ONLINE GAMING INDUSTRY

Description

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Context

A task force set up the Ministry of Electronics and Information Technology has prepared a final report of its recommendations to regulate the online gaming industry in India.
For this, it has proposed the creation of a central regulatory body for the gaming sector, clearly defining what games of skill and chance are, and bringing online gaming under the purview of the Prevention of Money Laundering Act, 2002, among other things.

What is the need for a Central level Law?

Failure of State Governments

Online gaming so far has been a state subject, but state governments have said they find it extremely difficult to enforce certain rules like geo-blocking certain apps or websites within the territory of their state.
Also, there is a concern that rules passed in one state are not applicable in another, which has caused inconsistency in how the online gaming industry is regulated in the country.
State governments also do not have enough blocking powers like the Centre to issue blocking orders for offshore betting sites.

Suicides

Stakeholders have highlighted a number of societal concerns that can arise from the proliferation of online games in the country. There have been a number of reported incidents of people losing large sums of money on online games, leading to suicides in various parts of the country.

Impact of gaming on health

Research shows that gaming disorders can also be linked with anxiety, depression, obesity, sleeping disorders, and stress.
People who remain physically inactive for long periods because of gaming may also be at higher risk of obesity, sleep disorders, and other health-related issues, according to WHO.
While time spent online is still not as high as in other countries, almost a quarter of adult Indian gamers had missed work while playing games during this pandemic.
Gaming addictions cause physical, social and emotional damages, impairing sleep, appetites, careers and social lives.

Lack of Regulatory Framework

There is currently no regulatory framework to govern various aspects of online gaming companies such as having a grievance redressal mechanism, implementing player protection measures, protection of data and intellectual property rights, and prohibiting misleading advertisements.

For online gaming businesses, the inconsistency has led to uncertainty. The thinking within the government is to have a nodal agency that will address all issues related to online gaming, including introducing a uniform law to determine what forms of online gaming are legally allowed.

Recommendations of the task force

Central-level law for online gaming

According to the Task Force’s Report, a central-level law for online gaming should apply to real money and free games of skill, including e-sports, online fantasy sports contests, and card games among others.
Casual games with no real money element in the form of stakes may be kept outside the scope of such rules, unless they have a high number of users in India, or permit the publication or transmission of information in the nature of any inappropriate content like violence, nudity, addictive content or misleading content.

Regulatory body for the online gaming industry

It has also recommended creating a regulatory body for the online gaming industry, which will determine what qualifies as a game of skill or chance, and accordingly certify different gaming formats, seek compliance and enforcement.

Three-tier dispute resolution mechanism

A three-tier dispute resolution mechanism, similar to that prescribed under the Information Technology Rules, 2021 for online streaming services, consisting of a grievance redressal system at the gaming platform level, self-regulatory body of the industry, and an oversight committee led by the government should be put in place for online gaming.

‘Reporting Entities’ under the Prevention of Money Laundering Act, 2002,

Any online gaming platform – domestic or foreign– offering real money online games to Indian users will need to be a legal entity incorporated under Indian law. These platforms will also be treated as ‘reporting entities’ under the Prevention of Money Laundering Act, 2002, and will be required to report suspicious transactions to the Financial Intelligence Unit-India.

Which ministry will be in charge of the regulation?

The task force has suggested that MeitY may act as the nodal ministry to regulate online gaming, except for the e-sports category on which the Department of Sports can take the lead.
The scope of the regulation by MeitY should only cover online gaming, that is, games of skill, and the issues of online betting and gambling being games of chance in nature should be excluded from its scope.
Certain other aspects of online gaming such as advertisements, code of ethics relating to content classifications etc. could be regulated by the Information and Broadcasting Ministry, while the Consumer Affairs Ministry can regulate the sector for unfair trade practices.

What did the task force say about offshore betting apps?

On the aspect of prohibiting games of chance, gambling websites or apps being played online, the proposed Digital India Act can include it in the list of prohibited user harms that will not be permitted, the task force has said.
Many offshore betting and gambling websites which are illegal in India have become popular among Indian users. Despite being based outside India, some of these websites are widely advertised in Indian newspapers and TV channels, and allow users to transact in Indian rupees through popular digital payment modes such as internet banking, UPI and popular wallets,” the task force is learnt to have said in its report.

Online Gaming Market in India

A 2019 survey by the U.S.-based Limelight Networks found that India had the second largest number of gamers after South Korea.
The revenue of the Indian mobile gaming industry is expected to exceed $1.5 billion in 2022, and is estimated to reach $5 billion in 2025.
The industry in the country grew at a CAGR of 38% between 2017-2020, as opposed to 8% in China and 10% in the US.
It is expected to grow at a CAGR of 15% to reach Rs 153 billion in revenue by 2024. India’s percentage of new paying users (NPUs) in gaming has been the fastest growing in the world for two consecutive years, at 40% in 2020 and reaching 50% in 2021.
According to a report by EY and FICCI, transaction-based games’ revenues grew 26% in India, with the number of paying gamers increasing by 17% from 80 million in 2020 to 95 million in 2021.

Way Ahead

Many countries — including Australia, China, Japan, India, Italy, Japan, Korea and Taiwan— already officially recognize tech addiction as a disorder,some even going so far as to declare the issue a public health crisis, leading governments and health-care providers to develop a series of major initiatives to curb the problem. India needs to take a cue from them.
The livestreaming of unauthorized video games was banned in China, signalling stricter enforcement of rules as part of its broad crackdown on the gaming industry aimed at purging content the government does not approve of.
Awareness needs to be generated among the youth and their parentsabout internet addiction and educate them about the use of internet in a responsible manner.

Rajasthan government advisory

An advisory by Rajasthan government warned parents and teachers to look out for abnormal behaviour in children to detect and prevent addiction to online gaming. The recent advisory listed measures to protect children from getting overly involved in online gaming, which has become a growing concern of late.

The Rajasthan government advisory advised parents to establish an “internet gateway" at home which will help in effectively monitoring their child's internet usage. The document also suggested that it should be ensured that the child accesses internet from a computer placed in family space.

Other

In India, the Central Board of Secondary Education (CBSE) has recently launched a counseling app for students called “Dost for life,” which includes counseling for Internet addiction disorder, apart from counseling for depression, anxiety, SLD, etc. Furthermore, in India, treatment for Internet addiction is provided through special clinics for behavioral addiction, in some institutions such as AIIMS, NIMHANS, and RML Hospital. Furthermore, while there are no national policies or programs targeting Internet addiction, the Indian Psychiatric Society (IPS) has developed guidelines for the management of Internet addiction.

In India, there has been a rise in gaming industry, as well as recognition by the government of the benefit of revenue by investing in gaming industry leading to the development of draft guidelines for the regulation of games such as the “Online fantasy sports platforms” in India. There are also plans to set up Center of Excellence for Gaming. However, how these guidelines and center of excellence will have an impact on problematic Internet use needs to be examined further.
Government policies to restrict the timings children and adolescents indulge online, especially in gaming, for example, “gamer guard” policy in Thailand, “fatigue system” policy in China, and “shut down” policy in South Korea.
Harm reduction initiatives with respect to Internet addiction involve displaying warning messages and restriction on advertisement or gaming, regulation of product development, etc.
There is also need for multisectoral coordination – there should be involvement of public health experts, behavioral addiction experts, and experts from the department of education, information, and technology to promote responsible Internet use.
The setting up of a Central Level Regulatory Body as envisaged by the Task Force is a step in the right direction.