ONLINE GAMING AND ITS REGULATIONS

ABSTRACT

Online games have become a trending topic during the COVID-19 pandemic, as lockdowns confined people to their homes. The sudden and tremendous growth in online gaming has raised concerns about safety, security, and misappropriation of content by cyber threats, which increased. Additionally, the addictive nature of these games led to both physical and mental health issues in individuals. To regulate online gaming, governments in India have taken measures and implemented regulations to protect players and publishers. Landmark judgments by the Supreme Court have also clarified the difference between game of chance and game of skill in some games. Furthermore, the growth of online gaming globally and emerging trends have been analyzed, highlighting the need for continued regulatory oversight and adaptation to the evolving online gaming landscape.”

KEYWORDS 

Online Gaming, Gaming Culture, Regulating Laws, Global Growth, Game of Skill, Game of Chance.

INTRODUCTION

In recent times India has witnessed a rise in gaming culture. There was a significant transformation undergone by India in online gaming which also reached to new heights in the global level, where the choices became unlimited for virtual players. For example achieving of bronze medal by Indian DOTA2 squad’s was impressive witness. With the spurt in gaming industry has seen due to COVID-19, there are many factors determining the growth of gaming culture such as affordable smart phones and cheaper data costs. During lockdown as more people rely upon online entertainment due to no physical contacts with each other, choosed online gaming as an alternative to social media entertainment platforms. The Indian media and entertainment sector recognized online gaming segment as its fourth largest segment. Except china, Indian online gamers reached to an adressive level of 442 million becoming  the 2nd largest gaming user base globally, with a growing Compound Annual Growth Rate (CAGR) of 20% in 2023.  Where 90 to 100 million  are regular players. Currently  there are more than 400 gaming companies in India including hyper link info system, Infosys Limited, Fg factory and Zensar technologies.  Online gaming has evolved with advancements in technology offering improved graphics, faster connections ,and a new business models like free-to-play and subscriptions. In  2022 an increase in revenue of 39% by transaction based game is seen in report of FICCI-EY. In India players are paying for online games with India’s percentage of first time paying users increasing to 67% in 2022 .It provides entertainment , socialization and competitive opportunities. But also raised concerns about addiction, privacy and player safety. So the need for regulating them by states is much needed as it was considered as state matter under constitution.

RESEARCH METHODOLOGY

The method used in this paper is  based on secondary sources, where the data has already been collected by other researchers from variety of channels (newspapers, journals, websites) for the purpose of analyzing growth in online gaming and  laws regulating it.

REVIEW OF LITERATURE

We have witnessing  emerging trends in online gaming  throughout  the nation. In year 2023 India is placed second largest gaming user base globally. To protect the safety of gamer as well as developers ,regulating laws  are developing day by day. Because of the adverse innovation in security and reliability in technology with advanced features like Virtual Reality (VR), Augmented Reality (AR) and Mixed Reality (MR) in gaming experiences led to increase full time professional gaming careers  that also helped in substantial growth of industries 

Online gaming

Online gaming involves playing games through mobile phones ,computers and other gadgets irrespective of their physical locations which facilitates  player connections and collaborative game play.

Online gambling

Online gambling is an activity which involves placing bets or wagers on games in online, where they involve digital currencies instead of cash through  sources of net banking. 

Legality of online games and online  gambling  in India

To constitute whether an activity is gambling or not, the amount of skill involved is taken into consideration. The regulations governing gambling rules in India before independence is The Gambling Act 1845, The Betting Act of 1853 and public gambling act 1867 which gave power to central government, where it is ancient  and ill equipped law to handle challenges in present scenarios. Whereas now after India’s independence states were given power regarding  the constitution  under state list of entry 34. 

Lotteries regulation Act, 1998:-

 In India lotteries are considered legal. The state government which organizes lotteries  must  be  within its  jurisdiction only including the place of draw and conduction of event too. 

Foreign exchange management Act (FEMA),1999:-

FEMA act  ,  prohibits  certain income that is   generated from remmitance of  lottery  winning ,  racing/riding., etc.

Information technology Act, 2000 :-

Computer related crimes are dealt under section 66 in IT Act, whereas powers to make laws on subject matter of online gaming, gambling, and betting is given under section 67, 67A,67B. The act  provides its jurisdiction within its territorial boundaries. 

