This note captures the key takeaways of Ministry of Electronics and Information Technology (MeitY)’s amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (IT Rules 2021) to regulate online gaming (the Amendment). The Amendment proposes a self-regulatory structure for the online gaming industry. Broadly:
- Online games played for real money that are deemed ‘permissible’ may be offered in India. The verification of the permissibility of these games will be done by Self-Regulatory bodies (SRBs) recognised by MeitY and are meant to weed out games considered betting and gambling. Online games that are not deemed permissible run the risk of being blocked in India. Companies enabling access to online real money games will have to disclose information about its policies and practices (e.g., on protecting users’ deposits) to its users. And comply with the obligations including responding to law enforcement requests and conducting know-your-customer (KYC) before accepting deposits.
- Self-regulatory bodies will create frameworks to verify online games, in accordance with the baseline set out in the Amendment. The frameworks have to factor in preventing harm to users (e.g., through gaming content oversight, and measures to prevent financial loss or addiction).
- MeitY has powers to exercise oversight in various ways, including through nominating a member to the board of directors of self-regulatory bodies, blocking access to non-compliant online games played for real money, and extending applicability of the Amendment to online games played without real money.
Next steps: The obligations related to online games will come into force three months after at least three self-regulatory bodies are notified by MeitY, unless MeitY notifies the application of the rules beforehand.
Fact-checking powers: While the Amendments predominantly pertain to the regulation of online gaming, MeitY has also brought in changes to curtail misinformation. MeitY now has the power to notify a fact check unit of the central government to identify fake, false, or misleading information pertaining to any business of the central government. It is likely that the government will appoint the Fact Check Unit of the Press Information Bureau, Ministry of Information and Broadcasting. In cases where information has been flagged as false or misleading, intermediaries will be expected to take down the content.
B. Key definitions and explanations
- ‘Online game’ means a game that is offered on the internet and is accessible by a user through a computer resource or an intermediary.
- ‘Online real money game’ means an online game where a user makes a deposit in cash or kind with the expectation of earning winnings on that deposit.Winnings means ‘any prize in cash or kind’.
- ‘Online gaming intermediary’ (OGI) means any intermediary that enables the users of its computer resource to access one or more online games. OGIs therefore refer to all gaming entities irrespective of the whether it involves real money or not.
- ‘Online gaming self-regulatory body’ (SRB) means a body notified as an SRB under rule 4A of the Amendment. The SRB will be responsible for verifying an online real money game as a permissible online real money game.
- ‘Permissible online game’ means a permissible online real money game or any other online game that is not an online real money game.
- ‘Permissible online real money game’ means an online real money game which an SRB has verified according to the Amendment. All online real money games require to be verified by the SRB before they can be offered.
- ‘User harm’ and ‘harm’ means any effect which is detrimental to a user or child, as the case may be.
- ‘Prominently publish’ means publishing in a clearly visible manner on the home page of the website or the home screen of the mobile based application, or both, as the case may be, or on a web page or an app screen directly accessible from the home page or home screen.
C. Compliance for OGIs under the Amendment
1. Obligations for all OGIs: The Amendment introduces differentiated obligations for OGIs offering online real money games, and other online games. However, all OGIs irrespective of game format must comply with intermediaries’ obligations under rule 3 in the IT Rules 2021, including:
a. Not offering games that cause user harm. User harm is defined broadly as any effect that is detrimental to a user or child. Online gaming content or gameplay may be experienced differently by different users/children, and what may be detrimental may vary across users/children. Therefore, compliance for OGIs may be challenging, without a clear uniform understanding on what may be considered detrimental. Additionally, the lack of clarity could result in government intervention based on subjective views of harm, such that relatively benign games (e.g., Candy Crush) may be considered harmful and be subjected to compliances under the Amendment.
b. Desisting from advertising or surrogate advertising of online real money games that are not permitted.Since October 2022, the Indian government has taken note of offshore betting and gambling websites that advertise on over-the-top platforms and sought to curb such ads. This provision appears to be aimed at continuing this effort, to support the online gaming industry, by providing mechanisms to weed out bad actors.
c. Prominently and clearly publish details of its grievance redressal officer. OGIs must also have a system to confirm receipt of complaints from users. Users can appeal decisions of OGIs grievance redressal officer to the Grievance Appellate Committee (GAC).
d. Complying with orders of the GAC and publish a compliance report of the same on their website.
