The Online Gaming Intermediaries Regulations: A Comprehensive Overview of Recent Changes

On April 6, 2023, India implemented a new legal framework to regulate online gaming by introducing amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Amendment Rules, 2023”).

The journey leading to the gaming amendments began in early 2023 when the Ministry of Electronics and Information Technology (“MeitY”) proposed a co-regulatory regime for Online Gaming Intermediaries (“OGIs”) through the proposed amendments also known as draft rules to the intermediary rules.

The IT Amendment Rules, 2023 represent a positive step in regulating a dynamic sector and establishing a regulatory framework for an industry that has long been riddled with disruptions, and misconduct by certain factors.

The key changes and their potential impact are as:

1. A Broader Scope: The gaming amendments encompass all games offered on the internet. While free-to-play games are generally allowed, entities providing them are now classified as OGIs. However, most substantive obligations under the amendments apply to the operation of real money games (online real money games), which are games that users can play after making deposits.

This leaves room for potential future regulations and interpretations, possibly considering playing fees or payments for in-game items as deposits, thereby regulating free to play e-sports as Online Real Money Games.

2. Lighter Compliance for SRBs: The gaming amendments have simplified the compliance requirements for Self Regulatory Bodies (“SRBs”), which is a positive development. Previously, it required SRBs to submit reports to the central government for each registered online game, along with the basis for such registration.

Under the gaming amendments, SRBs are only required to publish a report on their website listing the verified online real money games, their validity period, reasons for approval, and details of any suspensions or revocations.

Additionally, if an SRB’s registration is revoked, the central government can issue directions to real money OGIs and intermediaries to allow continued access by users to online real money games that were verified by the SRB. This provides clarity to intermediaries and users regarding the status of these games.

3. Clearer Obligations for OGIs: The gaming amendments combine the previously extensive obligations for OGIs, with the obligations applicable to significant social media intermediaries. Specific obligations for real money OGIs are also included. These requirements encompass KYC and user verification, as well as prohibit financing or facilitating credit for players of online real money games by real money OGIs.

Compliance standards for real money OGIs, such as notifying users of changes in terms and complying with law enforcement requests or court orders, are more stringent compared to significant social media intermediaries.

The central government has the power to designate OGIs not offering online real money games as real money OGIs based on specific parameters, and such OGIs will need to comply with certain obligations, including appointing a chief compliance officer, having a physical address in India, implementing grievance redressal mechanisms, registering with the SRB, displaying visible registration marks, and providing detailed terms and conditions.

4. Advertisement Related Obligations for Intermediaries: The gaming amendments also highlight the roles of non-gaming intermediaries such as advertisers. Intermediaries now have a due diligence obligation to ensure that OGIs do not make available online games causing user harm and that online real money games are verified.

Furthermore, intermediaries are prohibited from advertising non-permissible online real money games and any real money OGIs offering them. This area is expected to receive regulatory attention, as evidenced by a recent advisory from the Ministry of Information and Broadcasting concerning advertisements by online betting platforms. A better approach could be to require SRB verification for online real money games and adopt an actual knowledge standard for other online games regarding potential user harm.

5. The Harm Standard: The gaming amendments emphasize the prevention of user harm. SRBs are tasked with prescribing mechanisms and standards to prevent harm, and the government is empowered to establish rules for online games to prevent harm.

Intermediaries are required to make reasonable efforts to ensure that an online game causing user harm is not published, irrespective of deposits. It is essential to have a clear and objective definition of harm to avoid ambiguity. The definition of harm used in other draft legislation, such as the Draft Digital Data Protection Bill, 2022, could be considered.

6. Mandatory Registration: The gaming amendments mandate that online real money games must be verified by an SRB to be permissible. However, with the vast number of games and formats, not all real money games may obtain valid certification in time, especially considering the three-month validity period for self-certification and the delayed implementation of certain parts of the amendments.

7. KYC: While the gaming amendments have limited these obligations to the time before accepting a deposit, an opportunity for staged KYC requirements, similar to prepaid instruments, may have been missed.

8. SRBs and Safe Harbour: The gaming amendments introduce an important improvement in the interaction between SRBs and the central government. Although the harder powers to suspend or de-register SRBs remain, the central government can now engage with srbs on individual formats and seek de-registration after providing an opportunity for a hearing.

in conclusion, the gaming amendments include several positive aspects, but there is room for further refinement through clear guidance and clarification to avoid ambiguity for intermediaries, including OGIs, as well as to provide clear directions to SRBs. Such improvements will continuously enhance the effectiveness and fairness of the regulatory framework for online gaming in India.