The Ministry of Electronics and Information Technology (MeitY) said on Thursday that the introduction of the online gaming rules is to protect children and other vulnerable sections from the negative impact of such games. MeitY notified the online gaming rules earlier this month. 

“The purpose of these amendments is to control the unabated and unwarranted negative impact of online gaming activities on users, especially children and other vulnerable sections of society,” the ministry said in a press statement.

While the online gaming industry has seen growth over the past few years, the ministry said that various social and economic concerns have also emerged from such games. This include addiction-related concerns among children and adults, especially financial losses incurred by adult users.

Content-related concerns include depiction of violent or inappropriate content, with absence of concrete measures to prevent children from accessing such content or real money games.

“The rules address addiction-related concerns among children and adults through safeguards such as warning messages, monetary spending limit and time limit,” MeitY said.

Moreover, per MeitY, the gaming rules will enhance public awareness about trusted online games that have been subject to a mandatory verification process as users will be able to identify permissible online games through a visible mark of verification. Under the new rules, all online games verified by self-regulatory bodies will need to display the permissible mark.

Besides, the rules provide adequate controls to protect citizens from illegal gambling and betting websites and apps, the ministry noted.

“The rules cast an obligation on intermediaries, including social media platforms and app stores, to make reasonable efforts to not host, publish or share any online game that causes user harm or which has not been verified as a permissible online game by an online gaming self-regulatory body (SRB) designated by the Central Government,” it explained.

To address the growing menace of online ads of illegal betting and gambling operations, the rules even disallow intermediaries to host or display any advertisement or surrogate advertisement or promotion of an online game that is not a permissible online game. 

Earlier this month, the ministry notified the rules for online gaming.The rules define an online game as a game that is offered on the internet and is accessible by a user through a computer resource or an intermediary. 

Online real money games will have to follow KYC procedures, and inform users of changes to user agreement, terms, and privacy policy within 24 of hours of the change coming into effect. They also cannot offer financing on its own or through a third-party for users to play games on their platform.

The ministry is also reportedly working on a separate order to fintech and payment companies for blocking the access of their payment gateways to non-permissible online games.

However, the tussle between states and the Centre on the regulatory front has still been ongoing. Tamil Nadu (TN) came out with a full-fledged law that banned online gambling altogether. 

Minister of State (MoS) for Electronics and Information Technology Rajeev Chandrasekhar said that it was meaningless for states to regulate online gambling as the internet came under the purview of the Centre. 

“… the basic principle for what online gaming permits has been established (via IT amendments). The Internet can’t be regulated by states so, in some aspects, it is meaningless for a state government to try and legislate things that are happening on (the) Internet even if they have law and order under their control,” said Chandrasekhar.

Despite the regulatory uncertainty, the gaming sector has seen immense growth over the past few years in terms of user growth. India’s gaming market size was estimated to be around $ 2.6 Bn in FY22, and was predicted to reach a size of $8.6 Bn by FY27, according to a report by Lumikai. The number of gamers in India stood at 507 Mn in FY22, growing at a CAGR of 12% from 450 Mn in FY21.

According to Inc42 data, Indian gaming startups raised $349 Mn funding in 2022, which was 80% lower than the capital inflow of $1.74 Bn in the previous year. The average deal size stood at $3.4 Mn, a 38% decrease compared to 2021.