Home / Compliance Cues / Trade & Regulatory Compliance Updates / MeitY has proposed amendments, in relation to ‘online games’ and ‘online gaming intermediaries’, to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021

MeitY has proposed amendments, in relation to ‘online games’ and ‘online gaming intermediaries’, to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021

MeitY has proposed amendments, in relation to ‘online games’ and ‘online gaming intermediaries’, to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021

The Ministry of Electronics and Information Technology (“MeitY”), on 2nd January 2023, invited public feedback on the proposed draft amendments, in relation to ‘online games’ and ‘online gaming intermediaries’ (“Draft Rules”), to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Rules”). The Draft Rules were proposed right after the notification of the Government of India (Allocation of Business) (Three Hundred and Seventieth Amendment) Rules, 2022 as per which MeitY has been made the nodal ministry for “matters relating to online gaming”. 

Some of the key draft amendments proposed by the MeitY to the IT Rules are as follows:
  1. Key definitions: The Draft Rules propose to introduce definitions for the terms “online game” and “online gaming intermediary”:
      • Online game: An online game has been defined as a game that is offered on the “Internet” and is accessible by a user through a computer resource if the user makes a “deposit” with the expectation of earning “winnings”. The explanation to this proposed definition clarifies that a deposit can be made by a user in cash or in kind.
    Further, as per the explanation, ‘winnings’ would mean a prize (in cash/kind) distributed/intended to be distributed to a user of an online game based on their performance and in accordance with the rules of the online game, and, the term ‘Internet’ would mean a “combination of computer facilities and electromagnetic transmission media, and related equipment and software, comprising the interconnected worldwide network of computer networks that transmits information based on a protocol for controlling such transmission”
    • Online gaming intermediary: An online gaming intermediary has been defined to mean an ‘intermediary’ offering one or more than one online game.
  2. Due diligence by an intermediary: The Draft Rules seek to amend Rule 3 of the IT Rules, which provides the due diligence requirements of an intermediary, in the following manner:
    • Firstly, the Draft Rules propose to bring an online gaming intermediary within the scope of an intermediary for the purposes of due diligence under the IT Rules.
    • As per the Draft Rules, an intermediary would be required to take reasonable efforts to cause the user of the computer resource to not “host, display, upload, modify, publish, transmit, store, update or share any information” that is identified as fake or false by the fact check unit at the Press Information Bureau or other agency authorized by the Central Government for fact checking or a department of the Central Government responsible for fact checking. In fact, this draft amendment was introduced in the recent version of the Draft Rules that were published on 17th January 2023. Further, intermediaries would also be required to take such reasonable efforts in respect of information in the “nature of an online game” which is not in conformity with the existing laws, including the laws related to gambling and betting, as well as those related to competency of a person to enter into a contract.
    • Before hosting/publishing/advertising an online game for a consideration, an intermediary would be required to ascertain, from both the online gaming intermediary as well as the self-regulatory body (which will be established if the Draft Rules are implemented in their current form), that the online game has been registered with the self-regulatory body. The intermediary would also be required to display that the online game is registered on its website, mobile based application or both.
  3. Additional due diligence by online gaming intermediary: The MeitY has proposed additional due diligence requirements that an online gaming intermediary will be required to observe while discharging its duties under the IT Rules. Some of the additional requirements that would be applicable to online gaming intermediaries if the Draft Rules are implemented in their current form are as follows:
    • A “demonstrable and visible” mark of registration of the online game will have to be displayed by the online gaming intermediary.
    • The online gaming intermediary would be required to have a physical contact address in India.
    • Through the rules and regulations, privacy policy, terms of service and user agreements of the online gaming intermediary, the users of the computer resource will have to be informed about inter alia, all the online games offered by the online gaming intermediary as well as details regarding withdrawal/refund of deposit, risk of associated financial loss and addiction, the KYC procedure for registration of a user’s account, framework of the self-regulatory body of which such online gaming intermediary is a member.
    • A random number generation certificate and a no bot certificate from a reputed certifying body will have to be published on the website/mobile based application/both of the online gaming intermediary for each online game offered by it.
    • The online gaming intermediary will also be required to identify the user and verify such identity at the time of commencement of user account-based relationship for an online game, using the procedure followed by entities regulated by the Reserve Bank of India for identification and verification. Further, users must be allowed to voluntarily verify by using appropriate mechanism and such voluntarily verified users will be provided with a demonstrable and visible mark of verification.
    • A grievance redressal mechanism will have to be established that would also allow the complainants to track the status of their complaints.
    • Further, a grievance officer, a Chief Compliance Officer as well as a nodal contact person will have to be appointed.
    • Any change in the rules and regulations, privacy policy or user agreement would have to be informed, in English or any of the 22 languages specified in the Eighth Schedule of the Constitution, immediately after such change is effected.
  4. Establishment of Self-regulatory body(ies): The MeitY has proposed to establish self-regulatory bodies (“SRO”) that will be responsible for registration and developing a framework to secure conformity by the online games and online gaming intermediaries.
    • These SROs will be required to register with the MeitY as per the criteria provided in the Draft Rules. This registration can be suspended or revoked by the MeitY.
    • Further, a registered SRO can register an online game and grant membership to an online gaming intermediary basis the criteria for such registration/membership as provided in the Draft Rules.
    • A registered SRO will be required to communicate the fact of the recognition of every online game registered with it to the Central Government.
    • A registered SRO will also be required to establish a grievance redressal mechanism for resolution of complaints of users that have not been resolved by the grievance redressal mechanism of its member online gaming intermediary.
  5. Notification of any other game as an online game: As per the Draft Rules, MeitY can notify and treat a game, that has been made available on the Internet and is accessible through a computer resource ‘without making a deposit’, as an “online game” if the MeitY is satisfied that such a game can create risk of harm to “the sovereignty and integrity of India or security of the State or friendly relations with foreign States or public order, on account of causing addiction or other harm among children”.
Our Take:

