Check out the changes in the offing for online gaming industry

With the user base of online games growing in India, there has been a growing chorus to ensure that such games be offered in conformity with Indian laws and that the users of such games be safeguarded against potential harm.

Last week, the Indian government allocated matters related to online gaming to the Ministry of Electronics and Information Technology. The ministry has now come up with some draft amendments to address the issues, while enabling the growth of the online gaming industry in a responsible manner.

Broadly, the draft amendments envisage that an online gaming intermediary shall observe the due diligence required under the rules while discharging its duties, including reasonable efforts to cause its users not to host, display, upload, publish, transmit or share an online game not in conformity with Indian law, including any law on gambling or betting.

Moreover, it shall observe additional due diligence by displaying a registration mark on all online games registered by a self-regulatory body and informing its users regarding its policy related to withdrawal or refund of deposit, manner of determination and distribution of winnings, fees and other charges payable and know your customer (KYC) procedure for user account registration.

Self-regulatory bodies will be registered with the ministry and may register online games of such online gaming intermediaries who are its members and which meet certain criteria. Such bodies will also resolve complaints through a grievance redressal mechanism.

Most of online gaming bigwigs are currently private firms backed by venture capital and private equity investors, with the exception of Nazara Technologies and few others. Fantasy sports and real money-based games have been growing fast over the last 3-4 years despite there being lack of regulatory clarity on their scope and due diligence.

The new draft amendments seek to bring them under the ambit of more pronounced and established rules with clauses that could put the onus of compliance on the ventures. While this would push up the cost of operations for some of these startups, it also paves the way for attracting more investors who were averse to backing companies prone to regulatory whiplash.