Regulating The Game: Towards A Safe and Sustainable Online Gaming Ecosystem in India
INTRODUCTION
With the onset of technological developments throughout the world, Gaming, especially, Online gaming has started getting more attention throughout the world. Earlier, games only included sports or board games like Ludo. After that, the concept of video games came into being, and since then various new and revolutionary developments have been made in this sector. Nowadays, there are various sources to play games. You can buy a console, and plug it in your television set, or a desktop. Various companies like Razor, Nintendo, etc. have created a niche market in the gaming Industry, introducing special products for gaming. In recent times, even mobile gaming has garnered a huge user base since not everyone can afford a costly gaming setup. With this development, there was also a rise in various new and low budget games emerging guaranteeing people with prize money or scamming them, by making them buy in-game currency, which was either not transferred, but could not be used for some reason. Moreover, another issue which emerged was the onset of various fantasy game platforms which is in a way promoting betting and gambling. People have even used their gaming skills to turn it into a career, by either live streaming their gameplay, on platforms like twitch, YouTube, etc., or by participating in competitions held throughout the world. This has also led to people communicating across borders, as various people have found a friend and confidante in someone who they have never met physically, but interacted through online gaming communities, and now bond over shared interests. However, this has also led to a rise in various data and security concerns as well. Online games have also led to various unfortunate deaths across the country. Many people, most of them being students, have committed suicide, just because they could not do well in a game or were reprimanded by their parents for being on the phone for long periods. Various accidents too have been reported where people were too focused on their mobile phones playing games and not realizing that their life is indeed in danger in, not just in the game, but also in real life as well. This has also led to people calling for ban on various games. The online gaming industry in India is largely a home grown start up ecosystem growing at 27% CAGR. Artificial Intelligence (AI) and online gaming can also become contributing USD 300 billion to India’s GDP by 2026-27, it is widely estimated. In 2020, India’s mobile gaming sector earned USD 1.5 billion and is projected to reach USD 5 billion in 2025, according to a 2021 BCG report. Hence, the Indian Government has introduced various legislations aiming to regulate the Gaming Sector.
HISTORICAL BACKGROUND
The first law which governs the modern-day online games is Prevention of Gambling Act, 1867, which prohibited all gambling related activities. Various states have adopted their own gambling laws and often have altered PGA,1867 to meet their own needs. Most of the online fantasy games are regulated by this act. Other legislations include the Information Technology Act, 2000 and Prize Competition Act, 1955. These acts were enacted at a time when Online and e-gaming either, did not exist, or was not well known. Hence, these laws are outdated in modern world where the topic of gaming laws needs much more detailed and specific laws regarding all of the complex issues surrounding it. The above-mentioned laws are not much focused on e-gaming as a whole, but rather only on betting and deals with it slightly. Another factor which furthered the development in the gaming laws was the introduction of the concept of “Game of Skill vs. Game of Chance” by the Supreme court in KR Lakshmanan vs Tamil Nadu. The Supreme Court defined ‘Game of Skill ‘as “One in which success primarily depends on the superior knowledge, training, attention, experience and adroitness of the player. Golf, chess and even Rummy are considered to be games of skill.” Supreme Court further defined ‘Game of Chance’ as “one in which the element of chance predominates over the element of skill.” Game of Skill is allowed, however a game of chance is not, and comes within the purview of gambling, so according to the state list, each state government has the power to make it its own laws on the matter.
In Varun Gamber vs Union Territory of Chandigarh, the petitioner, Varun Gumber went to the Punjab and Haryana high court to ask it to ban online game Dream 11 as it is a game of chance. He said he had lost around $50,000 playing on the app. The respondents, however, shot back that Dream 11 is a game of skill, not luck. The idea is to have participants create virtual teams using real players’ performance in live matches and the points are awarded based on them. The respondents indicate that it took a great deal of sports knowledge to form competitive teams. The Court found that Dream 11 is at heart a skill game which not within the purview of the Gambling Act of 1867.
In Galactus Funware Technology vs. State of Karnataka, Under Article 226 of Indian Constitution, the petitioners from online gaming sector, challenged Karnataka Police (Amendment) Act 2021 in Karnataka High Court. The Amendment makes betting, wagering, and gambling, in whatever form or manner, with money, a crime, whether the contract involves a game of skill or chance. But cash stakes are not forbidden in games. Petitioners argued that the Amendment represents over paternalism and flouts the separation between games of skill and games of chance. The Court held the Amendment ultra vires Article 14 since it substantially prohibits skill-based games. It ruled the law was disproportionate and unsupported by data, insisting legislation must be in keeping with the Constitution’s basic structure.
