Draft Online Gaming Policy

January 4, 2023

The Ministry of Electronics and IT (MeitY) has released the Draft Rules for Online Gaming, which have been introduced as an amendment to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. These proposed rules aim to regulate the online gaming industry in India and ensure a safe and fair gaming ecosystem for users.

Overview of the Draft Rules

Self Regulatory Body: Online gaming companies in India will be required to register with a self-regulatory body. Only games that have been cleared by this body will be allowed to legally operate in the country. The self-regulatory body will have a board of directors with five members from various fields, including online gaming, public policy, IT, psychology, and medicine. It is possible for there to be more than one self-regulatory body, and all of them will need to inform the government about the games they have registered, along with a report detailing the criteria for registering these games.
Due Diligence: Online gaming firms will also have to undertake additional due diligence measures, including KYC (know your customer) checks for users, transparent withdrawal and refund policies for money, and fair distribution of winnings. For KYC checks, these firms will need to follow norms set by the Reserve Bank of India (RBI).
Random Number Generation Certificate and No Bot Certificate: Gaming companies will be required to obtain a Random Number Generation Certificate, which is typically used by platforms offering card games to ensure that game outputs are randomly generated and unpredictable. They will also need to obtain a “no bot certificate” from a reputed certifying body, which will confirm that the platform does not use bots or automated processes.
Restrictions on Betting: Online gaming companies will not be allowed to engage in betting on the outcome of games.
Compliance: Similar to social media and e-commerce companies, online gaming platforms will also need to appoint a compliance officer to ensure that the platform is following all relevant rules and regulations. They will also need to appoint a nodal officer, who will act as a liaison with the government and assist law enforcement agencies, as well as a grievance officer to resolve user complaints.

Reasons for the Introduction of the Rules

Protection of Female Gamers: Approximately 40-45% of gamers in India are women, making it important to ensure the safety of this segment of the gaming population. The introduction of these rules is seen as a positive step towards comprehensive regulation of the online gaming industry in India.
Reduction of Regulatory Fragmentation: The online gaming industry in India has previously faced regulatory fragmentation at the state level, making it challenging for the industry to operate smoothly. The introduction of these draft rules is expected to reduce this fragmentation and provide a more unified regulatory framework for the industry.
Growing Industry: The Indian mobile gaming industry is expected to reach a revenue of USD 5 billion in 2025. Between 2017-2020, the industry grew at a compound annual growth rate (CAGR) of 38% in India, compared to 8% in China and 10% in the US. According to a report by VC firm Sequoia and management consulting company BCG, the industry is expected to continue growing at a CAGR of 15% and reach INR 153 billion in revenue by 2024.

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