New amendments to IT Rules lack clarity, fall short in defining key aspects

While the new rules leave the definition of wagering undefined, rummy and similar games raise concerns about legality.

Published : Apr 20, 2023 11:00 IST - 12 MINS READ

Union Minister of State for MeitY Rajeev Chandrasekhar at a press conference in Chennai in 2022. Chandrasekhar took to Twitter to clarify the new amendments.

Union Minister of State for MeitY Rajeev Chandrasekhar at a press conference in Chennai in 2022. Chandrasekhar took to Twitter to clarify the new amendments. | Photo Credit: BIJOY GHOSH

The odds that anyone using social media, watching television, or reading a newspaper in India has seen an advertisement for an online real money game that makes it seem like it is raining cash are pretty high. Such aggressive marketing has become ubiquitous in media. Most of these companies were operating in a regulatory grey area or amidst restrictions imposed by States until recently.

After a series of consultations, on April 6, the Ministry of Electronics and Information Technology (MeitY) notified the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023, and framed rules for “permissible” online real money games (RMGs) and brought them under regulatory oversight. RMG industry leaders, lobbyists, and other stakeholders welcomed the rules.

The CEO of All India Gaming Federation (AIGF), Roland Landers, said that the industry was “grateful that the government recognised the industry demands and provided light touch, but comprehensive regulations, which will support innovation”.

According to the websites of these companies, the online rummy platform RummyCircle has over 50 million users, the fantasy sports platform Dream11 has 150 million users, and Mobile Premier League has over 90 million users. Various industry reports, including the one from AIGF, have projected that the industry could grow twofold by 2025 and turn over a $3 billion profit.

Also Read | Online video games vs online real money games: Not one and the same

“We see the Indian online gaming ecosystem to expand and grow into a multi-billion dollar industry and be an important catalyst to India’s one trillion-dollar digital economy goal by 2025-26, with very clear restrictions on online wagering and betting,” Union Minister of State for MeitY Rajeev Chandrasekhar said announcing the amendments.

While the amendments were supposed to bring much-needed clarity, they do not appear to have accomplished that in some definitional aspects. Under the rules, only a game that “does not involve wagering on any outcome” is permissible. What classifies as wagering has been left undefined. Some stakeholders are concerned whether games such as rummy may be classified as illegal or not permissible because of this ambiguity in the new rules.

Chandrasekhar took to Twitter: “Wager is a well-defined expression in Contract Law and decisons hv clearly held what wager means. There is no need in this framework to get into ‘nuances’ of chance or skill, bcz the harm of wagering is directly being prohibited—regardless of nature of game.” The Minister also posted that Self-Regulatory Bodies will “evolve framework” to deal with these aspects.

State subject

Under the new IT Rules, 2023, all online wagering and betting forms are not permissible. This includes offshore online gambling companies. Public gambling has been an outlawed activity in India under the Public Gambling Act of 1867. The only exemption provided is for “games of mere skill”, but there is no exhaustive list of such games. However, since gambling is a State subject, the nuances of regulation were left to the States.

Also Read | Tamil Nadu Governor gives assent to Bill banning online gambling

Much before the IT Rules, 2023, came into effect, several States, anticipating user harm, had already banned online gambling—Andhra Pradesh, Telangana, Odisha, Assam, and recently Tamil Nadu. Some States recognised some forms of betting. Sikkim, for instance, has legalised some digital casinos. Meghalaya has also legalised them with a State Act. Some experts thus believe that State-specific instances might have solutions.

“Self-regulation is the second step; the States must first set up some control. Meghalaya has one of the best laws in India as it defines and regulates both games of skill and games of chance,” believes Nishit Tandra, assistant professor and scholar from Telangana researching gambling and betting.

An advertisement featuring Bollywood actor Hrithik Roshan that appears on the RummyCircle app on Google Play.

An advertisement featuring Bollywood actor Hrithik Roshan that appears on the RummyCircle app on Google Play. | Photo Credit: By special arrangement

There is a little confusion now on whether State-specific legislation concerning “Internet-based” betting or gambling will have to be amended in the context of the notified rules.

