India's Online Rules In Force

April 11, 2023
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The online gambling space in India is now under formal central government regulation following the gazetting of amendments to information technology rules on Thursday.

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The online gambling space in India is now under formal central government regulation following the gazetting of amendments to information technology rules on Thursday (April 6).

The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules 2023 retain most of the rules’ draft content released in December, with minor changes in the final version mostly benefiting industry.

Although the rules extensively define an online real-money game, they also prohibit “wagering” without clearly defining the term, as well as conflating gaming platforms that publish their own games with those that do not.

However, the rules also place significant authority with the industry, with registered companies self-regulating, processing customer disputes and executing know your customer (KYC) protocols, which has attracted praise from industry bodies, including the All India Gaming Federation.

Although the amended rules contain “vague” anomalies even after industry and other stakeholder consultation, and despite regional governments possessing overriding legislative powers, they “signal a watershed moment for India’s online real money gaming industry that has long sought central regulations in lieu of State-wise laws”, legal experts said.

The Nishith Desai law firm said in a review on Monday (April 10) that the rules “propose a light-touch, co-regulatory framework” between the Ministry of Electronics and Information Technology (MeitY) and “registered self-regulatory bodies, in line with the government’s overall objective of reducing prescriptive laws and enhancing ease of doing business in India”.

Nishith Desai said the final version dilutes or relaxes requirements for online gaming intermediaries, which could refer to operators online gaming platforms regardless of authorship of product.

One of these changes allows operators to delay KYC data obligations until a customer’s first deposit is made instead of on the opening of an account. However, other “onerous” requirements have been retained, the review said.

Industry feedback also succeeded in distancing self-regulation, especially customer appeals, from the activities of individual members of industry groups, citing the need for impartiality and confidentiality.

“It appears that in recognition of these concerns, the amendments require the board of directors not to have conflicts of interest, and the SRBs [self-regulatory bodies] operating in a manner free from conflicts of interest and ‘at an arm's length’ from its members',” the Nishith Desai review said.

Overall, “the success of the … rules will depend upon the extent to which SRBs introduce and enforce their frameworks".

“For instance, the [initial] amendments required OGIs to obtain no-bot certificates and Random Number Generation certificates and publish them on their websites.

“However, the [published] amendments have deleted this obligation, likely because the expectation will be for SRBs to introduce such measures.”

Regarding ambiguous elements in the rules, Nishith Desai suggested the government may make clarifications through “frequently asked questions”.

The gazetting of the rules comes as separate state government initiatives continue to move in opposite directions ahead of a likely binding ruling by the Supreme Court of India on the legality of online gaming with stakes.

Chhattisgarh state in March became the third state to legalise skill-based gambling following Meghalaya state’s withdrawal of liberalising legislation.

Also on Monday, Tamil Nadu state, an appellant before the Supreme Court seeking to ban online gaming with stakes outright, re-instituted a ban on online gaming following assent from the governor.

Governor R.N. Ravi had refused to assent to an earlier iteration of the punitive bill, enraging the legislature that passed it.

Ravi’s change of mind puts the onus back on operators to appeal to the state’s High Court, which threw out an earlier law almost identical to the one now in force.

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