2. OGIs offering permissible real money online games have additional obligations:
a. OGIs should not offer financing on its own or through a third-party for users to play games on their platform. Earlier in 2023, MeitY and the Ministry of Home Affairs, banned 138 loan and betting apps with alleged linkages to China. Among other allegations, these apps were reportedly offering users loan facilities to gamble online. The requirement not to offer self-financing or links to third-party applications appears to be targeted at such activities.
b. Procure and display registration of all the permissible online real money games with SRB.
c. Inform users of its KYC procedure, SRB framework for verification of online real money games as permissible, policies for refund/withdrawal/deposit and methods to secure the users’ deposits.
d. Follow KYC as per RBI norms, and verify users’ identities before accepting deposits from users. The draft amendments to the IT Rules 2021 released in January 2023 (January 2023 Version), required that KYC be done at the time of commencement of a user’s account. This has been changed to conducting KYC before accepting deposits from users. The Amendment has stuck to the January 2023 Version’s requirement to follow KYC norms set out by the RBI, but only for OGIs offering permissible real money online games.
e. Appoint a Resident Grievance Officer (RGO), Chief Compliance Officer (CCO), who is a managerial/ senior employee residing in India. And appoint a nodal contact person, other than the CCO and RGO, and residing in India, to ensure 24×7 coordination with law enforcement.
f. Have a physical contact address in India.This requirement appears to be geared towards exercising oversight on online gaming companies offering real money games in India, without actually being located in India. And to weed out bad actors such as companies that offer offshore betting and gambling.
h. Complying with law enforcement requests for information related to offences arising from online games, within 24 hours. This is less than the 72 hours given to other intermediaries.
3. MeitY power to extend obligations to online games not played for real money: MeitY can enforce compliance on online gaming intermediaries of additional due diligence requirements under the Amendment even for online games played without real money, if said online game can 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, or may cause user harm. Such games must comply with the obligations of intermediaries, and must get verified by SRBs. The power given to MeitY here, to bring even non-real money online games at power with permissible real money games under the IT Rules 2021, could target games that the government considers addictive or harmful. The explanations of “harm” and “user harm” are broad and could lead to relatively benign games being saddled with compliances under the IT Rules 2021. For instance, a Tamil Nadu bench in late 2022, observed the emotional, physical, and psychological side effects of children playing games like “Subway Surfer”. If MeitY were to take a similar view, it could require such a game to adhere to SRB verification process under the IT Rules 2021, which includes such games adhering to the frameworks evolved by the SRB (e.g., on de-addiction).
D. SRB framework under the Amendment
1. Recognition of SRBs:
a. Criteria for SRB recognition by MeitY: MeitY can recognise Section 8 companies (not-for-profit companies under the Companies Act, 2013) whose-
i. Membership has a track record of offering and promoting online games responsibly,
ii. Membership is representative of the gaming industry,
iii. Governing documents comply with the Amendments’ requirements,
iv. Board of Directors (Board) are qualified to perform functions of an SRB and are free of conflict of interest.
v. SRBs must have adequate funds to carry out the functions of the Amendment.
b. SRB’s governing documents: The SRB’s memorandum of association (MoA) and articles of association (AoA) must ensure that (a) the relevant provisions of the IT Rules 2021 are enforced free of conflict of interest and at arm’s length from the SRB’s Members; (b) requisite disclosure and reporting by and accountability of its Member in relation to the online games verified by such body; (c) any changes to Board composition, disclosure requirements, or SRB functioning in a manner that is free of conflict of interest, are done with prior approval of MeitY; and (d) provide clear rules for accepting, and revoking/ suspending Members, provided an opportunity to be heard is granted. The requirement that the SRB be a section 8 company is to ensure accountability and transparency of the SRB’s functioning. The specificity of the MoA and AoA is to ensure that the SRB functions independently and is not subject to industry capture. In January 2023, MeitY Minister of State, Rajeev Chandrasekhar specifically highlighted the issue of preventing industry capture in self-regulation.
c. SRB composition: The SRB’s Board must consist of eight people- (i) an individual with special knowledge of or practical experience in the online gaming industry; (ii) an individual with a track record of advocacy of the interests of users of online games; (iii) an educationist; (iv) an expert in the field of psychology or mental health or such other relevant field; (v) an individual with special knowledge of or practical experience in the field of information and communication technology; (vi) an individual who is or has been a member or officer of an organisation for the protection of child rights; (vii) nominee of MeitY; (viii) and other such persons appointed with previous approval from MeitY. The Board composition appears to be geared towards ensuring representation of all interest groups in the governance of the SRB and permissibility of online real money games. It is also geared towards ensuring the independent functioning of the Board from its OGI members.