NEED FOR REGULATING ONLINE GAMING

* To ensure that children and teenagers are not exposed to inappropriate content or gambling 

* To safe guard players from fraudulent or deceptive practices such as rigged games or unfair terms            and conditions

* To protect player personal information and prevent cyber threats.

* To help prevent excessive gambling and provide support for those struggling with addiction. 

* To prevent usage of online gaming platforms for money laundering and terrorist financing . 

* To safeguard game developers and publishers intellectual property protection rights.

* To ensure that online gaming operators pay applicable taxes.

 * To address issues like harassment, hate speech and other forms of toxic behaviour.

BILLS FOR REGULATING GAMING INDUSTRY

In Loksabha the online gaming (REGULATIONS BILL, 2022) was introduced during the budget session of parliament  as  a private members bill. Meity has setup a task force to produce its final reports of recommendations on regulations to be made on online gaming industry in India. The bill was introduced to setup a proper regulatory regime and maintain standards in online gaming.

In April 2023 the Union Ministry of Electronics and Information Technology (“MeitY”), by virtue of rule-making available to the central government under the Information Technology Act,2000, implemented a new central legal frame work for online gaming through amendments to the  Information Technology(Intermediary Guidelines and Digital Media Ethics Code) Rules,2021(“IT Rules 2021”). These amendments (“Online Gaming Rules“) propose a light-touch, co-regulatory regime whereby MeitY-recognised, independent self-regulatory bodies (SRB)will verify whether an “online real-money game” is to be made available to the general public or not -in accordance with the baseline criteria prescribed by the Online Gaming Rules.

Proposed amendments 2023

“The 2021 amendments to the IT Rules apply to real money games and free skill games, including online fantasy sports contests and e-sports. The key recommendations include:

– Firstly, the government will establish a three-tier dispute resolution mechanism, including a Grievance Redressal System, to regulate gaming platforms.

– Secondly, the amendments define permissible online real money games as those where players deposit cash or kind with the expectation of earning more cash or winnings. These games must be verified by self-regulatory bodies.

– Thirdly, the amendments introduce regulations for online gaming intermediaries, defined as entities that enable users to access online games through their computer resources. Examples of intermediaries include internet providers, web hosting companies, cloud services, and social media platforms.

Fourthly, online gaming intermediaries must verify users through Know Your Customer (KYC) processes before accepting initial deposits in cash or kind for permissible online real money games. KYC involves due diligence and monitoring, similar to the processes followed by regulated entities like banks, NBFCs, and financial institutions.

Fifthly, the prohibition of online games related to gambling, including advertisements and player regulations, aims to ensure that games follow guidelines for preventing addiction and mental harm. This includes measures for parental supervision.

Sixthly, the Group of Ministers (GoM) reviewing goods and services taxes (GST) on online gaming has recommended maintaining the 28% tax on gross gaming revenue (GGR), which is likely to apply to casinos and horse racing, currently taxed at 18%.”

GAME OF SKILL VS GAME OF CHANCE

Human  in recent time, opt to play online games, where some games need human intellect i.e., skill to be performed where as some purely based  on luck i.e., chance. India does not legalized games that are based on “game of chance”.

Skill Game

  Success rate  in the game of skill is probably  determined by the individual skill having in games like  chess, carrom,  horse racing etc.

Chance Game 

 There is no complete determination of chance for success. Though skill is present, Success depends on chance. Example playing cards, rolling dice etc reflect chance based games .Hence it was given as subject of state matter in the constitution ,but then the confusion between game of skill and game of chance raised in games like poker, fantasy sports etc., to clear such confusion between skill and chance  based games , Below are some land mark judgements  by Indian courts.

*Manoranjithan Manamyil Mandram V. State of Tamilnadu(2005) , when a question of fact arises. A  game is considered to be chance or skill is to be decided on the facts and situations of each case  is been held in this case.

 Games as a Game  of Skill ;- 

Rummy :- In the case of State of A.P  V. K.Satyanarayana (1968), the HON’BLE Supreme Court  held that  Rummy game  can be preponderantly qualified as a game of skill and not of a game of chance as it needs some skill to win unlike 3 card game. 

