04 Jan 2023 Draft on Regulation of online gaming in India

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Draft on Regulation of online gaming in India

This article covers “Daily current events “and the topic is about ‘Online gaming regulations in India’ which is in news, it covers the “Government policies and interventions” In GS-2, and the following content has relevance for UPSC.

For Prelims: Facts regarding

For Mains: GS-2, online gaming regulations in India, Government policies and interventions

Why in news:

The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, have recently been amended by a proposal made by the Ministry of Electronics and Information Technology (MeitY).

About the bill

The mechanism for resolving disputes: A three-tier dispute resolution mechanism, similar to that required by the Information Technology Rules, 2021 for online streaming services, that consists of an industry self-regulatory body, an oversight committee chaired by the government, and a grievance resolution system at the level of gaming platforms.

A system that controls itself:

Online games must register with a self-regulatory organization, and only those that have been given their approval will be allowed to operate lawfully in India.
The board of the self-regulatory agency will consist of five directors from a range of fields, including online gaming, public policy, IT, psychology, and medicine.
It must ensure that the registered games don’t contain anything harmful to India’s sovereignty, integrity, defense, security, good relations with other nations, or public order, or that promotes the commission of any crimes relating to the aforementioned.
Each self-regulatory agency, which may exist in more than one, is obligated to inform the Center of the online games it has registered and to give a report describing the prerequisites for doing so.
The need to confirm the know-your-customer requirements (KYC)
According to the proposed rules, internet gaming companies won’t be allowed to wager on the outcome.

India’s online gaming

The country is the largest market for fantasy sports globally, with more than 13 crore players spread over more than 200 sites.
The number of people playing online rummy has increased, according to the authorities.
India separates the competitions into mostly two big groups.
The game can be classified as either a game of chance or a game of skill.
Game of chance gambling: Any game that is played at random is a game of chance. These games primarily rely on luck. These games don’t require any prior understanding or knowledge to play. A few examples are playing dice games, selecting a number, etc. These games are regarded as illegal in India.
Games of skill are any video games that are played depending on the player’s prior knowledge or gameplay expertise. A person will need abilities like analytical decision-making, capability, logical thinking, etc. Some games could also need some preliminary practice to succeed. Most Indian states consider these games to be legal.

Needs such regulations

Users’ Protection:

Shielding players against any harm that skill-based games might inflict.
The intention is to regulate online gaming platforms as middlemen and hold them to high levels of due diligence.
It will encourage creativity and help the online gaming sector.

Security of Women:

The fact that between 40 and 45 per cent of gamers in India are female makes maintaining the security of the gaming industry even more crucial.

Regulation is necessary because they generate revenue:

It is expected that the Indian mobile gaming market will bring in more than $1.5 billion in 2022 and $5 billion by 2025.
Compared to 8% in China and 10% in the US, the industry grew at a CAGR (compound annual growth rate) of 38% in India between 2017 and 2020.
It is projected to grow at a CAGR of 15% and produce Rs 153 billion in revenue by 2024.

Transparency & Credibility:

By ensuring more transparency, consumer protection, and investor trust, this framework will support the legal domestic online gaming business.

Supporting Startups:

Online gaming is a crucial element of both the startup environment and the goal of the $1 trillion economy.
In contrast to China’s and the US’s respective CAGRs of 8% and 10%, India’s industry grew at a CAGR of 38% between 2017 and 2020.
Sales are projected to increase by 15% CAGR to reach Rs 153 billion by 2024.
Greater Transparency, Consumer Protection, and Investor Confidence: These three aspects of the framework will promote domestic legal online gambling.

Promoting Startups:

Online gaming is a crucial component of the startup ecosystem and contributes to the goal of a $1 trillion economy.

Challenges in Online Gaming:

Problems with addiction: Many government authorities, law enforcement personnel, and social activists feel that online card games like rummy and poker are inherently addicting and that playing them for money can have negative consequences.

Some people are incurring losses and being caught in a debt cycle. A few of the victims committed suicide.

The study demonstrates that internet games are addicting whether or not they actually require expertise.

Social Dangers: There have reportedly been a few incidents where young people have committed other crimes including theft and murder due to mounting debt brought on by losses in online games.
Loss of revenue: Users who switch to grey or illegal offshore online gambling apps do so at the expense of tax money for the government and local employment prospects. They also lose access to legal recourse in the event that a provider behaves unfairly or refuses to pay out wins.
Websites that manipulate users: Some experts think that websites that host online games have the ability to manipulate users.

It’s possible that users are not playing these games against other people but rather against computer programs or “bots,” in which case there is no fair chance for a regular user to win the game.

Online gaming is accepted in India.

Gaming: The Supreme Court established in 1957 (Chamarbaugwala cases) that competitive games of skill are considered commercial activity and are therefore protected by Article 19 (1) (g) of the Constitution.

The courts have categorized rummy and horse racing as skill-based activities that are exempt from gaming laws.

Betting and gambling: In India, gambling is a non-recognized offense that is subject to bail.

Part II of the State list contains information on betting and gaming.

The Indian Constitution’s seventh schedule contains a detailed description of them.

In other words, this only indicates that local governments have the authority to regulate betting and gambling in their jurisdictions.

Additionally, they can create their own state-specific Laws.

Others: In order to offer real money online games to Indian customers, any online gaming platform, whether local or foreign, must be a company that has been formed in India.

Under the 2002 Prevention of Money Laundering Act, these platforms will likewise be regarded as “reporting organizations.”

They must notify the Financial Intelligence Unit-India of any suspicious transactions.

Way Ahead:

Online gaming platforms will be required to hire a compliance officer to make sure the industry standards are being followed, a nodal officer to act as a government liaison and help law enforcement, and a grievance officer to handle user complaints. These appointments will be similar to those made by social media and e-commerce companies.
The government would do great efforts to make sure that Indian start-ups are given every opportunity.
The acquisition of a random number generator certificate, which is commonly utilized by platforms that provide card games to guarantee that game outcomes are statistically random and unpredictable, will also be required of gaming enterprises. A “no bot certificate” from a reputable certifying authority will also be required of them.

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