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Games Law Explainer 2024

Games Law Explainer 2024

  • The Indian Government recognizes online gaming segment as having the potential to make significant contributions to the Indian economy through FDI investments, employment opportunities and revenue generation for the government. Recent industry report estimated that the Indian gaming community comprises ~425mn gamers in FY 2023 with a y-o-y growth @ 4-5%.1 This segment has cumulatively attracted investments close to USD 9 mn between FY20- FY23. According to another industry report,2 this segment is expected to reach USD 4.6 bn by 2025 at a Compound Annual Growth Rate of 21%. With increasing acceleration in internet access in India, as well as ~548mn smartphone users, approximately~430 mn unique downloads of gaming apps took place in in FY23.
  • Till now, real money gaming (RMG) sub- segment is dominant with a market share of 82.8% in FY23. Indian developers and publishers have thus, till now, focused on the RMG segment. Even the Statutes, Regulations and Policy initiatives have, till now, revolved around addressing the concerns of the RMG segment. The Government as well as the enforcement machinery (through the Judiciary and Law Enforcement Agencies) has focused on curbing illegal betting / gambling so as to protect and promote legal RMG online
  • Four major lobby groups represent the majority online gaming companies in India – the Internet and Mobile Association of India (IAMAI), the Federation of Indian Fantasy Sports (FIFS), the E-Gaming Federation (EGF) and the All India Gaming Federation (AIGF). As has been the theme, their focus has also, till now, revolved around lobbying for legitimizing RMG games of skill and to shed the baggage of illegal betting / gambling for such games. Their voluntary code of ethics has become the industry standard in protecting consumer interest and creating a healthy online gaming environment in India.
  • However, identifying the immense potential of non-RMG games, the Indian Government in its recent Consultation Paper has sought industry views on promoting Indian developers and publishers. The Government recognizes that popular online games are all developed in foreign countries as Indian developers lack the expertise and the wherewithal to market, distribute and manage their gaming communities in the absence of support from independent publishers. The discussion around promoting Indian developers and independent publishers has thus commenced in India. The focus is slowly shifting from the debate on illegal gambling / betting versus legal RMG games, to means and ways to tap into the revenue potential of the online gaming industry.
References:

1Ernst and Young, Navigating the evolving landscape for online gaming in India, (December 2023), available at <https:// assets.ey.com/content/dam/ey-sites/ey-com/en_in/news/2023/12/ey-new-frontier-online-gaming-report.pdf?download>

2FICCI and Ernst and Young, #Reinvent: India’s Media and Entertainment Sector is Innovating for the Future, (March 2024) [116], available at <https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/media-and-entertainment/2024/03/ ey-in-india-s-media-entertainment-sector-is-innovating-for-the-future-03-2024-v3.pdf?download>

(a) Games of chance versus Games of mere skill

  • Pre-independence, the Public Gambling Act, 1867 prohibited gambling, wagering, and betting on games whose outcome depended upon an element of chance. Staking money on horse racing, and games of ‘mere skill’ involving money, were excluded from the scope of the Judicial interpretations adopted the predominance test to assess whether a game is a game of ‘mere skill’. Thus, games that may have an element of chance but predominantly involved skill were excluded from the prohibition under the Public Gambling Act. The rationale behind this test is that a pure game of chance is entirely passive with the participant not having any control or having little determinative control in maximizing their expectation of success. On the other hand, games which require a predominant degree of skill, involving the use of strategic thinking, analysis of gameplay, accounting for rules of the game, time constraints, etc., fell in the category of permissible games of skill.
  • After India gained independence, it followed a federal structure and gambling activities became the subject of State laws. Consequently, the position of the law on exemption to gambling laws varies across states. Barring six (6) states, all States and Union Territories in India have adopted the same principles as enshrined in the Public Gambling Act, 1867, as a part of their local laws. What this means is that in all these states, games of mere skill involving money can be Two (2) states – Sikkim and Nagaland – have legalized betting, wagering and gambling as well, through strict licensing regimes. The State of Goa also has casinos but those are on territorial waters and not on land. On the other hand, four (4) states – Orissa, Assam, Telangana and Andhra Pradesh – have gone the other extreme and prohibited games of mere skill if they involve any form of real money. Thus, in these four (4) states, only free online games of mere skill are permitted, and not their paid versions.
  • Judicial attention has mostly focused on whether an online game falls within the prohibition or exemption under these gambling Till now, litigations have revolved around assessing that card games such as Rummy and Poker, and online fantasy gaming platforms like Dream11 and MPL, are games of mere skill. The online gameplay of Poker and Rummy has also been held to be legal by various High Courts. However, in context of the specific state legislations categorizing online Rummy and Poker to be prohibited games of chance, the issue is currently pending before the Supreme Court of India.
  • RMG online games in India is thus understood in this context – as involving games of mere skill where real money is involved as a Lobbying efforts to legitimize such RMG games of mere skill led to the introduction of the Online Gaming Intermediary Rules (OGI Rules) under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021, administered by the Ministry of Electronics and Information Technology. More about this is discussed in Part V(a).

(b) Prohibited advertisement versus legitimate brand extension

  • Advertisements of products or services that are otherwise prohibited from being produced, sold, or provided under any law in force in India is barred under the Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022 framed by the Central Consumer Protection Authority (CCPA) under the Consumer Protection Act, 2019. Notably, these Guidelines apply agnostic of the medium of dissemination of the advertisement. Violations could lead to stringent actions against the manufacturers, advertisers, publishers, intermediaries, social media platforms, celebrities, influencers, endorsers, and other relevant stakeholders. This includes penalties ranging up to USD 13,300 along with imprisonment for up to two years and up to USD 60,000 for repeated contravention along with imprisonment for up to five years.
  • However, these Guidelines permit the mere use of a brand name or company name which may also be applied to goods, product or service whose advertising is prohibited or restricted, if such advertisement is not otherwise objectionable as per the provisions set out in these guidelines.

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