Horse Racing  :-In the case of Dr.K.R Lakshmanam V. State of Tamilnadu (1996), The Hon’ble supreme court held that horse racing is a game of mere skill while dealing with issues. The expression mere skill would mean domination  of skill . It is  neither considered as gambling or gaming.

  Games As a Game of skill or Game of  chance;-

 Poker :-  State like West Bengal in West Bengal Gambling and Prize Competitions Act, 1957 specially remove poker from the definition of “Gaming or Gambling”. The State of Nagaland also expressively categorized it as a game of skill. Whereas states like Gujarat and Tamilnadu stated it as chance based game. 

Fantasy Sports  :- Punjab,  Haryana ,Bombay and Rajasthan, High Courts  in different cases,  held fantasy sports as a game of skill which upheld the status of fantasy sports  format offered by leading Operator Dream 11 (as per charter of Industry body federation of India fantasy sports) 

Casino:- Casino is a game of chance but as far as state laws are concerned to give exemptions like Goa and Sikkim ,where a license regime for five star hotels were given.

LEGISLATIONS AFFECTING ONLINE GAMING IN DIFFERENT STATES

   States like Bombay, Punjab, Madhya Pradesh, etc., have legislations to control online gaming,

whereas, Assam’s government legislation failed to differentiate  between the game of skill and the game of chance. The  Online Gaming Act  was passed by Sikkim State imposes taxes on industries to control the unfair gain and intentions of the gaming industry. An amendment was proposed to the same  in 2018 which introduce mandatory provisions of gaming. 

Nagaland also passed similar legislations and it has obtained authorized license  for online games categorized under mere skill now. Licensing regime for games of skill and chance is only limited to Sikkim.  In 2020, both Telugu  states i.e., Telangana and Andhra Pradesh,  imposed a ban on any online gambling or real money gaming activities. Where they are cancelled  by  the respective State High Court’s on grounds  unfair ban is applied  to game of skill. To regulate online fantasy games the  Rajasthan   government has brought a draft bill too. 

UNDERAGE GAMBLING, FRAUD AND ADDICTION

Children of age below 18 having access to online gambling is treated as underage gambling. Preventing underage gambling is vital because of its addictive nature it has great effect of negative results. So to protect them age verification is important , it is the process of checking age of player’s before allowing them to use a gambling service.  It is usually done by checking a user’s details which are recognized Government documents such as a driving license or passport, in  the initial stage of entering into gambling services. Scammers may target players like minors, to steal personal information or money. online gaming can be highly engaging and potentially addictive where sometimes person can easily take his life as part of game. It will also impact on both physical and mental health of a person, Ex:- The recent suicide of a class six student who lost sixty thousand rupees in an online game.

To address these issues, online gaming operators and regulators must verify the identity and age of a player. operators have to detect any suspicious activities in gaming and provide responsible gaming tools and resources. There is a need to educate players about the risk involved in gambling , fraud, and addiction and provide supportive mechanism treatment for those suffering with addiction. Ex, Including Ads, in between the game for interrupting the players which divert them from being addictive.

  By taking these steps, the online gaming industry can work to create a safer and more responsible environment for all players.

 Online  games – worldwide

In 2023, the global online gaming market generated approximately 26.14 billion U.S dollars in revenues, which translates to 9.8 percent growth compared to previous year. In USA, In 2022, mobile games revenue in the U.S reached to a  record level of  41.7 billion U.S dollars, the number of U.S mobile video game users is now higher than ever. The UK is the leading video game market in Europe and one of the 5 largest video game markets worldwide. Compared to 2017 spending in  is almost doubled in 2022  in the UK . Coming to  China’s growth , over the last decade China’s gaming revenue saw a more than six fold increase and passed the 296 billion Yuan mark in 2021.

  • The projected revenue in Online Games market worldwide is expected to reach 27.97 billion U.S dollars in 2024.
  •  By 2027, The expected  annual growth rate (CAGR 2024-2027) is 5.20%, resulting in a projected market volume of 32.56 billion U.S dollars 
  • The number of users in the Online Game market  in 2027 is expected to amount of 1.2 billion users.
  • The user growth is estimated to  increase  by  2024 to 2027 from 15.1% to 15.8%  
  •  China  tops  in  projection to generate the highest revenue in the online games market, reaching 532.00million U.S dollars in 2024  globally. 
  • The average revenue per user (ARPU) in the online games market is estimated to be 23.88 U.S dollars in this year. 

