Regulating Online Gaming in India: Analysing the Gaming Draft Bill and MeitY Report

17th May, 2023 - 7:01 am Categories: Gaming Industry 0 Comments

Introduction

The gaming industry in India has multiplied itself in size and content in recent years and is expected to grow as big as ₹400 billion by 2025. Multiple reasons like inexpensive internet, a critical mass of young population, high disposable income etc.[1] are rendered for this massive growth of online gaming apart from the pandemic lockdowns.[2] Playing games online via downloaded applications or URLs, including role-playing, shooting, building, real-time strategy, etc., can be considered online gaming.[3] This growing gaming flambeau also includes the rise of fantasy sports,[4] where players assemble virtual teams of proxies of professional players and earn points based on real-time sporting events. Considering that playing such games require predictive team selections and has a significant monetary mooring, some commentators see this as effectively betting.[5] However, the jurisprudence in India has given the benefit of the doubt to the gaming companies and does not consider fantasy sports as betting[6] but protected under Article 191(1)(g) of Indian Constitution as a business activity.[7]

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Hitherto, charters issued by self-regulatory bodies like All India Gaming Federation (AIGF) and Federation of Fantasy Sports (FIFS) regulated online gaming.[8] However, things are pointing towards a massive change. In April this year, the central government tabled in the Lok Sabha the Online Gaming (Regulation) Bill 2022. Furthermore, the Ministry of Electronics and Information Technology (MeitY) has created a task force for drawing out the contours of national online gaming regulation in India. Even more recently, a draft gaming bill has been introduced under the IT Rules, 2021 for which the MeitY has been declared the nodal ministry.

Analysing the points made by draft gaming bill and meity report

It is imperative to point out that the central government seems to have neglected or digested the idea of gaming falling under List-II, i.e., the State List. In fact, even if one considers online games that say some online fantasy sports (OFS) to be betting, they would fall under Entry 34 (Betting and Gambling) of List-II.[9] Otherwise, as the jurisprudence stands, it would fall under Entry 26 of List-II, which deals with intra-state trade and commerce.[10]

A. Crucial aspects of draft online gaming (regulation) bill

The key takeaway from the bill is that a commission would be formed to regulate online gaming. It would consist of Chairperson, Vice-Chairperson and five other members nominated by the Central Government. This would include at least one expert from the field of law, law enforcement, and cyber technology each.[11] This body would be tasked with granting licenses to online gaming websites and platforms, also suspend or withdraw the licenses when subject to lapses. The commission also has the power to request the police to investigate on matters.[12] This bill however does not apply on those providing back-end services from India.[13]

The other aspect which need most attention are the data protection questions which flow from the bill. In the statement and objects section of this bill, highlights the problems of the “in-app” purchases in games which leads to wastage of national resources, causes addiction and mental health problem to children. It is strange to see however, paradoxically no provision deals with the idea of user welfare and precautionary measures with this regard. It is imperative that the bill deals with such problems and has provisions in pursuance of the same. The OECD’s recommendations on children in digital environment can be incorporated,[14] and also OECD’s guidelines for digital service providers.[15] An important lesson is that data collected from players be monitored and limited because behavioral actions can be tracked down and specific loot crates or baits can be given to continue an addictive user experience. It is important to address data protection concerns in this bill itself because the data protection bill fails to address specific demands of data protection when it comes to online gaming.

The Age Conundrum

It is pertinent to note, that since the joint parliamentary committee has deleted the idea of guardian data fiduciaries it would be difficult for the gaming companies to know the age of users. Firms might have to build a “separate parental consent flow off the platform.”[16] It has been argued that it also leads to a consent fatigue for age of consent for processing data is 18 years old.[17] Which basically means that there will be multiple level of verification required which might cause threat to the business because it damages user interface and children below 18 years are a critical mass of players. It is difficult to understand why the definition of child has been raised to such a high threshold, which is 18 years. The argument that it has been done for consistency within legal framework does not hold water, for even in the POCSO Act, definition of child is two years less than 18 years. This seems also inconsistent even with GDPR standard where in the age is 13-16 years of a child. The draft bill, thus, ideally should have dealt with the concept of consent, and what it considers as a legitimate user base of games. For, from this would flow the idea crucial answers of welfare.

