Analyzing the Implications of MeiTY’s New Online Gaming Rules on the Indian Gaming Industry

Online gaming has emerged as one of India’s fastest-growing industries, with the number of gamers expected to increase by 30 million from 2022 to 2023. As the number of users continues to rise, it has become crucial to introduce appropriate laws to regulate the online gaming industry.

On January 02, 2023, the Ministry of Electronics and Information Technology (“MeitY”) proposed an amendment to the (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Amendment Rules, 2023”). The IT Amendment Rules, 2023, provide regulation for social media intermediaries and significant social media intermediaries.   

The aim behind implication of new online gaming rules is to enforce greater due diligence by online gaming and social media intermediaries in respect of online games and false misleading information related to government business.

This marks an important milestone for the Indian online gaming industry. Through the amendment rules, the Indian government has taken a firm step towards safeguarding Indian gamers and their funds against online scams and frauds, encouraging responsible gaming, and protecting young and vulnerable users against online abuse and indecency.

Appointment of Self Regulatory Organizations (“SROs”) 

The Indian government will appoint multiple SROs comprising industry representatives, educationists, and other experts such as child experts, psychology experts, etc. To begin with, the government will notify three SROs.

What will these SROs do?

SROs will be responsible for declaring online games permissible based on whether games allow wagers. The SRO can declare online real money games as permissible if it is satisfied that the online real money game does not involve wagering on any outcome.

The guidelines make it mandatory for online gaming platforms to register with SRO. While such a norm is necessary to ensure good efficiency and quality of the services provided by such platforms, it has not specified the constitution, procedure, timeline, and mode of the appointment.

What are the New Rules?

The new rules can be summarized as follows:

• Establishment of Multiple SROs: The Indian government will set up several SROs comprising representatives from various sectors, tasked with determining the permissibility of online games.
• Content and Identity Verification: Gaming firms or platforms are prohibited from offering, publishing, or sharing online games with harmful or banned content. They must also verify the identity of online gamers.
• Prohibition of Gambling-Related Games: Online games involving any form of gambling, including advertisements related to gambling, will be prohibited.
• Guidelines for Preventing Addiction and Mental Harm: SROs will ensure that games adhere to guidelines aimed at preventing addiction and mental harm. Measures such as parental controls, frequent warning messages, and age-rating systems will be implemented.
• User Voluntary Withdrawal: Gamers will have the choice to voluntarily withdraw from the games once they reach their self-defined limits for time or money spent.

Additionally, it is clarified that real money gaming is allowed as long as money is not based on the game result.

What are the new rules aiming to do?

The MeitY has asked SROs to prominently mention on their websites and/or mobile apps a framework for verifying an online real money game. This framework aims to achieve the following objectives:

• Ensuring User Safety: The MeitY requires SROs to prominently display on their websites and/or mobile apps a framework for verifying online real money games. This framework is designed to prevent user harm, including self-harm and psychological harm, arising from online gaming.
• Protecting Children: The rules seek to safeguard children from accessing inappropriate or harmful online games through the implementation of parental controls, access restrictions, and age-rating mechanisms.
• Mitigating Gaming Risks: To reduce the risk of gaming addiction, financial loss, and fraud, the rules mandate the use of repeated warning messages to caution users during extended gaming sessions. Additionally, gamers will have the option to exclude themselves from gameplay once they reach user-defined limits for time or money spent.
• Upholding National Interests: The rules also ensure that online real money games do not undermine the interests of India’s sovereignty and integrity.

Due Diligence Requirements

The guidelines necessitate gaming platforms and customers to undergo Know Your Customer (“KYC”) requirements during registration. While some level of KYC is essential, implementing it to the same extent as required for opening a bank account could have adverse effects. This might pose challenges for start-ups trying to attract customers and potentially act as a barrier to market entry.

Moreover, many users may be reluctant to provide personally identifiable information, such as residence proof, merely for accessing an online game. This is especially true given that a considerable number, if not the majority, of users may be minors under 18 years old. Even if such users agree to share such information, gaming companies would face various data privacy and consent-related risks that they must address. 

For gaming companies, the cost of conducting extensive KYCs may not be feasible, particularly for smaller organizations or startups. The process of KYC demands significant time and resources, including acquiring and implementing specialized software and staff training.

A more sensible approach would be for the government to relax the KYC requirements for accessing online games, limiting them to games that involve a certain threshold of financial inputs or investments from the users. In this way, the burden of extensive KYC procedures would be reduced, while ensuring compliance where necessary.

How have stakeholders reacted to the proposed rules?

Online gaming companies and industry associations have welcomed the new rules. Some have called it a landmark moment, while others view it as a catalyst for fostering gaming innovations in India.

Sai Srinivas, CEO and Co-Founder of MPL, expressed his enthusiasm, stating, “The release of the new online gaming rules marks a watershed moment for the industry, as it acknowledges and differentiates online gaming intermediaries from gambling activities. These rules are poised to propel India towards global leadership in the gaming domain, contributing to the enduring success of Brand India and the ‘Create in India’ initiative.”