The Ministry of Electronics and Information Technology (“Ministry”) has on, April 6, 2023, notified the amendments (“Amendment”) to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“Intermediary Guidelines”) in relation to online gaming.
Earlier this year, the Ministry had issued a draft of the amendment to the Intermediary Guidelines, inviting public feedback on the draft amendments. Our analysis of the draft amendments may be accessed here.
The following definitions have been inserted in the Intermediary Guidelines:
Argus Comment: As per these definitions, only an online real money game needs to be verified to become a “permissible online game”. All other type of online games are already permissible online games.
Due diligence measures to be observed by all online gaming intermediaries
Rule 3 of the Intermediary Guidelines lays down certain due diligence measures that must be observed by an intermediary. These measures have been specifically made applicable to an online gaming intermediary (“OGI”) as well. Accordingly, an OGI shall not host, display, publish or share an online game that causes user harm (means any effect which is detrimental to a user), or an online game that is not verified as a permissible online game, or any information that is in the nature of advertisement or surrogate advertisement or promotion of an online game that is not a permissible online game, or of any OGI offering such an online game.
Argus Comment: Hence an “online real money game” can be offered by an OGI only if it is a “permissible online real money game”, i.e., if such online real money game has been verified by an online gaming self-regulatory body in accordance with Rule 4A of the Intermediary Guidelines. As such, it shall be illegal for an OGI to offer an online real money game which has not been so verified, from the date the above obligation comes into effect. Please see section E below, for effective date of the above obligations.
Due diligence measures to be observed by an OGI offering access to a permissible online real money game
Rule 4 of the Intermediary Guidelines lays down the additional due diligence to be undertaken by a significant social media intermediary. Some provisions of this rule have now been made applicable to an OGI that enables the users to access any permissible online real money game. As a result, such an OGI shall be required to:
Further, Rule 4 has been expanded to include additional obligations which are to be observed only by an OGI who enables access to its users to any permissible online real money game. Accordingly, such an OGI, shall:
Argus Comment: An OGI offering a permissible online real money game is required to verify the identity of a user before accepting any deposit from such user, using the same procedure as is followed by a bank/NBFC for identification of a customer at the commencement of an account-based relationship. Therefore, Chapter VI of the RBI Master Direction – Know your Customer Direction, 2016 (“KYC Master Directions”) shall be applicable. Given the nuances of the KYC Master Directions, we feel it would be more effective if a simplified KYC procedure to be followed by OGIs, is specified in the Intermediary Guidelines itself.
Designation of online gaming self-regulatory bodies and verification of online real money games
A new rule, Rule 4A, has been inserted in the Intermediary Guidelines, sub-rule (1) of which provides that the Ministry may, by a notification in the Official Gazette, designate as many “online gaming self-regulatory bodies” (“OGSRB”) as it may consider necessary for the purposes of verifying an online real money game as a permissible online real money game under the Intermediary Guidelines. Rule 4A(2) provides the criteria to be fulfilled by an entity to be eligible to be designated as an “online gaming self-regulatory body”. A few other salient features of Rule 4A are as follows:
(i) the measures to ensure that such online real money game is not against the interests of sovereignty and integrity of India, security of the State, friendly relations with foreign States and public order;
(ii) the safeguards against user harm, including self-harm and psychological harm;
(iii) the measures to safeguard children, including measures for parental or access control and classifying online games through age-rating mechanism, based on the nature and type of content; and
(iv) the measures to safeguard users against the risk of gaming addiction, financial loss and financial fraud, including repeated warning messages at higher frequency beyond a reasonable duration for a gaming session and provision to enable a user to exclude himself upon user-defined limits being reached for time or money spent.
Effective date for application of Rules 3 and 4 in relation to online games
Rule 4B provides that the obligations under Rules 3 and 4 of the Intermediary Guidelines shall not apply in relation to online games until the expiry of a period of three months from the date on which at least three OGSRBs have been designated under Rule 4A. However, the Central government, may at any time before the expiry of the said three months, by a notification, direct that the obligations under Rules 3 and 4 shall apply in relation to an online game from a specified date.
The other Rules introduced by the Amendment shall come into effect from the date of publication of the Amendment, i.e., April 6, 2023.
Power of the Central Government to notify other online games
Rule 4C empowers the central government to direct an online gaming intermediary to comply with certain specified obligations (under Rule 3 and Rule 4) with respect to an online game offered by it, as if the online game is a permissible online real money game and specify the period within which all such obligations must be complied with by the online gaming intermediary. Such notification may be done by the central government if it considers it necessary to do so in the interest of sovereignty or integrity of India or friendly relations between states, public order, or preventing user harm. If an online game is notified under Rule 4C, the provisions of rule 4A shall apply to such game as they apply to a permissible online real money game.
Overall, introduction of the Amendment is a welcome move and is expected to go a long way in efficiently regulating the Indian online gaming industry and protecting the interests of the users.
This update has been contributed by Vinod Joseph (Partner) and Smriti Tripathi (Senior Associate).
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