India’s proposed rules to regulate online gaming largely leave industry oversight in the hands of one or more self-regulatory bodies. This “light-touch” approach will see online gaming intermediaries signing up with these bodies to get their games registered before they hit the Indian market. Once they’re members, they have to follow that body’s self-regulatory online gaming framework.
Why it matters: These rules are a long-anticipated first attempt at simplifying India’s complex (and confusing) online gaming laws. We spoke to experts to understand where the self-regulatory mechanism works—and where it can be strengthened to support consumers and companies alike. We explored the rules’ foundational concerns in part one of this two-part series.
What are these rules again?: “With the user base of online games growing in India, need has been felt to ensure that such games be offered in conformity with Indian laws and that the users of such games be safeguarded against potential harm,” explained the IT Ministry when the rules were released. They define what online games are, propose a self-regulatory mechanism to oversee the industry, and set up a grievance redressal mechanism, among other provisions.
“What the government has been able to achieve here, which is good for the industry, is steer clear of any onerous license regimes,” says Ranjana Adhikari, Partner at IndusLaw, speaking with MediaNama. “That might have entailed licence fees or other compliance requirements that could have had a different kind of burden altogether.”
But, what were past regulatory concerns?: Gambling is a state subject in India—barring some exceptions, many states have outlawed it. With the rise of online gambling-related suicides (to addiction and financial losses) and other harms states have tried to outlaw online gambling, or online games of chance, to ‘protect’ their residents. The problem is they’ve also inevitably ended up banning games held by courts to be legal too, called games of skill. Overarching bans could hurt the budding online gaming industry offering legal games—cutting them off from potential gaming audiences across the country. So, the industry has been asking the Indian government for a uniform framework that clearly defines what games of skill and chance are. The hope: that a pan-Indian gaming framework will stabilise the future of companies offering games of skill to Indian audiences.
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What’s the feedback so far?: Gaming and technology lawyer Jay Sayta has previously noted that the rules may abdicate the government’s regulatory responsibilities to private players. “Most [current] self-regulatory organisations are funded and backed by one or two major online gaming companies and therefore there are serious questions on their credibility, independence and autonomy,” he adds.
Some experts we spoke to differed. “If the government starts licensing everything, a likely critique is that this might amount to a licence Raj,” says Rohit Kumar, Founding Partner at The Quantum Hub (TQH), in conversation with MediaNama. “Given the volume, there is a need for an industry mechanism to act as an intermediary.”
Across the board though, experts we spoke to pushed for more oversight of regulatory bodies to ensure they operate fairly. Improving consumer awareness, so that consumers know about the kinds of harms they’re up against while playing online, was also a key concern. Public feedback on the rules closes on January 17th—submit yours here.
What kinds of consumer harm can self-regulatory bodies address?
Online gaming intermediaries can get their games verified by the self-regulatory body that they’re a member of, the rules say.“After that, online gaming companies will have to implement whatever frameworks are set out by the body,” says Prince Gupta, Senior Research Associate at CUTS International, in conversation with MediaNama. These frameworks should include safeguards to protect children from harm, mitigate financial fraud and addiction, and protect users from other associated platform harms. The rules do not define what harm is (or a threshold for it), leaving it to these bodies to develop “suitable criteria” to protect against them.
Nevertheless, these frameworks could address the varied gaming-related consumer complaints already visible today.
“Sometimes, companies arbitrarily block users saying they engaged in fraud or collusion with other players,” says Sayta in conversation with MediaNama. “At other times, a player’s money or balances are not paid out. Consumers may also complain about ‘hanky panky’ going on in the gameplay itself—such as if the results are not randomly generated. Other concerns could relate to online gaming intermediaries not following responsible gaming policies.”
This self-regulatory modus operandi also addresses the question of fraud online. For Kumar, the self-regulatory regime also doubles as a registration regime. “If a company is registered with a self-regulatory body, it means they’re a legitimate company,” he notes. “The fraudulent websites [such as offshore betting sites, for example] get caught here and weeded out. Registration is one way the government is trying to sanitise [the space] and protect citizens. The only difference here is that the government is letting the self-regulatory body register companies.”
But, everybody is susceptible to bias—and self-regulatory bodies are no exception. While developing these frameworks, it is also critical to establish the limits of what self-regulatory bodies can and cannot do.
Regulating the regulator
The rules do provide “fair” checks and balances to protect companies from biased self-regulatory body decisions, says Gupta. “When setting up the body, it has to be ensured that it will operate at an arm’s length distance from its members. The board of directors also has to be composed of independent experts [although one public policy expert will be nominated by the Indian government].”
While Kumar acknowledges these provisions, he adds that “practical experience of any decision-making body indicates that there are risks of bias or favouritism creeping in in different forms. For example, the self-regulatory body’s mandate is registration—which means it can also deny registration. The rules also don’t list out penalty provisions for non-compliance with self-regulatory frameworks. It’s possible that penalties could include de-registration—or that non-compliance penalties could be very high. If we are unable to safeguard the body’s independence, there is a risk that new disrupters may face difficulties in market entry.”