CONCLUSION 

In recent years ,India  has witnessed tremendous growth in online gaming which is  increased due to factors like , technological advancements, and changing lifestyles. The government of India have taken the matter into account and  represents its best regulatory framework  that ensures all necessary measures for safety of users, game developers and online audience by its  new rules announced  by the Ministry of  Electronics and Information Technology for online real money games and gambling activities. Regulatory steps has to be taken like adoption of the new online gaming bill 2022 by parliament which was introduced as a private members bill and UK’s centralized regulatory approach has to be adopted. Concerned authorities has to implement Corporate Ethical Responsibilities in online gaming.  But  there is still a need for some  more regulations for  better control  of online fraudulent activities because it was still a growing concern in near future if not regulated well enough. And  There is a need to fill the gap that has occurred due to lack of laws that regulate online gaming though there are different laws that regulate online gaming industry. The increasing number of incidents related to online games, such as the recent suicide of a class six student who lost sixty thousand rupees in an online game, highlights the need for an ‘Online Gaming Law’. This law should study the types of online games that require regulation, the reasons for regulation, and how they can be regulated, as well as  existing laws and precedents for regulation has to be examined. Given the Indian government’s has to  focus on Digital India, Data Protection Bill and E- Governance,  which holds intermediaries and social media sites liable for fake news they spread without proper reliable   information and authority. 

Sharvani Madugula

Dr.B.R.Ambedkar global law institute tirupati,A.P

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2 Ranjana Adhikari, Sarthak Doshi, Shashi shekar Misra, International Comparative Legal Guides, Gambling Laws and Regulations: India, 28Nov,2023, https://iclg.com/practice-areas/gambling-laws-and-regulations/india#:~:text=The%20states%20of%20Telangana%20and,games%20of%20%E2%80%9Cmere%20skill%E2%80%9D 

3 Nidhi Mishra, I Pleaders, Laws On Online Gaming in India, 22Feb,2023, https://blog.ipleaders.in/laws-on-online-gaming-in-india/ 

4Anupriya Chatterjee, The Print, All About Modi Govt’s New Draft Rules for Online Gaming: KYC to Skirting Skill Vs Chance Debate, 10Feb,2023, https://theprint.in/india/all-about-modi-govts-new-draft-rules-for-online-gaming-kyc-to-skirting-skill-vs-chance-debate/1297809/ 

5Amar Patnaik, The Hindu, Regulating India’s Online Gaming Industry, 13April, 2024, https://www.thehindu.com/opinion/op-ed/regulating-indias-online-gaming-industry/article67740783.ece 

6 Statista, Online Gaming, 14April,2024, https://www.statista.com/topics/1551/online-gaming/#topicOverview 

7 Statista, Online games-World Wide, 12April 2024, https://www.statista.com/outlook/dmo/digital-media/video-games/online-games/worldwide 

8Governament of India, Ministry of Electronics and Information Technology, Innovate India, Online Gaming Rules, 13April 2024, https://innovateindia.mygov.in/online-gaming-rules/#:~:text=Further%2C%20with%20a%20view%20to,of%20Electronics%20and%20Information%20Technology 

9 Indian Gambling Act, 1845, Act of Parliament, 1845, (India) 

10 Betting Act, 1853, Acts of Parliament, 1853, (India) 

11 Public Gambling Act, 1867, Acts of Parliament,1867, (India) 

12 Lotteries Regulation  Act,1998, Acts of Parliament,1998, (India) 

13 IT Act, 2000, Acts of parliament, 2000, (India) 

14 Online gaming Regulation Bill, 2022, Acts of Parliament,2022, (India) 

15 IT Rules, 2021, Acts of Parliament, 2021,(India) 

16 West Bengal Gambling and Prize competitions Act, 1957, acts of Parliament, 1957, (India) 

17 Manoranjith Manamyil Mandram V. State of Tamil Nadu, 2005 AIR 1968 SC 825 

18 State of Andhra Pradesh V. K.Sathyanarayana ,1968 AIR 825 1968 SCR (2) 387  

19 Dr.K.R.Lakshmanam V. State of Tamil Nadu, 1996 AIR 1153 1996 SCC (2) 226 JT 1966 (1) 173 1996 SCALE (1)208