India’s IT Ministry has come out with draft rules to regulate online gaming by amending the IT Rules, 2021, a week after it was made in charge of the sector. The proposed amendments require gaming companies to be part of a self-regulatory body, only publish games approved by such bodies, follow know-your-customer (KYC) norms, and set up a grievance redressal system, among other things.
“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.” — IT Ministry
The Ministry has invited feedback from the public on these draft amendments by January 17, 2023. The feedback may be submitted on MyGov.
Why does this matter: Due to the lack of central regulations for online gaming, multiple Indian states have come out with their own regulations to address some of the harms posed by the sector. This, in turn, has created uncertainty for online gaming companies. The proposed rules are expected to provide some clarity and certainty to this fast-growing sector.
Who is covered by the new rules?
Online gaming intermediaries: The current IT Rules, 2021, primarily cover social media intermediaries, but many of the proposed amendments are targeted at a new class of intermediaries—online gaming intermediaries, which are defined as intermediaries that offer one or more online games.
Online game: An online game is defined as “a game that is offered on the Internet and is accessible by a user through a computer resource if he makes a deposit with the expectation of earning winnings”.
- Deposit refers to any “deposit made or committed to, in cash or in kind, by the user for participating in an online game.”
- Winnings refer to “any prize, in cash or in kind, that is distributed or intended to be distributed to a user of an online game based on the performance of the user and in accordance with the rules of such online game.”
Free games not covered: Online games that are free to play don’t appear to fall under the ambit of the proposed rules.
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What are online gaming platforms required to do?
Online gaming companies are expected to follow all the due diligence that is applicable to social media intermediaries under the IT Rules, 2021, and then a few additional requirements specific to gaming intermediaries. Overall, here are some key requirements for online gaming platforms:
- Set up a grievance redressal system: Platforms will have to appoint a Grievance Officer, who is an employee of the company and resident in India, and publish the name of the Grievance Officer and his contact details as well as the mechanism by which a user can file a complaint with the officer. These complaints have to be acknowledged within 24 hours and resolved within 15 days. In some instances, this timeline is shortened to 24 hours. The user must also be provided with a way to track the status of their complaint. If the user is not satisfied with the resolution, they can appeal to the self-regulatory body that the gaming platform is a part of and then to the Grievance Appellate Committee, which the IT Ministry is currently in the process of setting up.
- Only host registered games and display verification marks: Before hosting or publishing or advertising an online game, intermediaries must ascertain whether that online game has been registered with a self-regulatory body (more on this in the next section). The intermediary should also “display a demonstrable and visible mark of registration on all online games registered by the self-regulatory body.”
- Be transparent about monetary aspects: The rules and regulations, privacy policy, terms of service and user agreements of an online gaming platform must inform users about all the online games offered by the platform along with “the policy related to withdrawal or refund of the deposit made with the expectation of earning winnings, the manner of determination and distribution of such winnings, and the fees and other charges payable by the user for each such online game” as well as “the risk of financial loss and addiction associated with the online game.” Additionally, the platform must also describe the “measures taken for the protection of deposit made by a user.”
- Publish random number generation and no bot certificates: Gaming platforms must prominently publish “a random number generation [RNG] certificate and a no bot certificate from a reputed certifying body for each online game” offered by them along with relevant details of the same. An RNG certificate confirms the statistical randomness in the numbers generated by the platform, meaning that the numbers are actually random and not skewed in any way to favour the platform or certain users.
- Verify user identity (KYC): When users create an account with a gaming platform, the platform must identify the user and verify his identity as per the know-your-customer norms laid out by the Reserve Bank of India for the financial sector. The procedure being followed should be conveyed to the user.
- Voluntary account verification: The gaming platform should allow its Indian users to “voluntarily verify their accounts by using any appropriate mechanism, including the active Indian mobile number of such users” and provide them with a demonstrable and visible mark of verification, which is visible to all users.
- Appoint a Chief Compliance Officer: Gaming platforms are required to appoint a Chief Compliance Officer, who is a key managerial personnel or a senior employee of the platform who is a resident in India. The officer will be responsible for ensuring compliance with the IT Act, 2021, and will be liable for any non-compliance.
- Appoint a nodal contact person: Gaming platforms are required to appoint “a nodal contact person for 24×7 coordination with law enforcement agencies and officers to ensure compliance to their orders.”
- Have a physical contact address in India: Platforms must have a physical contact address in India published on their website or mobile app.
