Over-regulation over online gaming industry must be avoided

Page one Asia, July 02, 2022

By Neelanaja Sharma & Prince Gupta

The online gaming industry in India is a sunrise industry and is growing at a fast pace. The total number of online gamers grew 8 percent from 360 million in 2020 to 390 million in 2021. It is expected that the number of gamers will cross 450 million by 2023.Online gaming is likely to become a US$ 7 billion market in India by FY2026 and generate 2 lakh new jobs in the process.

Despite the industry’s growth, it remains largely unregulated. There have been serious issues of gaming addiction, financial losses, and suicides among gamers, owing to a lack of gamer protection mechanism. Concerns about privacy, data protection, suspicious foreign and unregulated operators, sub-optimal grievance redressand consumer protection, use of bots and professionals to make the playing field uneven, have also been prominent.

As a result, in the past few years, various state governments under their power to legislate on ‘betting and gambling’, have tried to regulate online gaming. For instance, states of Karnataka and Tamil Nadu prohibited online gaming in all forms stating that such games are ‘games of chance’. However, the High Courts of Karnataka and Tamil Nadu have struck down such amendments to legislations banning online skill gaming as unconstitutional, and violative of the fundamental right to practise any profession, or to carry on any occupation, trade or business, under Article 19(1)(g) of the Constitution of India.

Recently, the state of Rajasthan had issued a draft law and held a stakeholder consultation on the same. The Central Government has set up an inter-ministerial panel to work on regulations for the online gaming industry and identify a nodal ministry to look after the sector. These steps are in the right direction, as working with all the stakeholders will be the key to design an optimal regulatory framework. However, gamers largely remain underrepresented in these consultative platforms. There is a need to expand the discussion to include gamer protection.The time is right to address the issue through a regulatory framework. 

CUTS has always tried to push the envelope towards optimal regulation, which promotes innovation and protects consumers, and online gaming is no different. Any regulatory framework should consider costs and benefits on different stakeholders, particularly gamers and start-ups. It should also be enforceable. To this end, we believe there is a need to undertake an ex-ante Regulatory Impact Assessment (RIA) while thinking about a regulatory framework for the sector.  

Given the sunrise status of the industry, over-regulation should be avoided and co-regulation with adequate consumer representation and stricter mandates for gamer protection might be the way forward. It is important to note that experts have considered online gaming operators to be intermediaries who would need to comply with the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or information) Rules, 2011. However, some provisions of these rules are perceived as disproportionate and imposing unreasonable burden on small operators and start-ups, which might impede innovation. 

While several industry associations have issued code of conducts and standards for their members to follow, it is not clear if such standards are disproportionately titled towards bigger operators. Such bodies have also put in place dispute resolution and grievance redress panels, but these are likely to have overwhelmingly representation from the industry, excluding consumer bodies and civil society. 

It is thus important to understand gamers’ perspective, expectations, concerns, and the level of grievance redress required. To this end, CUTS plans to undertake evidence-based study to understand and highlight consumers’ perception, attitude and behaviour in the sector. Such a study will help better understand gamers’ perspective to inform the regulation making process and achieve the goal of optimal regulation. 

( Neelanaja Sharma, Senior Research Associate, Prince Gupta, Senior Research Associate also contributed to the Article. The Authors works with CUTS International, a global policy research and advocacy organisation Views expressed are author’s own. )