Guidelines Regulating Online Gaming in India

The online gaming industry in India has seen rapid growth the last few years. This industry has also seen some significant growth during the global pandemic, as more individuals were forced to move online. However, the regulation of such games in India continues to be inconsistent across the country with no uniform law guiding online gaming operators. In this article we take a look at the new developments in the regulation of such games.

Regulation of Online Gaming in India:

In terms of regulation, online games which require the use of skill i.e. skill based online gaming, is allowed, while games of chance are hit by the Public Gambling Act.  Courts in India have declared in various cases that games where the success of a candidate depends on the use of “substantial skill”, then such games would not be hit by the Indian gambling regulations, even in games of chance. Certain states have also enacted rules excluding ‘games of skill’ from within the ambit of gambling rules. Online gaming is a matter subject to the State List; hence states are allowed to make regulations in this regard.

Online gaming (skill based online gaming) can be understood to include three main types of gaming: Real money games, mobile centric/casual gaming, and e-sports. As the industry has grown bigger, concerns have been raised about creating a regulatory framework to address the online gaming industry. While no formal frameworks for online gaming have been enacted, the Advertising Standard Council of India (ASCI) recently released new guidelines regulating the advertisement of real money games.

Fantasy sporting games, a subset of real money games, is one of the most popular types of gaming in India. As various industry players have pushed to make the regulation of such games more clear, NITI Aayog has recently proposed draft guidelines to regulate online fantasy sports in India. The guidelines are only a draft and are currently open to reviews and comments from industry stakeholders.

Advertisement Guidelines of 2020:

With effect from 15^th December 2020, new advertisement guidelines have come into effect for online gaming in India. Specifically, these guidelines cover advertisement of ‘online games for real money winnings’ i.e. games that require their players to put up money for the possibility of cash or cash equivalent winnings. The ASCI feels that such games run the risk of financial loss and can be addictive in nature, hence require stricter rules for the advertisements of the same.

The ASCI also clarified that they only have the power to regulate the advertising of such games and these guidelines are not meant to regulate online gaming itself.

Brief highlights of the guidelines are as follows:

• Depiction of minors: The guidelines have stated that the advertisements for such games should not depict any minors (below the age of 18 years) as being engaged in such games, or suggest that minors can play these games.
• Every gaming advertisement for such games will have to include the following mandatory disclaimer: “This game involves an element of financial risk and may be addictive. Please play responsibly and at your own risk.” The disclaimer has to meet the following requirements:
  • If the advertisement is in print form, it should not occupy less than 20% of the space.
  • The advertisement should also be in compliance of guideline 4 of the ASCI disclaimers on advertisement guidelines.
  • If the ad is audio/visual, then the disclaimer has to be placed in a normal speaking voice at the end of the advertisement, in the same language as the advertisement.
• Online gaming for real money winnings should not be presented as an income earning opportunity in their advertisements.
• And, the advertisements should not claim or show people engaged in online gaming as more successful than others.
  
  

The guidelines enacted by ASCI are self-regulatory, but the rulings of the ASCI are binding on all its members.  Further, the Ministry of Broadcasting has also issued an advisory asking private TV Channels to comply with the ASCI guidelines. The guidelines have been implemented after convening a meeting with industry stakeholders, and were released as part of an effort to make advertisements about online gaming transparent and safe.

Proposed Guidelines for Online Fantasy Sports Games:

NITI Aayog has released a discussion paper for analyzing online fantasy sports and the need for a formal regulation of this sector. As identified in the report, online fantasy sports grew at a rate of 212% from 2016 to 2019, with a potential to attract over INR 10,000 crores in foreign direct investment.

The paper acknowledges the need for uniform national guidelines, as the online fantasy sports now are regulated state-wise which causes greater compliance and operating burdens for them.

Briefly, here are the key highlights of the draft guidelines:

• A single self-regulatory body with membership of online fantasy games operators should be set up and receive government recognition.
• The games offered by online fantasy sports operators should continue to be skill-reliant, and in the event that any operator wishes to deviate from the recognized format of online fantasy sports, they will have to receive permission from the self-regulatory body. Operators will be required to keep collections of data to track player performance and the same would have to be supplied to the regulatory body periodically.
• Necessary safeguards to protect minors must be implemented, and pay to play formats should not be offered by operators to minors below 18 years of age.
• Operators should not advertise games of chance or gambling on their platforms. All advertisements of such games should be in compliance with the ASCI guidelines.
• A grievance redressal mechanism should be set up by the operators for dealing with disputes that arise as part of the games.
  
  

The report creates a distinction for online fantasy sporting games away from online gaming, recognizing it as a game of skill that is also reliant on real world sporting events. The proposed guidelines envision setting up a national self-regulatory body that can uniformly regulate the online fantasy sports in India, thereby ensuring consistency in regulation of such games across all states.

Impact of the Guidelines:

The guidelines spell the effort being taken in India in recognizing online gaming and reaping the advantages of the growing sector. The advertisement guidelines are a much needed effort being made by ASCI to protect consumers of online gaming, especially minors. All online gaming companies and operators, as well as private broadcasting channels must follow the guidelines.

The draft guideline proposed by NITI Aayog is the first step in a longer journey to legitimize not only online fantasy sport games, but also online gaming in India. While these guidelines have only been proposed to regulate online fantasy sports, industry players are already asking for similar guidelines for online gaming.

As the online gaming industry grows, more regulations such as this will be required to protect the interests of both the consumers of these games and the operators running them.

How to Set Up an Online Gaming Business in India:

With the opportunity of growth in the online gaming industry, there is push towards creating more such businesses in India. Here is a brief outline of the requirements for setting up such a business in India:

• Infrastructure: As an internet based gaming company, essentials of hardware, software, and networks (server management software) will be required to set up the business.
• Franchise: Instead of setting up the business on your own, it is possible to partner with online gaming co-operations that is looking to expand.
• Licenses: Generally for ‘games of skill’ there is no need to obtain licenses. However, the states of Sikkim and Nagaland have enacted their own rules for online games of skill, and the licenses under these rules would have to be acquired.
• FDI Investment: In India, 100% foreign direct investment is allowed under the automatic route for online gaming which falls under Electronic system, IT and BPM sectors. This means that approval from the appropriate ministries is not required for such investments.
  
  

Complete details on setting up an online gaming business in India are available here. Read More.