Getting verified by a self-regulatory body also comes with a literal cost for companies, notes Sayta. Today, annual membership fees can go up to Rs. 50 lakh. “For a small start-up with a small turnover, that can be a huge burden,” he adds. “The rules don’t regulate the threshold for fees that a self-regulatory body can charge.”
For Kumar, ring-fencing the powers of self-regulatory bodies can strengthen accountability. “The power of a self-regulatory body should not be so high that it is able to prevent a company’s entry into the market, or significantly dent what they do,” he says.
“The body could also be mandated to submit annual or six monthly reports [on its functioning] to the IT Ministry,” suggests Gupta. “They could also make their information on their functioning publicly available—such as the activities they’re doing, the consumer protection measures they’re mandating, or the companies and games they’re approving.”
But, protecting the regulatory body from the government is important too and may need to be addressed by the rules. “The Ministry may (..) for reasons to be recorded in writing, suspend or revoke the registration of a self-regulatory body,” notes the Internet Freedom Foundation (IFF). This can be done if the Ministry deems it to be necessary, for example. IFF warns that “the broad powers given to the Ministry further bring a high level of government discretion in determining which self-regulatory body will exercise these powers, and more importantly, how it will exercise these powers”.
The bogey of offshore betting websites
Gaming companies have consistently raised the alarm about offshore betting companies—which operate outside of India but offer illegal online gambling services to Indians. The experts we spoke to say the current rules partially address past piecemeal approaches to regulating these websites. That’s partly because they outlaw platforms from hosting content that violates prevailing gambling laws in India.
“If states had a complaint [against an offshore gambling website], they would have to approach the Indian government, as only it has the power to issue a blocking order under Section 69A of the Information and Technology Act, 2000,” says Aditya Kumar, Partner at NKR Law Offices, in conversation with MediaNama. “Also, by the time you blocked a website, another would pop up. With these rules, the IT Ministry has taken a clear stand that if a website like this pops up, it will block it by referring to the rules, which signal that such websites aren’t allowed.”
The government is also using registration as a tool to partly address the offshore gambling issue, says Rohit Kumar. “If a fraudulent offshore entity offers a game, but there’s no registration mark on the website, that’s the first alert,” he says. “But there’ll also need to be some consumer awareness campaigns to train people to look for these registration marks before they do anything on a particular website.”
At a more foundational level, Gupta believes the industry and government might need to work together to raise consumer awareness that these websites are illegal. “The Advertising Standards Council of India could also release guidelines regarding these kinds of ads,” he adds. The Indian government already issued multiple advisories last year advising physical and digital platforms against hosting ads for gambling and betting services.
Where do we go from here?
In his past work on the rules, Sayta has recommended “that the central government appoint an independent regulatory body on the lines of SEBI [Securities and Exchange Board of India] and IRDAI [Insurance Regulatory and Development Authority of India] to monitor and oversee the online gaming sector instead of outsourcing the responsibility to private bodies”.
If we are to stick with the self-regulatory model though, more can be done to smoothen grievance redressal for consumers and strengthen the independence of self-regulatory bodies.
Currently, users can file a complaint with a platform’s Grievance Officer—for the most part, these complaints have to be acknowledged within 24 hours and resolved within 15 days. If unsatisfied with how the complaint is decided, the user can approach the self-regulatory body that the company is a part of. A second appeal can be filed with the government-appointed Grievance Appellate Committee (GAC) currently being set up by the IT Ministry. At the first stage, companies have to provide a mechanism for users to file and track their complaints too.
This process can be further simplified for consumers, says Gupta. “The self-regulatory body, the GAC, and the online gaming intermediary should set up a single portal where consumers can register grievances,” suggests Gupta. “They should be able to automatically move to the next level of grievance redressal if they want. This is beneficial for consumers as they are not concerned with who is solving their grievance, but with getting their grievance solved. Even if the rules don’t mandate this, self-regulatory bodies should set up these systems.”
The system could also benefit from a strong appeals mechanism for companies, notes Kumar. “If one self-regulatory body denies registration to a game, what appeal mechanism does a company have?” he asks. “The company can of course approach another self-regulatory body, but that may delay the game’s launch. And approaching the IT Ministry directly could clog the system, which doesn’t serve anyone. There could be a tiered mechanism with different levels of appeals, instead.”
Part one of this series explores the rules’ ambiguities on online games and online gaming intermediaries, and the way forward. You can read it here
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Read More
- Summary: What Are India’s Proposed Rules For Online Gaming Platforms?
- Eight Major Issues With India’s Proposed Online Gaming Rules
- “A Farrago Of Confusing And Contradictory Provisions”: Jay Sayta’s 5 Concerns With India’s Online Gaming Rules
- Ongoing Saga Of “Disappointing Amendments”: Internet Freedom Foundation On Proposed IT Rules On Gaming
- Quick Take: Is It A Bird, Is It A Plane, Is It A Game?
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