An inter-ministerial task force, set up by the Ministry of Electronics and Information Technology (MeitY) to propose contours of a national-level legislation to regulate online gaming, has proposed the creation of a central regulatory body for the sector, clearly defining what games of skill and chance are, and bringing online gaming under the purview of the Prevention of Money Laundering Act, 2002, among other things.
The task force, set up by MeitY in May 2022, included the CEO of government think tank Niti Aayog, and secretaries of ministries including IT, Home, Finance, Information and Broadcasting, and Consumer Affairs, among others. The task force is understood to have prepared a final report of its recommendations and submitted it to the IT Ministry.
Why a central-level law?
Online gaming so far has been a state subject, but state governments have said they find it extremely difficult to enforce certain rules like geo-blocking certain apps or websites within the territory of their state. Also, there is a concern that rules passed in one state are not applicable in another, which has caused inconsistency in how the online gaming industry is regulated in the country. State governments also do not have enough blocking powers like the Centre to issue blocking orders for offshore betting sites.
Stakeholders have highlighted a number of societal concerns that can arise from the proliferation of online games in the country. There have been a number of reported incidents of people losing large sums of money on online games, leading to suicides in various parts of the country. Along with that, there is currently no regulatory framework to govern various aspects of online gaming companies such as having a grievance redressal mechanism, implementing player protection measures, protection of data and intellectual property rights, and prohibiting misleading advertisements.
For online gaming businesses, the inconsistency has led to uncertainty. The thinking within the government is to have a nodal agency that will address all issues related to online gaming, including introducing a uniform law to determine what forms of online gaming are legally allowed.
How big is the online gaming market in India?
The revenue of the Indian mobile gaming industry is expected to exceed $1.5 billion in 2022, and is estimated to reach $5 billion in 2025. The industry in the country grew at a CAGR of 38% between 2017-2020, as opposed to 8% in China and 10% in the US. It is expected to grow at a CAGR of 15% to reach Rs 153 billion in revenue by 2024. India’s percentage of new paying users (NPUs) in gaming has been the fastest growing in the world for two consecutive years, at 40% in 2020 and reaching 50% in 2021.
According to a report by EY and FICCI, transaction-based games’ revenues grew 26% in India, with the number of paying gamers increasing by 17% from 80 million in 2020 to 95 million in 2021.
What are the recommendations of the task force?
According to a source aware of the task force’s report, a central-level law for online gaming should apply to real money and free games of skill, including e-sports, online fantasy sports contests, and card games among others. Casual games with no real money element in the form of stakes may be kept outside the scope of such rules, unless they have a high number of users in India, or permit the publication or transmission of information in the nature of any inappropriate content like violence, nudity, addictive content or misleading content.
It has also recommended creating a regulatory body for the online gaming industry, which will determine what qualifies as a game of skill or chance, and accordingly certify different gaming formats, seek compliance and enforcement.
A three-tier dispute resolution mechanism, similar to that prescribed under the Information Technology Rules, 2021 for online streaming services, consisting of a grievance redressal system at the gaming platform level, self regulatory body of the industry, and an oversight committee led by the government should be put in place for online gaming.
Any online gaming platform – domestic or foreign– offering real money online games to Indian users will need to be a legal entity incorporated under Indian law. These platforms will also be treated as ‘reporting entities’ under the Prevention of Money Laundering Act, 2002, and will be required to report suspicious transactions to the Financial Intelligence Unit-India.
Which ministry will be in charge of the regulation?
The task force has suggested that MeitY may act as the nodal ministry to regulate online gaming, except for the e-sports category on which the Department of Sports can take the lead. The scope of the regulation by MeitY should only cover online gaming, that is, games of skill, and the issues of online betting and gambling being games of chance in nature should be excluded from its scope, the task force is learnt to have recommended.
Certain other aspects of online gaming such as advertisements, code of ethics relating to content classifications etc. could be regulated by the Information and Broadcasting Ministry, while the Consumer Affairs Ministry can regulate the sector for unfair trade practices.
What did the task force say about offshore betting apps?
On the aspect of prohibiting games of chance, gambling websites or apps being played online, the proposed Digital India Act can include it in the list of prohibited user harms that will not be permitted, the task force has said.
“Many offshore betting and gambling websites which are illegal in India have become popular among Indian users. Despite being based outside India, some of these websites are widely advertised in Indian newspapers and TV channels, and allow users to transact in Indian rupees through popular digital payment modes such as internet banking, UPI and popular wallets,” the task force is learnt to have said in its report.
Last month, The Indian Express had reported that betting websites such as 1xBet and FairPlay had placed surrogate advertisements on streaming services during the Asia Cup and the US Open.
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