There are certain concerns regarding the Draft Rules that need to be addressed by the MeitY. Firstly, there is no central legislation on online gaming. The Draft Rules seek to regulate online gaming in the absence of a legislative enactment for regulating online gaming. This is a concern since the existing law would in any case prohibit gambling applications/ games of chance. Glaring lack of legislative enactment for regulating online games which are games of skill (both paid/unpaid models) is of significant concern.

Secondly, publishers of games cannot possibly be classified as intermediaries because they curate and publish their own content and do not fall within the legislative definition of what constitutes an intermediary. In the true sense, the term ‘online gaming intermediaries’ would include game stores, such as the Xbox Games Store or the PlayStation Store, and other online mobile app stores. To expect these intermediaries to verify and authenticate users and to undertake due diligence steps, which should ideally be borne by the publishers of online games, will not only be impractical but perhaps unachievable. 

Moreover, to expect online intermediaries, such as app stores and game stores, to individually register online games published by third party publishers is not only unrealistic but also goes against the way gaming businesses are structured. The Draft Rules also present the possibility of complicating the relationship between users/subscribers and publishers of online games since the Draft Rules, in their current form, require intermediaries to virtually bypass the gaming publishers while engaging with the users/subscriber of individual online games to comply with the additional due diligence requirements. 

The Ministry would also have broad powers to declare any game which is made available on the Internet and accessible by a user through a computer resource, without making any deposit, as an online game which goes beyond the scope of what the Draft Rules seek to regulate.

While the intention behind introducing the Draft Rules is vested in the interest of the end user of an online game, the above noted concerns need further consideration by the MeitY. There is a need for a robust uniform regulatory framework for online games which is balanced and provides the much-needed assurance to the online gaming industry whose fates have mostly been decided by the States under their respective laws.   

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