On January 02, 2023, the Ministry of Electronics and Information Technology, Government of India has issued a draft of amendments proposed to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 with the objective to regulate online gaming. By virtue of the amendments being proposed to the Intermediary Rules, online gaming is sought to be regulated as an intermediary activity.

The growing user base of online games has necessitated the need to ensure that online games are provided in conformity with the laws of India and users are sufficiently safeguarded against any potential harm that may be caused on account of online games.

Key Highlights

1. Definitions of ‘Online Game’ and ‘Online Gaming Intermediary’: The draft of the amendments (‘Draft Amendments’) proposed to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (‘Intermediary Rules’) define an ‘Online Game’ as a game offered on the internet and accessible to a user through a computer resource if such user makes a deposit with the expectations of winnings. In this context, both terms ‘Deposit’ and ‘Winnings’ include both the deposit and prize to be distributed basis the user’s performance, whether in cash or in kind. An ‘Online Gaming Intermediary’ is an intermediary (as defined under the Information Technology Act, 2000) that offers an online game.
2. Self-Regulatory Bodies: The Draft Amendments contemplate Self-Regulatory Bodies (‘SRB’) for purposes of evolving a framework to secure conformity of interest with the sovereignty and integrity of India, defence of India, security of the State, friendly relations with foreign States, public order or for preventing incitement to the commission of any cognizable offence. An SRB is required to be registered with the Ministry of Electronics and Information Technology, Government of India (‘MEITY’). The key responsibilities entrusted to SRBs include granting membership to online gaming intermediaries and registering online games offered by intermediaries on fulfilment of certain criteria. Under the Draft Amendments, SRBs are also responsible to evolve a framework containing criteria for registration of online games, undertaking testing and verification of online games to conform with the framework, establishing a framework for grievance redressal and time-bound resolution of complaints not resolved by online gaming intermediaries. MEITY has reserved powers to suspend or revoke the registration of an SRB, if it considers necessary to do so and after giving an opportunity of being heard.
3. Compliance with Due Diligence Measures: As a natural consequence of an online gaming intermediary being categorised as an intermediary, it is required to comply with the due diligence measures prescribed under the Intermediary Rules for an intermediary.
4. Additional Online Game-Specific Due Diligence Measures: The Draft Amendments proposes to introduce additional due diligence measures to be observed by online gaming intermediaries that are specific to online games. These additional measures to be followed by online gaming intermediaries include:
   • A demonstrable and visible mark of the registration granted by SRBs in relation to online games must be displayed by the intermediary.
   • The rules and regulations, privacy policy, terms of service and user agreements must provide information about the online game, to the users. Such information must include risk of financial loss and addiction, online games offered along with expectation of winnings, manner of determination of winnings, fees, and other charges payable for online game, measures for protection of user’s deposit, know-your-customer procedure for user’s registration.
   • Identification and verification of users at the time of user’s onboarding and creation of user-account. In this regard, the Draft Amendments have prescribed that the online gaming intermediary must follow the procedure and thresholds prescribed by the Reserve Bank of India for regulated entities under the Master Directions – Know Your Customer (KYC) Direction, 2016.
   • Appointment of a Chief Compliance Officer (‘CCO’), who must be an Indian resident and a key managerial personnel or other senior employee of the intermediary. The CCO is responsible to ensure compliance with the Intermediary Rules and for coordination with law enforcement agencies to ensure compliance with orders or requisitions.
   • Appointment of a nodal contact person (‘Nodal Officer’), who must be an Indian resident and an employee of the intermediary other than the CCO. The Nodal Officer must be responsible for 24X7 coordination with law enforcement agencies to ensure compliance with orders or requisitions.
   • Appointment of a grievance officer, who must be an Indian resident and an employee of the intermediary.
   • Implementation of grievance redressal mechanism, which must include mechanism for receipt of complaints and providing a unique ticket number mechanism to track status of complaint or grievance. As an essential part of the mechanism, the complainant must be provided reasons for any action or inaction taken pursuant to the complaint or grievance.
5. An online gaming intermediary is required to have a physical contact address in India, the details of which must be published on the website and mobile application of the online gaming intermediary.

The Draft Amendments comes pursuant to a Notification dated December 23, 2022, issued by the Government of India that recognised MEITY as the nodal ministry for online gaming.

Way Forward

MEITY invited public comments and feedback from the industry and other stakeholders on Draft Amendments, which was required to be submitted until January 25, 2023. MEITY may consider the inputs and feedback provided by the concerned industry stakeholders for finalisation of the amendments to the Intermediary Rules giving effect to a framework governing online gaming activities.