Loot Boxes And Online Gaming: The Need For Regulation In India
INTRODUCTION
The term Loot Boxes is new to the Indian Economy but not to the online gaming platforms. It might appear on your screen while watching a random YouTube video. This advertisement appears with a splash of color, a grandiose soundtrack, and the promise of “legendary rewards.” Loot boxes appear on the screen, waiting to be opened. Although they may appear common, each one may contain an unusual weapon. All it takes is a tap to get sucked into the excitement of chance. First, let’s clarify what these prize boxes are. In its recent Department for Digital, Culture, Media, and Sport report of September 2020, the U.K. government defines Loot boxes as features in video games that may be accessed through gameplay or purchased with in-game items, virtual currencies, or directly with real-world money. India, the second-largest online gaming market after China, is addressing its regulatory challenges. The rapid expansion of the sector raises significant issues that need immediate attention. This is the ideal time for the government and media to prioritize these concerns, ensuring effective regulations are implemented to protect consumers and encourage responsible gaming.
THE CURRENT GOVERNING SCENARIO:
There is no specific regulation in India for governing online gaming and Loot Boxes, and as of now, they are being governed by the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (‘IT Rules’). Section 4A of the rules puts an additional measure on the intermediary providing access to online games to observe due diligence, but that’s insufficient in the current scenario.
The 7th Schedule of the Constitution lays down the division of powers between the union government and state governments as part of the segregation of powers; ‘betting and gambling’ form part of the ‘state list.’ Therefore, each state legislature is entitled to make its own laws regarding betting and gambling. After the Independence, most states adopted the Public Gambling Act of 1867. All the state-specific legislation declared all forms of gambling illegal in India but also demarcated between games of chance and skill, leaving a lot of ambiguity about what a game of skill is. Because internet gaming involves a certain amount of chance, the current discussions consider it gambling. Unlike traditional forms of gaming, online gaming is not easily covered by laws like the PGA, which focuses exclusively on land-based gambling operations and falls short in addressing the intricacies of the digital arena. Sikkim being the first Indian state to have passed a law regulating internet gambling, the Sikkim Online Gaming (Regulation) Act, 2008.
THE PRESSING CALL FOR REGULATION AND RISK ASSOCIATED:
The speed at which online gaming is booming in India poses a risk, and as well it requires attention from the government to look closely at the issue. In 2023, India emerged as the biggest gaming market globally, with 568 million gamers and record-breaking 9.5 billion gaming app downloads. One of the biggest markets comes from adolescents and teenagers, the most vulnerable. Many game developers use loot boxes as a revenue stream, often incorporating designs that entice players to spend large sums of money to unlock better in-game items. Players who are not subject to regulation may become victims of manipulative tactics that take advantage of psychological weaknesses and cause compulsive spending. Due to their strong victimization associations, children and teens are especially vulnerable to these adolescent gambling methods. Furthermore, the hazy distinction between gaming and gambling needs to be made. Loot boxes in games meant for younger players generate a gambling-like experience that may cause negative habits to form early in life. Game makers are free to use these systems without being held accountable or transparent, provided they are not categorized as gambling or given consumer protection measures. This legal vacuum allows the exploitation of players, many of whom may not fully understand the financial implications, particularly through the “pay-to-win” model, where players are incentivized to spend more money to gain a competitive advantage. In India, gaming has no clear legal definition of loot boxes. Because of this, players are left with few options when dealing with unethical actions like false odds or withholding information regarding the actual cost of these in-game purchases.
DRAWING INSIGHTS FROM OTHER COUNTRIES’S REGULATION
Most countries are trying to cover the loot boxes under their respective legislation. As in the U.K., the House of Lords committee has recommended that loot boxes be included under the UK Gambling Act. The South Korean government passed a bill amending the Game Industry Promotion Act in 2019. Some countries have even tried to cover online gaming under the purview of gambling. One such example is Dutch laws, which prohibit the offering of gambling without the necessary permits, and they were included in the gambling rules of 2018; also, the Belgian Gambling Commission ruled back in 2018 that allowing players to buy loot boxes with real money is legally considered gambling. The second concerning problem is to regulate them age-wise, as the young audience is more exposed to it. It can be done by putting an age restriction bar so the young audience is not exploited. The Indian Government has added online gaming and esports under the Ministry of Electronics and Information Technology (‘MeITy’). In addition to provisions concerning due-diligence obligations of an online gaming intermediary and mandatory Know-you-consumer (‘KYC’) compliance by the users, much more needs to be done as the targeted or better called victimized audience is not exposed to financial implications, which need to be covered under current Self-Regulatory Mechanism.
CONCLUSION
The risks associated with the current issue require the Indian government to take swift action to mitigate it. The government may take advantage of this to grow the internet gaming industry by implementing the Self-Regulatory Mechanism or by enlisting the aid of international standards. While the Indian Government has taken initial steps, such as bringing online gaming under the purview of MeITy and implementing due diligence measures by Intermediaries under Section 4A of the IT Rules, much more needs to be done. To further require transparency from game creators and guarantee consumer protection, the Legislature must define loot boxes under gaming regulations and draw a clear line between gaming and gambling. In this respect, the administration can tailor an appropriate framework by embracing foreign techniques to ensure a secure and sustainable online gaming ecosystem. This would benefit all stakeholders, especially consumers and intermediaries. Now is the moment to do it before the game’s euphoria becomes a social risk.
Author: Ashpinder Kaur , in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing
REFERENCES:
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