Regulating Online Gaming Under The Information Technology Law

Highlights & Shortcomings of the proposed amendments by the Centre to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021


The online gaming industry in India has undergone dramatic transitions in terms of not only its audience but even its terms of its modes of participation and engagement and is now being widely recognized as a sport away from realm of ‘gambling’. Online gaming has recently experienced a spike. People have turned to numerous online platforms for entertainment and comfort, particularly during the pandemic, which has led to the popularity of such gaming platforms. However, all human actions need to be governed and gaming online is not an exception, especially in the instant case which pertains to an industry growing at a whopping compound annual growth rate (CAGR) of 38% in India between 2017-2020, which is much more than China and even the United States of America. Legislators work hard to offer the best protection possible to the creators and players of these games


Until now, for the purpose of regulating gaming in India, most of the Indian legislations formed a fundamental differentiation between “games of skill” (such as Bridge, Rummy, Poker, Fantasy Cricket) and “games of chance” (such as Flash / Teen Patti). While there is a complete bar on monetization of games of chance, games of skill, on the other hand, are recognized away from the realms of gambling or betting. The Constitution of India confers upon the States the power to make specific laws on “Betting and Gambling”, for they are enumerated in Entry 34 of List II of the Seventh Schedule and hence, only State legislatures have the competence to pass laws pertaining to the same. Most of the States and UTs now have also passed special enactments dealing with the topic of online gaming.


IT Rules, 2021 amended to include “online gaming

Given the recent boom in online gaming, which still largely remains an unregulated territory, the Central Government, in an attempt to bring it within its legal clutches, has issued an amendment to The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (hereinafter referred to as the “IT Rules, 2021”), whereby for the first time, the term ‘online gaming’ has been defined without outrightly distinguishing between a ‘game of skill’ or ‘game of chance’.


Key Highlights

According to the draft Amendments:

  • an online game has been defined as any game that requires a user to make a deposit with an expectation of winning a prize which can either be in cash or kind. In other words, any game that involves ‘real money’ is covered under this definition.
  • also provide for registration of an online gaming intermediary which can be an intermediary offering one or more online games on the Internet.
  • publishing terms and conditions, privacy policies and ensuring that no online game permits ‘betting and gambling’ are some of the obligations of the online gaming intermediaries alongwith ensuring that all the information related to the online game is provided on their website. Hence, an online gaming platform such as Dream 11 is a perfect and clear example for an online gaming intermediary.
  • however, currently the draft Amendments does not impose any financial penalties for non-compliance of the above obligations. The only penalty that an intermediary will face is that it will lose the safe harbour granted under Section 79(2) of the Information Technology Act, 2000 (hereinafter known as the ‘IT Act, 2000’), which is that any social media intermediary that makes information, data, or communication links available to or hosts them for third parties shall not be subject to legal action.
  • further requirement of all online gaming intermediaries to register themselves with a self-regulatory body which in turn will be registered with the Ministry of Electronics and Information Technology.
  • the self-regulating body will also develop a framework to safeguard interests, evaluate and confirm that online games adhere to the said framework, and continually update and improve upon the same.
  • Ministry of Electronics and Information Technology also has the discretion to indicate / notify any game, if it deems it fit, under the ambit of the online games. It may do so to protect children, public order or the sovereignty and integrity of the nation.


Online Gaming – whether covered under IT Act?

At the very outset, it is pertinent to note that the subject ‘online gaming’ itself is not covered under the IT Act, 2000 per se, since gaming is not a central legislative subject. Interestingly, however, the Central Government has notified an amendment in the Allocation of Business Rules for appointing MeitY as the nodal ministry for online gaming. It is to be borne in mind that even though this amendment is only vital to clarify which Ministry shall possess administrative control over the subject of online gaming, it doesn’t tide over the Constitutional bar on the Central Government from exercising control and power over the same. Hence, it is not understood as to how the IT Rules, 2021 are being amended to include ‘online gaming’ without introducing necessary amendments in the parent statute itself.


Proposed Amendments full of lacunas

The online gaming industry is much more complex and self-evolving / developing to come within the ambit of the IT Rules, 2021 and it seems that the said draft amendments have not been able cover all the aspects of the said platform. For instance, as already highlighted above, the difference between “games of skill” and “games of chance” is not highlighted. This distinction is deemed imperative in most legislations surrounding gaming to different the same from betting / gambling. For instance, Section 2(1) of Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016 states that staking of money on games of skill has been excluded from the ambit of gambling, while Section 2(3) defines at length what are games of skill and lists them in Schedule A to the said Act.


Furthermore, it is unclear from the draft Amendments if the same exclusively apply to for-real-money games or also apply to games played for free. Even the conflict between the present licencing system and the state gaming laws of Meghalaya, Nagaland, and Sikkim is not addressed by the draft Amendments.


It appears that the primary intention behind introducing the draft Amendments is to prevent fraud and misuse, which can lead to betting and gambling. The law is often a national statute. This shows that the subject area on which the Central and State legislatures can pass laws is in conflict because of the Law. This duplication of legislative authority harms the proposed draft.


The draft also empowers the Online Gaming Commission, proposed to be setup under the Bill, to provide server licences to websites that offer online gaming, but it makes no mention of the interests of the creators of the online gaming platforms (that is, the online gaming intermediaries) or the players themselves. Given that they are primarily responsible for the industry’s existence and growth, these two parties are essential to the online gaming business. If their rights aren’t protected, the Commission will have greater authority over the platform than the site’s owners and users combined.


Therefore, in our opinion, for the online gaming industry to be regulated it is important that these shortcomings of the draft are looking into. Further, as the industry is relatively new and complex it is recommended it have a new legislation which will cover all the possible issues in the industry.

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