Reasonably speaking, even if we were to take a game which in terms of content might not have something affront to children’s mental constituencies and stability, the chat box feature in many games has shown to cause various problems to children. It is rife with sexism, racism, problematic opinions etc. which might be damaging to the child’s growth. The bill falls short of any provisions which deal with such pressing issues. Algorithms might also pose a very pertinent threat to the user base, even if it was not initially envisioned by the gaming company. There is substantial literature on algorithmic injustice and the bill falls short of issuing any protections from disturbing mechanisms. Algorithms are black-boxes out of which any random even might be born, or a chain of unforeseeable events might be born which is affront to child rights and user welfare. With the growth of data and data processing the institution of algorithms becomes stronger and deeply disturbing. This is an entirely new frontier, which will be further possibly explored in the metaverse idea. Thus, a statutory protection form algorithms is need of the hour. Since it is beyond the scope of this paper to inquire into algorithmic injustice, this has been dealt briefly.

B. Shortcomings of the Draft Bill

Section 2 (f) defines, Online Gaming Server as “(sic) any main frame computer or set of computers, installed or maintained by the Licensee, that accepts, processes, stores and validates transactions arising out of Online Gaming, and which manages, monitors and controls the entire system of Online Gaming;”[18] This definition poses two problems. One, that is does not define what a “main frame” actually means. Two, this can be further vague when we take into account blockchain gaming where determining a mainframe is difficult and even futile.  The bill also has a major shortcoming for it fails to distinguish between what constitutes games of skill and what constitutes game of chance. This will lead to a host of confusion in the market, for a lot of guidelines are made by regulatory bodies with the idea of game of skill, for example adverting.

Roadmap Laid Down by the MeitY Task Force

The important proposals include setting up a central regulatory body to regulate online gaming, bringing online gaming under Prevention of Money Laundering Act, 2002 (PMLA)[19] which includes these platforms being legal “reporting entities” under PMLA, and amending the Information Technology Act, 2000.[20] The IT ministry would be heading online gaming, except for esports and games of chance.[21] Furthermore, a central law must govern online games of skill and games with monetary consideration, for example, various esports, fantasy sports, card games etc. Some exceptions can be made for casual games not involving real money unless they have a substantial user base. Regarding regulation, MeitY would act as the nodal ministry, with the Ministry of Information and Broadcasting (MIB) looking into advertisements, code of ethics etc. and the Consumer Affairs Ministry regulating unfair trade practices.

In June 2021, MIB issued an advisory directing the newspapers, publishers of online news platforms, and private satellite television channels preventing them from displaying advertisements of betting and gambling online sports. They were also requested to comply with the Advertising Standard Council of India Guidelines on Online Gaming issued in 2020. The problem with the guidelines of this order is that they do not spell out what constitutes a game of skill and a game of chance in online gaming, which can be attributable to the lack of statutory definition in this regard. This leaves the platforms responsible for the determination, which might lead to the continued advertisement of betting games as observed.[22]  Even at the cost of repetition it must be noted that the proposed bill also does not distinguish between game of skill and chance. Thus, the delegation to MIB hides the problem at the heart of it, which remains unresolved.

First, it is unclear how the consumer affairs ministry would oversee anti-trust in the online gaming market and whether the mandate of CCI would stand abridged. Since this is unlikely and not feasible, it would be plausible to believe that the Consumer Affairs Ministry would refer cases to CCI, which it seems problematic. In that respect, challenges emerge. Considering children and young adults constitute the consumer base, consumer welfare is difficult to define and understand, and the action of CCI and the Consumer Affairs ministry should be gauged and analyzed very carefully. The Convention of Rights of Child says that best interests of child ought to be the primary consideration when a decision is made by courts of law, legislature, social welfare bodies etc.[23]

Second, the online gaming industry is expected to multiply further due to the metaverse. This came to light, especially during Epics’s anti-trust tussle with Google and Apple’s.[24] Where it was brought to light that gaming is a battle ground for multiple tech companies and they would likely want to have the first mover’s advantage, or effectively emerge as a bigger umbrella company. Microsoft has also initiated the metaverse-building exercise through the acquisition of Tencent, the second largest gaming company. This translates to the fact that competition jurisprudence and legal framework need an upgrade themselves to address these questions. Online gaming is a much larger battleground than what it seems, and would pose conflicts at multiple levels.

Conclusion

In conclusion, the Indian gaming industry has experienced a significant boom in recent years and is expected to grow further by 2025. The rise of fantasy sports has also played a major role in this growth, and while some consider it as effectively betting, it is protected under Article 191(1)(g) of the Indian Constitution as a business activity. However, with the introduction of the Online Gaming (Regulation) Bill 2022 and a task force for drawing out the contours of national online gaming regulation, things are pointing towards a massive change. The bill proposes the formation of a commission to regulate online gaming, which would be responsible for granting licenses and suspending or withdrawing them when subject to lapses. However, it is imperative that the bill addresses data protection concerns, age verification, and the welfare of children in digital environments. There is also a need to regulate the algorithms used by gaming companies to prevent algorithmic injustice. Overall, while the Indian gaming industry is poised for growth, it is important to regulate it responsibly to protect users’ interests and ensure sustainable growth.

