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Friday, February 3, 2023

India introduces Online Gaming laws and self-regulating body to govern

India has proposed regulations for the first time to oversee areas of online gaming that fall in the gray area between gambling and entertainment, seeking to address rising complaints of addiction, especially among minors.

The Indian gaming industry, which welcomed draft amendments in the IT Rules to regulate online gaming, to help solve the ambiguity around certain aspects such as between games of chance and games of skill.

The online gaming industry will seek greater clarity from the Indian government over the structure of the proposed self-regulating body for the industry, stakeholders stated.

The Department of Information Technology has published proposed rules for apps or websites that involve the exchange of user money, from online casinos and card games to fantasy sports clubs. This sets them apart from popular, competitive gaming titles such as Electronic Arts Inc.’s FIFA Soccer, which will be regulated by the Ministry of Sports.

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The industry, which has generally welcomed proposed changes to IT rules to regulate online gaming, has raised some concerns about the ambiguity of some aspects, such as gambling and skill games, and questions about sharing games’ intellectual property rights with the self-regulatory body, which may include executives from competing companies.

“SRO will be the basic building block of the new policy. So it is important to understand how it will be created and who will be on it,” said Nitish Mittersain, Managing Director, Nazara Gaming.

He said it is important to ensure that the SRO is well run and fair to all developers and companies.

One of the proposed guidelines states that all games must be registered with an SRO, but the process or requirements are not clear.

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“The mechanism or threshold for registration of games by SROs is not clear,” said Abhishek Malhotra, Managing Partner, TMT Law Practice.

This means that if the game is rejected by the SRO, the developer would have no means of redressing the complaint.

The current guidelines are also unclear as to whether an SRO would have to analyze a game before registration.

“The SRO would be made up of industry members, and if that’s the case, it means the members would have access to the competitor’s intellectual property even before the game is launched,” said Saumya Singh Rathore, co-founder. WinZO.

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While the original draft was hailed as a positive step towards consumer protection, the industry hopes the final bill will be less ambiguous on aspects such as the distinction between games of skill and games of chance, which has been an ongoing issue.

“This clarity will facilitate investment and job creation, which will strengthen the ecosystem,” said Rajan Navani, Chairman of JetSynthesys.

According to another provision of the proposal, any game that is not currently in violation of the law can be registered.

“It’s a bit open because some laws have been passed by state governments and that could mean that if a game violates one of those laws, it can’t be registered, which could lead to a conflict,” TMT’s Malhotra said.

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Taxation also needs clarification, said Satyam Rastogi, founder and CEO of Khiladi Adda & GamerPe.

“It is not clear whether the current guidelines we follow for TDS will continue or change,” he said.

There is a consensus that the sooner these guidelines come into effect, the better it would be for the industry.

According to a report by BCG and Sequoia India, mobile gaming is expected to be a $5 billion industry by 2025.

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“The new draft of the online gaming rules marks a continued push to drive innovation and digital transformation in India. They will also bring clarity and certainty to investors, industry players and consumers… Progressive regulation will help boost investor confidence, entrepreneurial energy and job creation in this promising sector,” said Rajan Anandan, Managing Director, Sequoia India and SEA & Surge.

Online gaming has proliferated along with the explosive growth of the mobile population in India, creating a group of domestic unicorns like Dream 11 Inc. and the Mobile Premier League. But consumers have complained about the rise of titles that take money — sometimes from minors — in exchange for financial gain, saying they encourage gambling addiction.

Online gaming companies will form a regulatory body registered with the IT ministry, which released draft rules on Monday. Under the rules, the self-regulatory body’s board would include a federal government nominee with experience in public policy, law enforcement, public administration or public finance.

The companies will also appoint a chief compliance officer who will be responsible for coordinating with law enforcement agencies and ensuring that companies put in place measures to check the identity and age of players, the ministry suggested. The rules are open to public input and may be revised.

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