On April 06, 2023 “The Information Technology Rules” (hereinafter referred to as ” Rules”) came into force, concerning the regulation of online gambling services in India.
The relevant law came into force upon its publication, but until three months from the date when the Ministry of Electronics and Information Technology (“MeitY”) approves at least three Self-Regulatory Bodies (“SRBs”), or the Central Government, by notice in the Official Gazette, imposes another deadline, operators are not required to comply with the said rules.
Since neither the SRBs have been approved nor the notice has been published, the provisions of the Rules described below are currently declarative.
Turning directly to the consideration of these Rules, let’s start with the concept of online gaming, hence, “online gaming” means a game that is offered on the Internet and is available to the user through a computer resource or intermediary.
Basically, the Rules refer to permitted online-games, which are divided into two categories, such as:
(Online games that are not considered permitted risk being blocked in India).
Special rules are only for online real-money games. There are no special rules for other online games, but MeitY has the right to apply certain obligations under the Rules to other online games as well, if MeitY deems it necessary.
Real Money Online Game acquires the status of “PORMG” after passing the self-regulatory body verification. In order to pass the relevant inspection, the online real money game must comply with the following:
In addition, in order to receive PORMG status, games must meet the following criteria:
The rule in question is rather imprecise, since there is no clarity on what games are considered to be wagers. The generally accepted interpretation of the word “wagering” is “to risk money on an unknown outcome of an event in the hope or expectation of winning more money than you have risked”. In this aspect, we should also refer to jurisprudence, which, among other things, distinguishes the following games, which should be considered as “wagering on any outcome”:
– Betting on horse racing ;
– Fantasy sports games .
Additionally, it can be noted that SRBs are empowered at their sole discretion to allow the release of online real money games immediately for a period of up to three months based on the initial information provided by applicants, pending a more detailed investigation. After completing the inspection within the 3-month period, SRBs will either recognize the game as PORMG or notify the applicant in writing with justification that the online games do not meet the stipulated criteria.
In summary, it is necessary to note that state laws in the aspect of gambling regulation take precedence. For example, since Telangana and Andhra Pradesh, even offering gambling games are considered a prohibited gambling activity, meaning that once a game acquires PORMG status, the game will still be prohibited in these states.
Therefore, even operators who register their games in SRBs can get an order to suspend such games from the state government if the games are offered in those states and are prohibited under local law.
The Act establishes a number of obligations imposed on the “online gaming intermediary”, i.e. the operator who provides users with access to one or more online games.
The relevant obligations are as follows:
“Chief Compliance Officer” means key management personnel or other senior employee who is a resident of India;
“Contact Person” means an employee of the operator who is a resident of India;
“Resident Grievance Officer” means an employee of the operator who is resident in India;
– policy for withdrawal or return of the deposit made for the purpose of receiving the winnings, the method of determination and distribution of such winnings, as well as commissions and other fees payable by the user;
– “know your customer” procedure used to verify the identity of the users of such online game;
– measures taken to protect the deposit made by the user for such game;
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