Blog: How the draft regulation in online gaming will finally streamline business operations – The Financial Express

From an increase in foreign direct investment to ease of doing business, the draft regulation released by the Ministry of Electronics and Information Technology (MeitY) in online gaming finally shows the way for the industry to grow and expand. “ Regulation is perfect for protecting consumers but sometimes it can hurt the industry. Nonetheless, I think what the government has done is get the balance. Absolutely right. They have made some proposed changes. We agree with a lot of those changes. While there are a few aspects which can be tinkered with. But what in essence, it means that the government is responsive and is listening to what people are saying and saying you can put your view forward,” Joy Bhattacharjya, director-general, The Federation of Indian Fantasy Sports (FIFS), told BrandWagon Online. 

To give perspective, the online gaming industry which registered anywhere between $6-7 billion in FDI earlier, received about $40 million just last year. Industry observers believe that with regulation now, rolling in and adding to the pace of growth, the industry is expected to earn anywhere between $10-15 billion in FDI. “For the industry to further grow, it is important to educate consumers about the kind of online games that exists. In fact, the five-six states have been banning online games on a regular basis has hindered its growth process,” Rameesh Kailasam, CEO, IndiaTech.Org, said. 

As per the proposed guidelines, online games will have to register with a self-regulatory body. Furthermore, only those games which have been cleared by the body will be allowed to legally operate in India. Online gaming companies will not be allowed to engage in betting on the outcome of games. While the proposed guidelines allow the formation of multiple SROs, there is a feeling that this might lead to another set of tussles. Minister of State for Electronics and IT Rajeev Chandrasekhar, however, last week, clarified that SROs will not be allowed to take control. “The most important thing is that an SRO is not a surrogate for the government. The SRO is a body, between because rules and technology. So SRO is a buffer organisation, which is respected on both sides – government and companies. We have Justice Sikri from the Supreme Court, Justice Sistani and Justice Mudgal with us as part of the SRO. The moment you say, let us create SROs and have independent experts decide these issues or give guidance. I think that’s the collaborative spirit that we require. And this will prevent disputes,” Bhattacharjya explained. 

Industry experts opine that SROs will help in implementing strong self regulation through a strong frame of rules. What this will help with is that tomorrow even if the government decides to verify these rules, it will realise these are good and legitimate opinions.

Furthermore, the guidelines suggest that just like an intermediary, online gaming firms will have to undertake additional due diligence, including KYC of users, transparent withdrawal and refund of money, and a fair distribution of winnings. To implement KYC, online gaming firm will have to follow norms laid down for entities regulated by the Reserve Bank of India (RBI). According to Gopla Jain, senior advocate, The Supreme Court of India, the eKYC rules could have been a little gentler, “It could have been more graded, a little more proportionate, just like the rules that the RBA does for wallets. But again, the whole aspect of stakeholder consultation and engagement is also to get that view from a cross-section of people,” added. 

On the subject of safe harbour,  industry experts opine that if intermediaries are registered and have legal designation, definitely they should get protection, namely safe harbour. And secondly,  a clear line has been drawn in the sand between making a distinction between online games which includes several format versus those without betting and gambling. At the end of the day, it will be important to follow regulation to drive sustainable growth.  

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