Regulating Online Gaming in India

What’s in Today’s Article?

• Why in News?
• Types of Online Gaming
• The Online Gaming Market in India - How big is it?
• Challenges Faced by the Online Gaming Market in India
• The Issue of Self-Regulatory Bodies under the IT Rules

Why in News?

• The Union Ministry of Electronics and Information Technology (MeitY) will now prepare a framework for permitting and certifying online games which involve money.
• This means, the Government of India will act as a regulator for the online gaming sector rather than an industry-led self-regulatory organisation (SRO).

Types of Online Gaming

• e-Sports: These are video games that were played privately or on consoles in video game stores in the 1990s, but are currently played online in a structured manner between professional players, either individually or in teams.
• Fantasy sports: These are games in which the player selects a team of real sports players from several teams and earns points based on how well the players perform in real life. For example,Dream11.
• Online casual games:
  • These could be skill-based, where the outcome is heavily impacted by mental or physical skill or chance-based, where the outcome is heavily influenced by some randomised activity, such as rolling a die.
  • A game of chance may be considered as gambling if players bet money or anything of monetary value.

The Online Gaming Market in India - How big is it?

• The online gaming industry in India is predominantly a home-grown start-up ecosystem growing at 27% compound annual growth rate (CAGR).
• It is widely estimated that AI and online gaming can add up to $300 billion to India’s GDP by 2026-27.
• India's percentage of new paying users (NPUs) in gaming has been the fastest rising in the world, with 40% in 2020 and expected to reach 50% in 2021.
• According to a FICCI report, transaction-based games revenue increased by 26% in India, while the number of paying players increased from 80 million in 2020 to 95 million in 2021.

Challenges Faced by the Online Gaming Market in India

• Lack of regulatory oversight:
  • There is currently no regulatory framework to govern various aspects of online gaming companies such as -
    • Having a grievance redressal mechanism,
    • Implementing player protection measures,
    • Protection of data and intellectual property rights, and
    • Prohibiting misleading advertisements.
  • No mechanism exists for individuals to differentiate between legitimate gaming platforms and illegal gambling/betting sites.
• Safety and financial ramifications of illegal offshore betting and gambling markets:
  • Money laundering and national security concerns are exacerbated by the growth of illegal offshore gambling and betting markets.
  • The clandestine and untraceable operations of these platforms are causing substantial losses to the exchequer.
  • Estimates indicate that India lost $45 billion per annum in taxation due to operations of illegal offshore markets.
• Online gaming - a state subject: Some State governments attempt to ban online gaming. However, the inherent cross-border nature of the Internet makes enforcing such a ban almost impossible.
• Societal concerns: The meteoric rise of online gaming has brought with it an array of concerns such as addiction, mental illness, suicides, financial frauds, privacy and data security concerns.

The Issue of Self-Regulatory Bodies under the IT Rules

• The IT (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021 marked a commendable step towards oversight.
• As per IT rules, online real money games need to be approved by a regulatory body. Online games, which do not involve real money, do not require any regulatory nod.
• The government had notified the online gaming rules (on April 6, 2023) and had given 3-months to the industry to come up with proposals for SROs.
• However, the proposals received were heavily dominated by gaming companies and their industry associations, and therefore would not have been able to act as a neutral regulatory body.

Q1) What are the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021?

The IT Rules 2021 attempt to go beyond the powers delegated by the IT Act 2000 in some cases, such as regulating significant social media intermediaries and online publishers and requiring certain intermediaries to identify the original source of the information.

Q2) Why is there a need to regulate online gaming in India?

The meteoric rise of online gaming in India has brought with it an array of concerns such as addiction, mental illness, suicides, financial frauds, privacy and data security concerns. Money laundering and national security concerns are other realities.

Source: MeitY to prepare guidelines soon: Proposals for industry body rejected, Centre to regulate e-gaming | TH