INTRODUCTION

India’s Ministry of Electronics and Information Technology (“MeitY”) has invited public feedback on a set of proposed amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“Intermediary Rules”) to regulate online gaming (“Draft Amendment”).

The Intermediary Rules set out specific compliance and due diligence obligations for intermediaries operating in India. Those platforms that comply with these requirements may rely on the safe harbour protection granted under Section 79 of the Information Technology Act 2000 (“IT Act”) against any liability arising due to any third-party information, content, or data hosted by them. However, under the Draft Amendment, intermediaries involved in the provision or the advertising of online games are required to comply with additional due diligence obligations to remain eligible for the safe harbour protection.

KEY CHANGES

(i) Introduction of definitions for “online games” and “online gaming intermediaries”

The Draft Amendment seeks to regulate intermediaries that deal with “online games”. It defines an “online game” as any game offered on the internet where a user makes a deposit with the expectation of earning winnings. The terms “deposit” and “winnings” include in-kind and non-cash components. Additionally, under Rule 6A of the Draft Amendment, MeitY has the power to classify certain games as online games (regardless of whether users are required to make deposits) if such games pose a risk to the security of the country or are likely to addict or cause other harm to children.

An “online gaming intermediary” has been defined as any intermediary that offers one or more online games. Hence, this definition will include gaming aggregators, gaming platforms, and (presumably) game originators that offer multiplayer games or games that allow user interaction and communication.  

(ii) Self-Regulatory Bodies

The Draft Amendment proposes to establish self-regulatory bodies that will be registered with MeitY. These bodies will comprise of individuals who will constitute the Board of Directors as well as online gaming intermediaries which will be its members. They will be responsible for ensuring their members’ compliance with regulations, developing frameworks, and grievance redressal processes to secure consumer interests as well as undertaking appropriate testing and verification procedures to ensure the conformity of the online games with said framework.

Prior to the registration of an online game, the self-regulatory bodies are required to ensure that such games as made available by their members satisfy specific criteria such as:

(a) the game must be offered by an intermediary which is a member of the regulatory body;

(b) the game must comply with applicable laws, including those on gambling and betting; and

(c) the game must not be against state interest.

Accordingly, game developers must ensure that their games are designed in conformity with these registration criteria. Furthermore, online gaming intermediaries are mandated to display evidence of such registration while offering online games on their platforms.

(iii) Due Diligence Obligations under Draft Amendment for Online Gaming Intermediaries

In addition to undertaking general due diligence requirements under the Intermediary Rules, online gaming intermediaries are broadly required to:

(a) set out public procedures for protection of users’ deposits, withdrawal or refund of deposits, distribution of winnings as well as inform users about the risks of financial losses, and any addictions associated with their games;

(b) publish a random number generation certificate and a ‘no bot’ certificate;

(c) undertake RBI-mandated KYC procedures to verify the identities of users during account registration processes;

(d) have a physical presence in India;

(e) appoint a grievance officer, a chief compliance officer, and a nodal contact person who should be available on a 24/7 basis for coordination with law enforcement authorities. These personnel must necessarily be employees of the online gaming intermediary and must be based in India, and;

(f) implement a mechanism for receiving complaints.

(iv) Additional Obligations on Intermediaries that Host, Publish, or Advertise Online Games

Intermediaries that host, publish, or advertise online games for a fee are required to undertake due diligence to verify whether the underlying online games are registered with self-regulatory bodies, and must publish the fact of such registration on their platforms through a demonstrable or visible mark.

WAY FORWARD

MeitY has recently been tasked with overseeing regulations on online gaming and while its quick initiative to issue a regulatory framework is commendable, the Draft Amendment appears to have overlooked certain aspects of the rapidly growing online gaming industry in India. While the Draft Amendment’s proposed self-regulatory mechanism is an efficient way to govern this dynamic industry, the excessive due diligence obligations, ambiguous definitions, and a general lack of clarity on the legality of certain online games require further in-depth consideration. We will be writing to MeitY with our feedback – do feel free to reach out if there are issues that you believe may be worth considering.

Please reach out to Mathew Chacko and Aadya Misra for queries.