The Covid-19 pandemic has led to an inevitable surge in the use of digital technologies in our day-to-day life, from work to socialization. We have had to find ways to keep ourselves entertained through OTT platforms and online gaming. This has led to an increase in the market value of the online gaming industry with more than 420 million active online gamers, which according to the statement of objects and reasons of the recently proposed Online Gaming (Regulation) Bill 2022 is set to reach a valuation of 5 billion US Dollar by 2025. A large youth population has contributed to this increase, but concerns have been raised about the addictive nature of these games leading to physical, mental, and even monetary harm (through in-app purchases). Therefore, the bill aims to “maintain the integrity in online gaming and introduce a regulatory regime for online gaming” to curb the harm and wastage of resources and time faced by the players. This comes at a time when the various high courts in the country are nudging the state governments to fill the void around online gaming as current legislations do not factor them in except in a few states like Sikkim and Nagaland. A good regulatory framework will not only help the players but also provide clarity to investors looking to provide capital to gaming companies.
This act will apply to any person with a license to install and operate a gaming company and the players who participate in their games. To maintain uniformity and ensure compliance with the act, the bill proposes the establishment of a central “Online Gaming Commission” (hereafter ‘the commission’) which will include an expert member from the domain of law, cybertechnology, and law enforcement respectively. Gaming companies will have to obtain a license from the commission to carry on their business. Further, the commission will be responsible to:
- Oversee the functioning of online gaming servers
- Make periodical reports to the central government
- To suggest measures to control and curb illegal online gaming
- To grant, revoke or suspend gaming licenses and determine the fee for issue and renewal of licenses
The bill makes no distinction between ‘games of skills’ and ‘game of chances’ as the definition of online gaming in the bill includes games played on any electronic device including personal computers, mobiles, tablets, and other devices. This might open the bill to legal scrutiny and conflicts between the Centre and state legislations as ‘gambling’ and ‘betting’ are state subjects. As online gaming has no geographical boundaries and anyone anywhere can play the games, even if located in a state which does not allow such gaming companies to function there, a lot of uncertainties are created by having multiple state legislations on the subject. The central government can use its powers under article 249 of the constitution to make legislation for “national interests” and this would surely fall under its purview. It would also reduce compliance requirements for gaming companies which would reduce their costs. Another method the central government may adopt can be via the use of article 252(1), wherein multiple states can approach the Centre to make common legislation. This was utilized in the Prize Competitions Act, of 1955 and has since then been adopted by several states. Further, the bill fails to distinguish between casual gaming and real money gaming, a sector that is set to grow by 11 billion dollars by 2025. It requires a solid regulatory framework to protect the people and curb unlawful activities. At a time when several states have imposed bans and stringent regulations on real money gaming companies, this bill might create more confusion for companies and investors going forward.
The commission will have the powers to grant licenses to gaming companies who want to install and operate online gaming servers in the Indian jurisdiction as well as powers to renew, suspend and revoke licenses. The license granted will be valid for 6 years and will be non-transferable. The gaming companies need to maintain accounts related to online gaming upon receiving their license, but the bill remains silent as to what these accounts should include and leaves any further formulation of rules and standards relating to licensing to the commission once it is set up. The commission can take the help of the legal framework from other countries like the UK, Sweden, and Denmark which have successfully implemented a licensing policy for the online gaming industry. The licensing in these countries requires the gaming companies to use high self-regulation and include things like self-timeout/limits on time played, and no loyalty programs to be offered to curb addiction. Any person operating an online gaming server or an online gaming website without a valid license will have to face punishment, which may extend to a period not exceeding 3 years or a fine, as prescribed by the commission. It will be a cognizable and bailable offense. Though the provisions of this act do not apply to companies/persons providing backend services in India like maintaining and hosting services for international gaming services based out of India.
Lastly, the bill remains silent on key issues like privacy and data protection, the Know Your Customer norms to be used, and the grievance redressal. Online gaming companies collect and handle a lot of personal data including names, geographical location, and payment information. A strict regulatory framework to safeguard the consumer/player data needs to be put in place as in the absence of any regulations, the companies have considerably little liability in case a breach happens. The commission should also be transparent and quick in its working and redressal of grievances as consumers become more aware and actively take interest in the quality of services they get.
The bill in its current form is filled with shortcomings but is a welcome step as the gaming sector is one of India’s fastest-growing industries and requires a robust and detailed regulatory framework to ensure user safety and privacy. Though, in the absence of a data protection bill, the bill may fall short on the privacy side even if amended. A similar bill proposed by Dr. Shashi Tharoor in 2018 was much more comprehensive and wider in scope but lapsed. The scope and jurisdiction of the Commission need to be clarified. The bill might give legislators a chance to have a thorough discussion on the future of legislation around online gaming and put forward appropriate rules to protect all the stakeholders involved. They can borrow measures from countries around the world to implement responsible gaming requirements like restrictions on the time played in a week, a cap on betting amount, customer support, and strict data protection protocols. The other shortcomings can be amended as and when the commission is established and the conflict between the Centre and state as to who has the power to make such appropriate rules is resolved.
Author(s) Name: Akshit Chaudhary (Faculty of Law, Delhi University)