Gaming firms seek clarity on revised rules

Gaming companies, which fear prosecution or probes by state governments acting in accordance with local regulations despite the notification of a revised set of central rules on Thursday, are seeking further clarification from the union government, several executives told ET.

They are particularly worried as gambling, betting and wagering on the outcome of a game are state subjects under the Constitution and can have wide definitions. States can also ban gaming in their area in accordance with local laws, they added.

At a meeting with Rajeev Chandrasekhar, the minister of state for Electronics and Information Technology, on Friday, top representatives from gaming companies asked that clarifications in the form of frequently asked questions (FAQ) be issued, the sources said. The minister urged the industry to submit proposals to establish self-regulatory organisations, or SROs, to oversee gaming in the country, they added.

Also read | New gaming rules notified; industry heaps praise but conditions apply

“We now have guidelines for online gaming. However, in all probability, different states can still interpret gambling and wagering as per their own definitions of the act,” said Rajan Navani, the chief executive officer of gaming intermediary JetSynthesys. They could label “risking something of value for a chance to win a bigger prize (as gambling or wagering) and pass legislation accordingly”, he added.

‘Gambling, betting are state subjects’

Representatives of online gaming and technology companies including Dream11, Nazara Technologies, InMobi, Gameskraft, WinZo Games, Mobile Premier League (MPL) attended the 45-minute-long meeting with MoS Chandrasekhar. Also present were members of industry bodies like the Federation of Indian Fantasy Sports (FIFS), E-gaming Federation and All India Gaming Federation.

“The rules are self-explanatory. We have heard their concerns and will issue any clarifications as needed,” a senior government official who attended the meeting told ET.

The new regulations allow the industry to define its own parameters for what online games will be permitted to operate in India. It said that SROs, consisting of industry representatives and experts, will have the power to decide which games can be offered to users while cautioning that it will not allow wagering or betting of any kind, nor permit games that cause harm to consumers.

Also read | Govt notifies rules for online gaming, to appoint multiple SROs

Gaming industry representatives and legal experts are of the view that the union government should instead have spelt out the regulations with more clarity. Thursday’s notification laid out a framework that legitimises online real-money games while banning only those that allow betting or gambling. The alignment of state governments with this new set of regulations has emerged as the key issue, said executives.

“Gambling and betting are state subjects under the Constitution. It will be interesting to see whether any state would deviate in its territorial jurisdiction,” said Abhishek A Rastogi of law firm Rastogi Chambers.

“These are early days and the ambiguity in this space will certainly be entangled over a period of time through pragmatic amendments,” he added.

The new framework creates a distinction between online games and those allowing betting and wagering, drawing praise from industry members. But the decision to keep the definition of “wagering on an outcome” open-ended could potentially lead to disputes, they added.

Apart from this, the companies also sought clarity on the know-your-customer (KYC) requirement under the new rules, according to people cited above. The Centre has mandated that all online real-money gaming intermediaries must conduct a central bank-mandated e-KYC of users for any-and-all monetary transactions.

“We were assured that the RBI-mandated e-KYC process kicks in only when the user starts transacting in real money. The process will not be applicable to all users of online games that use or involve real money,” the source said.

Further, they sought clarifications on the structure and functioning of the SROs.

“One of the participants raised the issue of forum shopping by online gaming companies in the presence of multiple SROs,” said one person who attended the meeting. He was seeking clarity “on whether the intent of the government on allowing multiple SROs was to have different formats like card games, fantasy sports, casual gaming, etc have their own self-regulators,” he added.

Meanwhile, IT ministry officials held that the gaming guidelines had defined very clearly what was permissible and non-permissible.

“The only things that are not permissible are real-money games where the person is betting on a third-party outcome. We were asked to talk to the states and explain our stand. They (IT ministry officials) told us that they would step in if there were gaps and if states sought more clarification and assurance on the subject,” said one of the people directly aware of discussions.

However, another ministry official told ET that certain fantasy games may find it difficult to operate in times to come despite their claim that they do not allow betting or wagering.

“We will take baby-steps in these aspects. While we are not dealing in the operational parameters of how the game functions, there is an element of wagering involved here. We will wait for the SROs to decide on these issues,” the official said.

The government intends to start with three SROs and may expand to more depending on the workload and the demand from the industry. These SROs will have to follow the broad working guidelines issued by the IT ministry and will be de-registered as a self-regulatory body if they fail to do so.

“The minister told companies to come up with suggestions over how the SROs should conduct themselves, but also underscored that the DNA of the SRO will have to be in such a way that it is not industry-dominated,” said a participant at Friday’s consultation.

“He (the minister) told us that the industry should have a credible institution up and running within the next three months, failing which the government will initiate the process of creating SROs,” another source added.