Analysis of amendments introduced by MeitY for regulation of online gaming (Part I)

Gaurav Bhalla , Ashneet Hanspal

April 13, 2023

Analysis of amendments introduced by MeitY for regulation of online gaming (Part I)

Earlier this year, the Ministry of Electronics and Information Technology ('MeitY') published a draft amendment (on January 2, 2023) to India’s existing Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (‘IT Rules’). For reference, these IT Rules [read together with Indian Information Technology Act, 2000 (‘IT Act’)] is the predominant legislation governing online ‘intermediaries’ operating in the country and prescribe compliances to be observed by certain categories of intermediaries (as enumerated therein). Through the draft amendment, MeitY proposed to incorporate specific provisions in the IT Rules for regulation of online gaming (and online gaming intermediaries) in India. Comments were invited from relevant stakeholders and the public on the draft amendment until January 17, 2023.

In furtherance, MeitY has now notified (as of April 6, 2023) the ‘Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023’ (‘Amendment Rules’) which primarily contains provisions for regulation of the online gaming sector in India. Upon scrutiny, it seems however, that the Amendment Rules differ from the draft rules previously released by MeitY (for public consultation). We’ll be analyzing different aspects of the proposed regulatory mechanism in our continuing series of posts on this subject.

As a first step, we’ve scrutinized the statutory definitions (pertaining to online gaming) which have been incorporated in the Amended Rules [under sections 2(qa) to (qf)]. Notably, an ‘online gaming intermediary’ has been defined as an intermediary that ‘enables the users of its computer resource to access one or more online games’. For reference, an intermediary (per the IT Act) includes any person who ‘receives, stores or transmits an electronic record or provides any service with respect to that record on behalf of another person. Meanwhile, we note that the term ‘online game’ has been (quite broadly) defined as any ‘…game that is offered on the Internet and is accessible by a user through a computer resource or an intermediary…’. The statute goes on to narrow down the scope for introducing the term ‘permissible online game’ which shall comprise of a ‘permissible online real money game’ or ‘…any other online game that is not an online real money game…’.

With numerous terminologies being used, it essentially boils down to the essential term - ‘online real money game’ (which is expected to the subject of varied interpretations in the coming weeks). The Amended Rules defines a ‘online real money game’ as an ‘…online game where a user makes a deposit in cash or kind with the expectation of earning winnings on that deposit’. [For the purpose of the relevant definition, the term ‘winnings’ is defined to mean ‘any prize, in cash or kind, which is distributed or intended to be distributed to a user of an online game based on the performance of the user and in accordance with the rules of such online game’].

The scope of this definition thus covers any online game in which a user may participate (through payment in cash or kind) with the expectation of winning vouchers or discounts or other similar perks, and not just monetary rewards. It is pertinent to note that a ‘permissible online real money game’ (under the Amended Rules) would only include an ‘online real money game’ which is verified by the ‘online gaming self-regulatory body’ proposed to be set up under the Amended Rules. Our subsequent posts (which we’ll be rolling out soon) will cover the analysis of the remaining provisions of the Amended Rules (such as the criterion for verification of ‘online real money game’, requirements for appointment as a self-regulatory body, etc.).

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