10 key takeaways from IT ministry’s consultation with the online gaming industry

Industry associations in the online gaming sector can become self-regulatory bodies only after approval by the union ministry of electronics and information technology, and at least three such federations have expressed their wish to get that status, according to a public consultation held between the government and the industry earlier this week.

The union IT ministry is holding public consultations on the draft amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. After a consultation on Tuesday, several media reports had claimed that union IT minister Rajeev Chandrashekhar said that industry bodies cannot become SRBs under the proposed rules. But the minister only said that an industry body could not become a self-regulatory body of its own volition – it has to first be vetted by the MeitY, as the proposed rules say. 

During Tuesday’s consultations, representatives from All India Gaming Federation (AIGF), e-Gaming Federation (EGF), and Internet and Mobile Association of India (IAMAI) said that they would apply to become self-regulatory bodies. 

Let’s take a look at the key points discussed at the meeting.

Definition of ‘online game’

Multiple stakeholders wanted greater clarity about what is included in the definition of an online game. 

Joy Bhattarcharjya, the director general of Federation of Indian Fantasy Sports, a Dream11-led industry body, said that the definition needs to be narrowed down to relate to only real-money games. He also asked for more clarity about real money games outside of betting or gambling, which are illegal.

Vaibhav Gupta, the CEO of Noida-based Rein Games, asked if free to play games would also be included within the ambit of this regulation and if more clarity could be given about the general distinction between games of skill and games of chance.

Chandrasekhar said that this was raised during the consultation with parents and gamers as well, and that the IT ministry would re-examine the definition. 

In response to a point by online gaming lawyer Jay Sayta about the divergence between the stances of MeitY and the Directorate General of GST Intelligence (Ministry of Finance) on the differences between games of skill and chance, Chandrasekhar said that since this is a new sector, harmonisation between different ministries will take a little time. However, he clarified that online wagering on the outcome of any game is illegal. 

Powers of states

Concerns were also raised about whether these rules would offer any protection against coercive action taken by states. Bhattarcharjya, for instance, asked about a scenario where an SRB says that rummy is a game of skill but the state government calls it gambling. He also asked if these rules would supersede state laws. 

Suhaan Mukerji, partner at PLR Chambers which represents Gameskraft, said that any conflict between the SRB and the state would have to be adjudicated by the courts. He suggested that the SRBs could be required to follow state laws as well. 

Chandrasekhar said that MeitY could not guarantee protection against state-level authorities but citing compliance with these rules should count as sufficient defence. He also clarified that these rules did not supersede any state governments, and offline gambling and betting remained within the purview of the states. 

Sameer Chugh, the general counsel of Play Games 24X7, one of the three gaming unicorns in India, asked if SRBs could instead register online games on a state-by-state basis. For instance, if rummy is banned in a particular state, the SRB would not issue a mark of registration for online rummy in that state. Currently, when a game is banned in a state, the online gaming companies geo-block it from that state and do not accept any users to pay to play from that state. Such users are filtered out during the KYC process. 

Another suggestion included exempting a game from state laws if it was registered by an SRB. 

Chandrasekhar said that the rules need to operate without ambiguity and must not give any additional leeway to states to legislate on online gaming and gambling. The ministry is already re-examining Rule 3(1)(b)(ix) under which the online gaming company must abide by all laws that are in force in India, including state laws. 

Reduce KYC compliance burden

Multiple stakeholders wanted the KYC burden reduced. A representative for Paytm First Games, an AIGF member, suggested introducing graded compliance for online gaming intermediaries in terms of the KYC. He said that the RBI has a lower KYC compliance burden for small prepaid payment instruments (PPIs) compared to banks and e-wallets, and online gaming intermediaries could be treated like small PPIs. 

Chandrasekhar, however, reiterated his stance from last week’s consultation – there is no getting around the KYC requirements. 

Harmonise charters of SRBs

Since multiple self-regulatory bodies are possible under the proposed rules, the charters of different bodies should be harmonised, Trivikraman Thampy, the CEO of Play Games24X7, said. This will ensure that member gaming companies cannot go forum shopping in search of a more lenient self-regulatory body. Play Games24X7 is a member of e-Gaming Federation (EGF). 

These views were echoed by Ankush Gera, the founder and CEO of Junglee Games and another EGF member, and Manmohan Kohli, of the US-headquartered Gaming Labs International. Sarvjeet Moond of Mayhem Studios said that MeitY could detail the list of dos and don’ts for SRBs to follow. Sai Srinivas Kiran Garimella, the co-founder of Mobile Premier League, said that instead of the government, eminent industry experts, educationists, and other social stakeholders, could instead prescribe the dos and don’ts. 