CURRENT LEGISLATIONS ON THE MATTER
- State Specific Legislations
The subject matter of gambling comes within the state list, so various states throughout the country have enacted their own legislations on the matter of online gaming where the games are related to betting and gambling. In 2023, Tamil Nadu introduced the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022, which has prohibited game of chances and introduced four conditions to consider a game as a game of chance. The Act also sets up an Online Game Authority to oversee the implementation of the act. Sikkim Online Gaming Act, 2008 was amended in 2018, making it mandatory for each player’s identity to be verified by a photograph. Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Rules 2016, inspects, regulates and keeps tabs on skill-based games like sudoku, car racing, solitaire, etc. Many state laws have also implemented pre-online gaming laws in the modern times by making slight moderations.
- Information Technology (Intermediary Guidelines and Digital media Ethics Code) Rules, 2021
On 6 April, 2023, the Ministry of Electronics and Information Technology, introduced amendments to the IT rules, to work towards bettering the existing online gaming environment in the country by preventing the gamers from various harms which they are likely to face like scams, breach of privacy, addiction, etc. The gaming platforms will now be treated as intermediaries and such obligations shall apply to them. It also introduced the concept of Recognized Independent Self-Regulatory Bodies, to verify whether the gaming platform is to be made available to the general public or not. It also introduces a due diligence process under Rule 3 and 4 which the Online Gaming Industry has to comply to. This amendment further classified the online games into two different categories- Ones which involves wagering and the others which do not, allowing for a more focused supervision. There are certain restrictions imposed regarding advertisement and promotion of harmful content, and a grievance redressal mechanism is also set up.
- Goods And Services Tax Council
By the amendments passed in 2023, a GST of 28% is levied on all deposits at full face value in all real money online games. This is done to discourage the activity of gambling. Moreover, all the gaming intermediaries registered outside India, must register themselves in India as well.
- Consumer Protection Act, 2019
The act prohibits any unfair trade practice. Hence, any game which gives false expectations to players regarding money or any other thing, can be held liable under this act.
- Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements 2022
These guidelines ensure that the customers are not lured by false claims made during the advertisement of the game. This can include exaggerated claims, unsubstantiated promises, misinformation, etc.
- Intellectual Property Acts
Acts like the Copyright Act,1957, The Trademark Act, 1999, Patents Act, 1970, etc., prevent developers from stealing the content of any other platform or company making such games. It also prevents the developers from using the original works of any other artists to promote their own game. Hence, no one can steal the creativity of someone else’s game, or use any art work like music, drawings, etc. not belonging to them, to promote their game among the masses.
- Criminal Laws
Various criminal laws like Bhartiya Nyaya Sanhita, 2023, IT Act, 2000, etc. have prohibited the game developers from portraying any content which might be objectionable and controversial in nature, or apply any such content while promoting their game. These can include objectionable content against women, promoting activities and behaviors which are not in public interest.
CONCLUSION
While online gaming brings with it exciting new opportunities for growth, the rapid growth creates many associated challenges which call for a sophisticated regulatory framework. Questions of games of skill versus games of chance have become central to legal disputes and to legislative endeavors. While gaming platforms help generate economic growth, career opportunities and the instant global social interaction, they are vulnerable to risks such as addiction, fraud, and the tragic cases of young users who purchased their lives for as little as €100. And so, blanket bans, even as states attempt, may not have the desired effect, because they forgo the realities of skill-based gaming, and its potential as an economic enterprise. There has to be a way forward, one where gaming is supported and the playing field plays fair when it comes to users’ safety. Some policymakers should go even further and update out of date laws like the 1867 Gambling Act. Responsible gaming, a harmonized framework of both regulation at state and national levels, having regulatory bodies and self-regulatory mechanisms, is essential. Additionally, users need to be aware of what’s happening, and need data privacy standards that adequately protect them. While this can be presented as prohibiting gaming, we should not follow the same role for the government; their role should evolve from minimal prohibition to active regulation and oversight to create gaming as an inclusive, innovative, safe, and most importantly an economically contributing space for India’s digital economy.
Author: Krish Mahna, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing
REFERENCES
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