Centre proposes self-regulatory body for online gaming companies

Draft policy calls for grievance redress mechanism, mandatory verification of players

The Centre has proposed a self regulatory body to certify what is permitted as an ‘online game’ in India and is all set to begin public consultations on the draft online gaming policy, revealed Union Minister of State for Electronics and Information Technology (IT) Rajeev Chandrasekhar in a press conference.

The draft was released on Monday and consultations will begin next week. The final rules are expected by early February.

“This process is expected to begin next week. We hope that by early February, we will have the final rules,” he said.

Gaming start-ups, companies, investors, and players will be part of the discussions.

The draft has proposed a grievance redress mechanism and mandatory verification of players and physical Indian addresses for online gaming companies in India. This comes just days after the IT ministry was appointed as nodal ministry for online gaming.

The public comments on the draft rules will be shared by January 17.

The rules do not reveal if they are related to games of skill or chance, which has been a topic of debate among industry stakeholders.

“Any game that allows for or permits wagering on its outcome will not be permitted,” said Chandrasekhar, adding, “All online gaming companies will have to register with the SRO that will decide on the action required to be taken in line with rules."

The SRO will have a board of directors with five members from fields as diverse as online gaming, public policy, IT, psychology, and medicine. The body will have to make sure that the registered games do not have 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, or incites the commission of any cognisable offence relating to the aforesaid”.

The game must be in conformity with the laws of the land, including regulations related to gambling and betting. The draft rules also prescribed a registration mark on all online games registered by the SRO.

The body will then provide membership to an intermediary, which will observe due diligence required under the rules, “including reasonable efforts to cause its users not to host, display, upload, publish, transmit or share an online game not in conformity with Indian law, including any law on gambling or betting”.

“Like an IT intermediary, the online gaming intermediary will be required to undertake certain additional due diligence, know-your-customer of users, transparent withdrawal/refund of money, distribution of winnings, fee, and also registration with the ministry, including the appointment of grievance and nodal officers, and formal redress mechanisms,” says Nakul Batra, associate partner, DSK Legal.

The online gaming intermediary shall prominently publish on its website, mobile-based application or both, a random number generation certificate and a no-bot certificate from a reputed certifying body for each online game offered by it, along with relevant details of the same.

It will also appoint a grievance officer who will be its employee and a resident of India. Also, a chief compliance officer will be appointed to coordinate with law enforcement agencies in India.

“While these amendments reflect the government’s overall intent to bring the online gaming industry under regulations, the narrowing down of the definition of online games to those involving deposits, along with other focal points proposed to target games involving financial implications of users, prize money earnings, indicate that the government seeks to particularly cater to such online games in which users’ financial implications are likely to come into play,” says Kritika Seth, founding partner, Victoriam Legalis-Advocates & Solicitors.

“While such requirements are undoubtedly the need of the hour for the sector to thrive in the right manner and manage traffic on these platforms, the quantum of compliance may become a speed-breaker to the gaming industry,” says Batra.

The industry by and large welcomed the draft.

“We believe this is a great first step for comprehensive regulation for online gaming and will hopefully reduce the state-wise regulatory fragmentation that was a big challenge for the industry. These rules will go a long way in ensuring consumer interest whilst helping the industry grow responsibly and transparently. These rules will also be a start in curbing the menace of anti-national and illegal offshore gambling platforms,” says Roland Landers, chief executive officer (CEO), All India Gaming Federation.

“These moves will eventually help the government establish a regulated and sustainable industry while promoting responsible gaming,” says Sameer Barde, CEO, E-Gaming Federation.

Trivikraman Thampy, co-founder and co-CEO of gaming unicorn, Games24x7, also believes it is a “step in the right direction” and will help in the sustainable growth of the industry.

“This will boost the legitimate domestic online gaming industry, ensuring greater transparency, consumer protection, and investor confidence,” he adds.

Nitish Mittersain, joint managing director and CEO of Nazara Technologies, says it will ensure the safety of players and responsible gaming. However, he adds that there are a lot of details which will need to be studied in greater depth.

“There is a one-month consultation period. By then, we will provide our inputs to the government,” he adds. 

What’s in store

• Consultations for draft rules —released on Monday — will begin next week and final rules are expected by early February
• Gaming start-ups, companies and investors, and players to be part of the discussions
• Online gaming companies will be covered under the new IT Rules that were issued in 2021 for social media platforms
• The rules do not reveal if they are related to games of skill or chance
• Industry by and large welcomes the draft rules