Online gaming to now be regulated by IT ministry, states not divested of their power

The ministry of electronics and information technology is now formally in charge of making rules related to online gaming while the ministry of youth affairs and sports is in charge of e-sports. 

The central government notified these changes to the Allocation of Business Rules on December 26. This is in line with a recommendation made by an inter-ministerial task force in its report on September 29. The changes were also recommended by the committee of secretaries, headed by cabinet secretary Rajiv Gauba, in a meeting on October 26. 

Additionally, the committee said the ministry of information and broadcasting would, if required, “continue” regulating online gaming conduct, advertisements and the code of ethics, among others. 

Meanwhile, the IT ministry would work on “drafting a legislative framework to regulate online gaming”. This framework “may not make any distinction between games of ‘skill’ and games of ‘chance’”. 

“These amendments do not impede the states’ power to regulate online gaming in any way,” lawyer Siddhartha Iyer told Newslaundry. It means that, at the centre, the nodal ministries for online gaming and e-sports will be the IT ministry and the sports ministry, respectively. 

Iyer, who has represented Avinash Mehrotra before the Delhi High Court and the Supreme Court for his petitions seeking a ban on online real money games, added, “This clarifies that the IT ministry has jurisdiction over online gaming, something they had refused in their affidavit before the Delhi High Court.”

Jay Sayta, a gaming and technology lawyer, told Newslaundry the amendment would “pave the way for the IT ministry to immediately issue some broad guidelines or rules to govern the online gaming sector without necessarily divesting the states of the power to legislate”.

He added, “Earlier, since the nodal ministry was not defined, nobody was ready to take the responsibility [for online gaming]. That has now been clarified with the amendments.”

Sayta, who is also editorial advisor to gaming news website G2G News, said Parliament may decide to come up with legislation to regulate online gaming at a future date, but it’s a “long-drawn process”. “Whether the centre would want to enact legislation on this issue now, when the question of whether this falls under the union or state list is pending before the Supreme Court, remains to be seen.”

Support for a central law

Online gaming includes casual games like Candy Crush, games involving real money like Teen Patti, fantasy sports that may or may not involve real money, and games of skill. The task force does not consider games of chance, like online betting or gambling, within online gaming. 

E-sports is a “measurable format of sports, where players compete on their own skills with live audiences, just like a physical sports event”, like a virtual version of physical sports. 

The need for a uniform law on online gaming has been voiced by multiple parties including state governments, the online gaming industry, the Law Commission of India, and Niti Aayog. 

The Law Commission had recommended a central law in July 2018 in its report titled Legal Framework: Gambling and Sports Betting including in Cricket in India. The report argued that Parliament had the remit to enact laws related to online betting and gambling because they take place over the internet, and entry 31 of the Constitution’s union list covers telephones, wireless, broadcasting and other similar forms of communication.

Similarly, in December 2020, Niti Aayog had released a draft report for public discussion on the regulation of online fantasy sports. After consultation, the government’s think tank had proposed creating a “uniform national level safe harbour framework” for fantasy sports that would also specify how to determine which of these games were games of skill.

But instead of centralised regulation, Niti Aayog had proposed that the central government recognise a single self-regulatory organisation for fantasy sports.

The inter-ministerial task force was formed on May 6, 2022. It included the secretaries of the ministries of home affairs, information and broadcasting, electronics and IT, and youth affairs and sports; and secretaries of the departments of revenue, promotion of industry and internal trade, and legal affairs; and the CEO of Niti Aayog.

In its consultation with the task force on June 7, the gaming industry had asked for a central legislation on online gaming. According to the task force’s report, this was supported by 13 states and union territories that had also participated in a consultation with the task force.

The task force’s report also talked about the need to “introduce a uniform law to determine what forms of online gaming are legally allowed, and eliminate the existing inconsistencies between the laws of different states”. The report emphasised the need to have a “single body – whether a nodal ministry or separate regulatory body – that will address all issues pertaining to online gambling, especially to address user grievances”.

Under the existing Allocation of Business Rules at the time, the report noted that all matters related to “cyber laws” and their administration fell within the purview of the IT ministry. Hence, a central law would fall under the IT ministry too, which could act as a nodal ministry for online gaming (except e-sports and games of chance) because, as per the rules, the IT ministry “governs all policy matters relating to information technology and the internet” and “online gaming is part of the internet ecosystem”. 

For Vivan Sharan, partner at Koan Advisory, the amendments signal a potentially more unified regulatory approach to online gaming. “After all, why should an Indian citizen experience different levels of digital freedom across states?”

Contradictions 

When the committee of secretaries met in October, IT ministry secretary Alkesh Kumar Sharma said his ministry was already drafting a set of rules or regulations to regulate online gaming pending the enactment of a separate central legislation on the subject.

Tarun Kapoor, advisor to prime minister Narendra Modi, suggested that online gaming “may be considered as one activity/service” with no distinction made between “skill” and “chance” as is “the global practice”. 

Revenue secretary Tarun Bajaj submitted to the same committee that the distinction between games of skill and chance was “difficult to make and may be avoided”. I&B ministry secretary Apurva Chandra had also argued against making such a distinction since it wasn’t done internationally and online gaming was considered “one indivisible activity”.

This is at odds with the task force, where most members said the differences between games of skill and chance must be made clear since games of chance – gambling – are a state subject. Representatives from the revenue department, Niti Aayog, and promotion of industry and internal trade department said such definitions would have implications on other issues such as taxation. 

Sayta told Newslaundry that some issues – like blocking websites, defining KYC requirements, and guidelines to prevent money laundering – would still have to be notified at a central level.

Are existing IT laws enough?

The revenue department submitted to the task force that the IT ministry act as a regulator for the industry as an “interim measure”, and that it should “license or, at least, register online gaming platforms, with power to de-license or re-register” these platforms.

In the task force’s third and final meeting on August 22, the IT ministry had proposed that it could act as the nodal ministry for online gaming to enact a regulatory framework. It had suggested that until “a full-fledged legislation for online gaming is enacted, rules can be passed under section 79 of the IT Act as an interim measure”. 

The IT ministry said it would also include provisions under the upcoming Digital India Act “to prohibit games of chance”. 

The I&B ministry said online gaming platforms cannot be regulated under section 79 since gaming platforms are publishers, not intermediaries. The department of legislative affairs recommended that online gaming instead be regulated through a new central legislation that could be administered by the IT ministry.

In its final recommendations, the task force said the long-term measure would be a separate law for online gaming. But in the interim, it suggested the industry be regulated through rules under sections 79 and 69 of the IT Act. As its report said, this could only happen after validating whether online gaming platforms, as simultaneous intermediaries and publishers, can be regulated via rules under section 79 of the IT Act. 

This confusion arises because gaming platforms develop the games themselves and then publish them. They control the content of the game and are thus publishers. But for the purposes of game play – which is the interaction between two or more players – they are intermediaries as they do not have control over the content and moves made by the players. The same platform temporarily changes from publisher to intermediary. The upcoming Digital India Act might be a way to resolve the issue, as per the task force’s report.