- Provide any information requested by the government within 24 hours: Gaming platforms are required to, within 24 hours of receiving an order, “provide information under its control or possession, or assistance to the Government agency which is lawfully authorised for investigative or protective or cyber security activities.”
Establishment of self-regulatory bodies and their functions
- Self-regulatory bodies must register with the IT Ministry: A section 8 company or a society registered with the Societies Registration Act, 1860, can apply with the IT Ministry to be a self-regulatory body (SRB). The IT Ministry may accept the registration based on factors like the number of online gaming intermediaries who are members of the SRB, its track record in promoting responsible online gaming, its general repute, the absence of conflict of interest, etc.
- Constitution of a self-regulatory body: The Board of Directors or governing body of any SRB must consist of:
- “an independent eminent person from the field of online gaming, sports or entertainment, or such other relevant field;
- an individual who represents online game players;
- an individual from the field of psychology, medicine or consumer education, or such other relevant field; and
- an individual with practical experience in the field of public policy, public administration, law enforcement or public finance, to be nominated by the Central Government;
- an individual from the field of information communication technology.”
- SRBs must function independently from gaming platforms: The Articles of Association or bye-laws of any self-regulatory body must ensure it’s “functioning independently and at arm’s length from its member online gaming intermediaries.”
- Framework to verify games to be established by SRBs: Every self-regulatory body must develop a framework to test and verify online games that take into consideration:
- “the content of an online game registered or to be registered with such body, with a view to safeguard users against harm, including self-harm;
- appropriate measures to be undertaken to safeguard children;
- measures to safeguard users against the risk of gaming addiction and financial loss, including repeated warning messages at higher frequency beyond a reasonable duration for a gaming session, provision to enable a user to exclude himself upon user-defined limits for time and money spent; and
- measures to safeguard against the risk of financial frauds.”
- Registering online games: Self-regulatory bodies may register any online game targeted at those above the age of 18 that is being offered by its members if the game does not “contain anything which is not in the interest of sovereignty and integrity of India, defence of India, security of the State, friendly relations with foreign States or public order” and is in conformity with other laws, including laws related to gambling and betting.
- Report to submit to central government: SRBs must communicate to the central government a list of all games registered with it and the bases of the same.
- The framework must secure conformity with Section 69A: Self-regulatory bodies must evolve “a framework to secure conformity with the interests referred to in section 69A of the [IT] Act.” While considering “the necessity or expediency of issuing a direction under section 69A of the Act in respect of an online game that is registered with a self-regulatory body,” the central government will evaluate conformity based on this framework and the report submitted by the SRB.
- Granting membership to gaming platforms: Every self-regulatory body can grant membership to an online gaming intermediary as long as the intermediary is only offering games registered with the self-regulatory body, is following all the other requirements under these Rules, and has a track record of “offering online games responsibly while securing the interests referred to in section 69A of the IT Act.”
- Grievance redressal: Self-regulatory bodies must have a time-bound mechanism to address any user complaints that have not been resolved satisfactorily by a gaming platform.
- Violation of rules by self-regulatory bodies: If the IT Ministry is of the view that an SRB is in non-compliance with any rules, the Ministry can communicate the same in writing and direct the SRB to take measures to rectify the situation. If the SRB is still in non-compliance, the Ministry has the power to suspend or revoke its registration.
What are the additional requirements for all intermediaries?
In addition to the existing due diligence that is applicable to them under the IT Rules, 2021, all intermediaries, including social media intermediaries, significant social media intermediaries and online gaming intermediaries must:
- Allow advertising of only registered games: Before hosting or advertising an online game, social media intermediaries must ascertain whether that online game has been registered with the concerned self-regulatory body. The intermediary should also display the proof of such registration.
- Ensure users don’t promote illegal online games: Make reasonable efforts to ensure that its users “do not host, display, upload, modify, publish, transmit, store, update or share any information that […] is in the nature of an online game that is not in conformity with any law for the time being in force in India, including any such law relating to gambling or betting,” or targeted at children under the age of 18. Essentially, this means that users should not be allowed to promote online games that are illegal under some laws.
Government power to notify any game as “online game”
Clause 6A of the proposed amendments allows the IT Ministry to notify any other game played on the internet as an “online game”subject to the rules mentioned above even if it doesn’t involve making any deposit, as long as the Ministry is “satisfied that such game may create a risk of harm to the sovereignty and integrity of India or security of the State or friendly relations with foreign States or public order, on account of causing addiction or other harm among children.”
Note (3 January, 6:50 pm): The government powers section was added.
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