The Ministry of Electronics and Information Technology (“MEITY”) has published draft amendments (“Draft Online Gaming Rules”) to the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“Intermediary Guidelines 2021”) in order to regulate online gaming and invited feedback on the proposed amendments. The Draft Online Gaming Rules, in addition to regulating online gaming, also aim to enable the growth of the online gaming industry in a responsible manner. Feedback on the Draft Online Gaming Rules may be submitted by January 17, 2023.
Section 30 of the Indian Contract Act, 1872 declares agreements by way of wager as void and prohibits any suit for recovering anything alleged to be won on any wager. Currently, there is no central law governing online gaming and states have promulgated their own statutes for the same. The majority of these state laws have banned ‘gaming’, which is defined as any type of wagering or betting other than wagering or betting on a horse race and excluding lotteries. Additionally, the term ‘gaming’ excludes games of pure skill.
In Karnataka, gaming is regulated by Chapter VII of the Karnataka Police Act, 1963 (“KPA”). As per Section 2(7) of the KPA, ‘gaming’ does not include a lottery but includes all forms of wagering or betting in connection with any game of chance, except such wagering or betting on a horse-race run on any race-course within or outside Karnataka, which satisfies certain specified conditions. ‘Game of chance’ has been defined to include a game of chance and skill combined and a pretended game of chance or of chance and skill combined, specifically excluding any athletic game or sport. Sections 79 and 80 of the KPA punish persons involved in operating gaming houses or participating in such games. Section 176 of the KPA clarifies that the provisions of sections 79 and 80 shall not be applicable to any game of skill and to wagering by persons taking part in such game of skill.
However, since most of the state statutes on gaming are pre-internet, they do not throw much light on online gaming. Sikkim is one of the few states that regulates online gaming by two statutes, namely, Sikkim Online Gaming (Regulation) Act, 2008 and Sikkim On-Line Gaming (Regulation) Rules, 2009. Under these statutes and rules, both gambling and online-gambling are legal.
The Draft Online Gaming Rules do not modify the existing rules regarding gaming and gambling.
An “online game”, has been defined by the Draft Online Gaming Rules, to mean a game that is offered on the Internet and is accessible by a user through a computer resource if he makes a deposit with the expectation of earning winnings. A ‘deposit’ has been defined to mean the deposit made or committed to, in cash or in kind, by the user for participating in an online game. Therefore, even providing credit card details for the purpose of payment collection after the online game, would also amount to a deposit.
The Draft Online Gaming Rules allow for self-regulatory bodies to be registered with MEITY. Self-regulatory bodies may register online games of online gaming intermediaries who are its members, provided they meet certain criteria. A self-regulatory body may be a company incorporated under section 8 of the Companies Act 2013, or a society registered under the Societies Registration Act, 1860.
Some of the criteria for registering self-regulatory bodies are as follows:
Such self-regulatory bodies are also required to have a grievance redressal mechanism to resolve complaints.
Every self-regulatory body is required evolve a framework to secure the Section 69A Interests, undertake testing and verification to establish conformity of online games with such framework, continuously update and further evolve such framework, testing and verification protocols, and shall prominently publish the same on its website, mobile based application or both, as the case may be. Such framework may, among other things, also include suitable criteria regarding—
Online gaming intermediaries
The Draft Online Gaming Rules define an “online gaming intermediary” to mean an intermediary that offers one or more than one online game.
The Draft Online Gaming Rules require online gaming intermediaries to comply with a number of requirements, some of which are as follows:
Registration of online games
Online games can be registered by online gaming intermediaries with any self-regulatory body. Some of the criteria for such registration is as follows:
The self-regulatory body with which an online game is registered shall allow the online gaming intermediary offering such online game to display a demonstrable and visible mark of registration stating that the online game is registered with the self-regulatory body.
Membership with self-regulatory body
Online gaming intermediaries can become members of self-regulatory bodies. A self-regulatory body may grant membership to an online gaming intermediary, having regard to the following criteria, namely:—
Compliance by Intermediaries
The Draft Online Gaming Rules propose to amend the Intermediary Guidelines 2021 by inserting a new sub-clause (ma) in Section 3(1) of the Intermediary Guidelines 2021, to require every intermediary, before hosting or publishing or advertising an online game for a consideration, is required to ascertain from the relevant online gaming intermediary and verify from the concerned self-regulatory body, whether such online game has been registered with such body, and shall display on its website, mobile based application or both, the fact of such registration. Though the Draft Online Gaming Rules do not contain a provision which states that it mandatory for online games to be registered with self-regulatory bodies or for that online gaming intermediaries should become members of self-regulatory bodies, the new sub-clause (ma) proposed to be inserted in Section 3(1) of the Intermediary Guidelines 2021 suggests that it would be obligatory for each online game to be registered with a self-regulatory body and for the relevant online gaming intermediary offering such game on the internet to become a member of a self-regulatory body.
Please find a copy of the Draft Online Gaming Rules, here.
This update has been contributed by Vinod Joseph (Partner), Jitendra Soni (Partner), Anushkaa Shekhar (Associate) and Kopal Agarwal (Associate).
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