Author: Puneet Srivastava, 2nd Year Law Student at West Bengal National University of Juridical Sciences, Kolkata, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

[1] Mediawire, Big Bang Growth of India’s gaming Industry, June 07, 2022, Available at https://economictimes.indiatimes.com/news/international/business/big-bang-growth-of-indias-gaming-industry/articleshow/92053190.cms (Last Visited on)

[2] KP Amin, Mark D. Griffiths, DD Dsouza, Online Gaming During the Covid-19 Pandemic in India: Strategies for Work Life Balance, International Journal of Mental Health and Addiction. 2022; 20(1): 296-302

[3] Michael Ray, Online Gaming, February 17, 2023, Available at https://www.britannica.com/technology/online-gaming (Last Visited on)

[4] Santosh Vikram Singh, The Rise of Fantasy Sports in India, December 02, 2022, Available at https://www.foxmandal.in/the-rise-of-fantasy-sports-in india/?utm_source=rss&utm_medium=rss&utm_campaign=the-rise-of-fantasy-sports-in-india (Last Visited on)

[5] Sunieta Ojha, Why fantasy sports is a gambling, not a sport, says Sunieta Ojha, January 15, 2022, Available at  https://www.forbesindia.com/article/sports-tech-special/why-fantasy-sports-is-gambling-not-a-sport-says-sunieta-ojha/77297/1 (Last Visited on)

[6] Gurdeep Singh Sachar v. Union of India, 2019 SCC OnLine Bom 13059 & Varun Gumber v. UT, Chandigarh, 2017 SCC OnLine P&H 5372

[7] Ravindra Ojha v. Jaswant Singh Choudhary, 2015 SCC OnLine Raj 2634

[8] Mathew Chacko and Aadya Misra, India: Online Gaming (Regultion) Bill, 2022, August 23, 2022, Available at https://www.mondaq.com/india/gaming/1223970/online-gaming-regulation-bill-2022-? (Last Visited on)

[9]“Andrew S, Should Online Gaming be Regulated by the Government?, April 28, 2022, Available at  https://pressroom.today/2022/04/28/should-online-gaming-be-regulated-by-government/  (Last Visited on)

[10] Id.

[11] Ministry of Electrons and Information Technology, Draft Notification, §2, Online Gaming Regulation Bill

[12] Ministry of Electrons and Information Technology, Draft Notification, §14, Online Gaming Regulation Bill

[13] Ministry of Electrons and Information Technology, Draft Notification, §17, Online Gaming Regulation Bill

[14] OECD, Towards a safe and beneficial online world for children, Available at https://www.oecd.org/digital/ieconomy/protecting-children-online.htm (Last Visited on)

[15] OECD, Towards a safe and beneficial online world for children, Available at https://www.oecd.org/digital/ieconomy/protecting-children-online.htm (Last Visited on)

[16] Mitaksh, Deep Dive: How India’s Data Protection Bill 2021 Impacts online gaming Companies, March 28, 2022, Available at https://www.medianama.com/2022/03/223-data-protection-bill-2021-impact-gaming-companies/ (Last Visited on)

[17] Id.

[18] Ministry of Electrons and Information Technology, Draft Notification, §2(f), Online Gaming Regulation Bill

[19] Soumyarendra Barik, The online gaming market in India, and the proposed rules to regulate it, October 10, 2022, Available at https://indianexpress.com/article/explained/explained-sci-tech/india-online-gaming-industry-rules-laws-task-force-8197042/ (Last Visited on)

[20] Ayush Khar, Old Game, new rules: Government taskforce to spend limits for online gaming, August 23, 2022, Available at https://www.moneycontrol.com/news/business/old-game-new-rules-government-taskforce-to-set-spend-limits-for-online-gaming-9072571.html (Last Visited on)

[21] Aditya Kalra, Factbox: India panel recommendations for booming online gaming industry, September 15, 2022, Available at https://www.reuters.com/world/india/india-panel-recommendations-booming-online-gaming-industry-2022-09-15/ (Last Visited on)

[22] The Hindu Bureau, Online betting platform advertisements still visible on TV and digital media: I&B Ministry, October 3, 2022, Available at https://www.thehindu.com/news/national/online-betting-platform-advertisements-still-visible-on-tv-and-digital-media-ib-ministry/article65967326.ece (Last Visited on)

[23] Article 3

[24] The Economist, In the metaverse, will big gaming eventually become big tech?, September 04, 2021 https://www.economist.com/business/2021/09/04/in-the-metaverse-will-big-gaming-eventually-become-big-tech (Last Visited on)