2. SRB verification of online real money games:
a. Verification process: SRBs will verify if an online real money game can become a permissible real money online game. SRBs can initially rely on the information furnished by Members for initial verification, which will be valid for 3 months. SRBs should endeavour to complete verification of online games within 3 months.
b. Criteria for verification: The online game must not involve wagering on any outcome and must comply with relevant provisions of the IT Rules 2021, the SRB’s framework for verification of online games; and the laws on the age of competency to contract. The SRB framework for verification must secure the interests referred to in section 69A of the Information Technology Act 2000, in online games verified by it. The framework can include- (a) criteria for the SRB verification of content on the online real money game (e.g., to protect against self-harm); (b) measures for safeguarding children (e.g., through parental access controls. Or age rating of content); and (c) measures to safeguard users against gaming addiction, financial loss/fraud (e.g., self-exclusion option for users or repeated warning messages beyond a duration of play).
c. Appeals and grievances on verification: There are two avenues to challenge the verification of an online real money game per the Amendment. Firstly, any person can appeal the order of the SRB’s Grievance Officer to the GAC. Secondly, MeitY itself can take the view that an online game has not been appropriately verified and give the SRB the opportunity to rectify the same. The avenue of appealing to the GAC could lead to subjective interpretations of the Amendment that do not account for the technical nature of online real money games. MeitY has led the charge on regulating online gaming, and spearheaded discussions with the online gaming industry. And as such would be better placed to understand the technicalities of online games to effectively exercise oversight on the SRB’s verification of an online real money game.
3. Other obligations of SRBs:
a. Public listing of permissible online real money games: Maintain and update a list of all permissible online real money games verified by the SRB, on its website and application. The list should also have the following information-
- details of the person who sought verification of such online real money game,
- the dates and period of such verification,
- whether it was an initial or final determination,
- details of the framework used to determine conformity of the online real money game,
- a statement regarding the bases for making such determination, and
- the details of the suspension or revocation, if any, of such determination.
b. Public updated listing of past and present membership: Ensure that an updated list of all its present and former member entities, the dates of their acceptance as member entity, their corporate or other business-related identity number and details, and the details of any suspension or revocation of their acceptance as member entity, is always maintained and published on their mobile application, website, or both.
c. Publishing grievance redressal information: Prominently publish the contact details of the Grievance Officer and method for to file a complaint related to their verification of their online game, on the SRB’s website, mobile application or both. The Grievance Officer must acknowledge receipt of the complaint within twenty-four hours and resolve it within fifteen days of receiving the complaint.
4. MeitY oversight of SRBs and their verification of online games:
a. MeitY oversight of verification of online real money game: MeitY can, of its own accord to a complaint from any person, take the view that the verification of an online real money game was not in compliance with the Amendment. And after giving the SRB an opportunity of being heard, communicate the fact of such non-conformity to that SRB and direct it to take measures to rectify the matter.
b. Blocking permissible online real money games: MeitY may consider the SRB’s documentation reasoning the verification of online real money game, while blocking access to the game, through its powers under section 69A of the Information Technology Act 2000.
c. Revocation of notification of SRB: MeitY can suspend or revoke notification of an SRB, after issuing the SRB notice and giving the SRB an opportunity to be heard. While the matter is being decided, MeitY can issue orders to safeguard users’ interests or any other orders it feels necessary.
Read MeitY’s Amendments here.
Read the redline to the IT Rules 2021 to see what’s changed in relation to online gaming and fact checking here .
This article is authored by Shambhavi Ravishankar (consultant) and Rahil Chatterjee (associate) with inputs from Aman Taneja (principal associate), Ikigai Law.
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