internet and is accessible by a user through a computer resource if he makes a deposit (in cash or in-kind) with the expectation of earning winnings”- In the absence of a definition of “gambling” and “betting” in the Draft and clarity on which category of games are sought to be regulated if the online game for consideration is sought to be regulated on one hand and gambling or betting content is prohibited on the other hand, remains a question[3]. While it may be assumed that the ‘kind’ component in the definition has been introduced to cover ‘non-monetary token’ or ‘online gaming currencies’, it may lead to the consequence where games that do not require any monetary incentive may also be included within the meaning of online games here. The definition can almost broadly cover all ‘gambling games’ within the purview of ‘makes a deposit (in cash or in-kind) with the expectation of earning winnings’. Would that mean that ‘gambling’ is brought within the purview of these Rules?

The Draft classifies online gaming platforms as ‘intermediaries’. Our understanding of the term ‘intermediary’ includes one that acts on behalf of another entity. However, in the case of online gaming platforms, we notice that most of them publish the gaming content themselves and do not host games on behalf of another. In view of the above, in an earlier debate, a government task force submitted a study stating that gaming platforms should be categorized as ‘publishers’ and not as ‘intermediaries’[4]. The question that remains unanswered is why we now bring online platforms within the purview of intermediaries thereby giving them passage to ‘safe harbour protection’ under Section 79 of the IT Act.

Apart from the few above-mentioned points, the Draft may expect push-back from various industry stakeholders on the Government’s over-arching power on issues of revocation of registration of self-regulatory bodies and exercising regulatory power for KYC. It is to be observed therefore how MeitY resolves the already existing issues on the IT Rules pending before the courts and accordingly brings about an amendment to the current online gaming Draft Rules catering to the purpose it mentioned in its notes[5] accompanying the Draft Rules.

References:

[1] https://www.indiatimes.com/explainers/news/how-rapidly-is-the-gaming-industry-growing-in-india-589059.html

[2]https://www.meity.gov.in/writereaddata/files/Draft%20notification%20for%20amendment%20to%20IT%20Rules%202021%20for%20Online%20Gaming.pdf

[3] https://g2g.news/online-gaming-laws/draft-online-gaming-rules-have-contradictory-provisions-ambiguity-can-still-continue/

[4] https://www.hindustantimes.com/india-news/govt-task-force-restarts-debate-on-status-of-online-gaming-platforms-101666896702910.html

[5] https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1888143

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Photo by Yan Krukau: https://www.pexels.com/photo/gaming-chairs-and-computers-9072216/

An online game has been defined in the Draft as a “game that is offered on the Internet and is accessible by a user through a computer resource if he makes a deposit (in cash or in-kind) with the expectation of earning winnings”- In the absence of a definition of “gambling” and “betting” in the Draft and clarity on which category of games are sought to be regulated if the online game for consideration is sought to be regulated on one hand and gambling or betting content is prohibited on the other hand, remains a question.

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