Mayhem Studios is an AAA gaming studio under MPL. 

Chandrasekhar said that the government did not want to be too prescriptive in the rules about how the SRBs functioned and would only lay down the principles. He said that there are two ways for the self-regulatory bodies to work – stick to government-prescribed dos and don’ts or evolve a code of conduct as an industry. Chandrasekhar was in the favour of the latter but acknowledged that in last week’s consultation with gamers, students and psychologists, concerns had been raised about the impact of having industry-led self-regulatory bodies. 

The minister of state categorically stated that while multiple self-regulatory bodies will be possible, the government would not allow self-regulatory bodies to mushroom. 

On the constitution of the SRB, at least three stakeholders suggested including a judicial member in the board of directors. Chandrasekhar was not very receptive to the idea. 

Conflicts between the SRB and gaming company

Moond highlighted that currently, only users could escalate their grievances to the grievance appellate committee (GAC) that was introduced through an October 2022 amendment to the IT Rules, 2021. He proposed that this be extended to the industry too. 

Mukerji, however, said that the SRB model does not contemplate a dispute between the SRB and a member company since a member company voluntarily joins an SRB. In case a company does not agree with the SRB, it can either be expelled or leave of its own volition, and in such a case, an appellate body is not required. 

Introduce tests for games of skill and games of chance

Self-regulatory bodies should have an objective, data-driven, quantifiable way of distinguishing between game of chance and games of skill, Dilsher Malhi, the founder and CEO of Zupee, said. To that end, there are multiple tests possible.  

Dhruv Garg from All India Game Developers’ Forum (AIGDF) added that qualitative tests based on court judgments should also be considered. AIGDF is a collective under the AIGF which represents the interests of game developers. 

Chandrasekhar said that this could be figured out within the SRB. 

Register games with SRB after launch

InMobi suggested that games should be registered after they have been launched. If the game request for registration is nor approved, the game can be later withdrawn from the market. 

Paavan Nanda, co-founder and CEO of WinZO, said that WinZO is like the Netflix of gaming where they partner with third-party Indian gaming developers and share the revenue with them. He said that pre-launch registration with the SRB posed risks to their intellectual property and could lead to trade secrets being leaked. He also said that since they released a new game every few days, pre-launch registration is onerous for them. He proposed self-certification instead of pre-launch registration with the SRB wherein the game could run for six to 12 months while the SRB did the registration in the background.

Rohit Kumar of the Quantum Hub said that the registration could happen in two stages, with the game being launched after minimal requirements are met and full registration being completed later. 

Chandrasekhar asked about the consequences for a gaming company if its self-certification goes wrong. Abhishek Malhotra, partner at TMT Law, the firm that represents WinZO, said that in case of a false self-certification, the gaming intermediary could lose its safe harbour. 

Create significant online gaming intermediaries

To impose additional due diligence requirements on online gaming intermediaries, their size or number of users should be considered, just as is the case for significant social media intermediaries, Shahana Chatterji, partner at Shardul Amarchand Mangaldas on behalf of ASSOCHAM’s gaming council, said. 

Moond also highlighted that unlike all other intermediaries which have 72 hours to comply with orders from a lawfully authorised government agency, OGIs only have 24 hours. He said that this was especially difficult for smaller gaming studios. 

Chandrasekhar said that the MeitY was already discussing reducing the time for all intermediaries to 24 hours. 

Prescribe standards for RNG and NB certification

Kohli said that the proposed rules do not prescribe any requirements for issuing random number generator (RNG) and no-bot certificates. He said that international standards, such as ISO 17025, could be prescribed to create a standardised framework for the SRBs. Gaming Labs International offers testing and certification services for gaming regulators across the world. 

Reduce burden on other intermediaries

Garima Prakash of NASSCOM wanted more clarity about whether other intermediaries, such as cloud service providers, would also have to verify with the SRB if the intermediary is a registered entity given that CSPs usually do not have visibility into the content that their clients may host or store on their platforms. She said that the onus should fall on the online gaming intermediary only. 

Chandrasekhar, however, disagreed and said that even a CSP had a responsibility and would not be given a free pass. CSPs would have to ensure that gambling would not be offered via their services. 

Malhi, meanwhile, also said that intermediaries such as Google’s Play Store, Facebook and Instagram act as gatekeepers when it comes to advertising by gaming companies. Also, people should be allowed to download gaming apps from the Play Store directly, instead of having to sideload them from different websites, he said. WinZO reiterated this ask. In addition to daily fantasy sports and rummy, WinZO’s Nanda said that Google was blocking access to other games as well.