On April 10, Tamil Nadu Governor R.N. Ravi finally gave assent to a Bill to ban online gambling and regulate online gaming. Over the past few months, the politics surrounding the assent had brought to the fore the debate about some States prohibiting a few types of online real money gaming (RMG) along with gambling. Industry bodies and companies are planning to challenge this legally as they believe that the latest amendments to the IT Rules address the concerns of States such as Tamil Nadu and adequately regulate RMG.

Also Read | Justice K. Chandru: ‘Governor is not umpire or referee’

“The rationale of why a separate law is required at the State government level is not clear and is likely to lead to confusion, unnecessary litigation, and instability in policy making. It will also cause duplication of efforts for start-ups, which form a large part of the online gaming ecosystem,” said Ranjana Adhikari, a partner at the law firm Induslaw.

RMG companies cite the court battles they won to establish that what they offer is a “game of skill” and is considered legal. Whereas, State governments, including Tamil Nadu, cite suicides, addiction, and financial harm these games potentially cause for opting for prohibition instead of regulation.

  • While the IT Amendment Rules 2023 were supposed to bring much-needed clarity, they do not appear to have accomplished that in some definitional aspects.
  • Under the new IT Rules, 2023, all online wagering and betting forms are not permissible. But much before the IT Rules, 2023, came into effect, several States, anticipating user harm, had already banned online gambling.
  • The 2023 Rules also have guidelines on advertisements. However, several advisories and guidelines already exist on that front but have not received oversight till now.
  • The RMG (real money gaming) lobby has strived to distance itself from the “gambling” tag. But the questions regarding the tag persist.

No clarity

The IT Rules, 2023, themselves provide no clarity on whether States can impose their restrictions atop these. Telangana Principal Secretary of Industries and Commerce Jayesh Ranjan told Frontline that States have “no clarity yet”.

Chandrasekhar spoke about this in a Twitter session on April 14. He said it was meaningless for States to “legislate” on “the Internet” as it “cannot be regulated by States”. “We have regulated online betting as not permissible in the Indian context on the Indian Internet,” the Minister said, adding that if some States want to do more than that “they are free to do that”. There was no official notification on this until this story was filed. 

Also Read | ‘Only the tip of the iceberg’: Dr Jayant Mahadevan on online gambling in India

Beyond concerns about jurisdiction, some experts have been sceptical about the scope of banning online betting or gambling. Despite prohibitory legislation in several States, the Internet there is filled with hundreds of sites and games that host gambling/betting games. For instance, Telangana banned online gambling in 2017, but advertisements of betting firms showed up in Hyderabad Metro stations as recently as December 2022. In January 2023, the Telangana Police arrested eight men for running an online betting racket.

Particularly exploitative are offshore betting sites. Esya Centre, a technology policy think tank, published the report “Offshore Online Betting and Gambling in India: A Risk Assessment” in July 2022. The report noted that there was an “enforcement gap” when dealing with most offshore betting or gambling sites as the States did not have the “technical capacity to block access to illegal websites” whereas there was no central nodal Ministry “to identify rogue offshore websites” for blocking under Section 69A of IT Act 2000. The enforcement gap issue might be resolved since MeitY is now the nodal Ministry.

A win for gaming lobby

An RMG is a game where a player deposits “cash or kind with the expectation of earning winnings on that deposit,” as per the newly defined IT Rules, 2023. Several high courts have already determined some games as not gambling but as games of skill as skill takes preponderance over chance. The amended rules have carved out a category named “permissible online real money game”, which is a game “verified by an online gaming self-regulatory body”. MeitY is permitting multiple such self-regulatory bodies to function in an attempt to eliminate conflict of interest within the industry.

Permissible real money games

Several forms of games are now set to operate as permissible RMGs. Fantasy sports and online card-based games are two predominant beneficiaries of this. Currently, RMG revenues contribute to 57 per cent of the Indian online gaming market, as per Lumikai’s “India Leveling Up: State of India Gaming FY 2021-2022” report. Lumikai is a venture capital fund targeting India’s gaming and interactive media start-ups. After initial hiccups, RMGs have grown into a business that may be too big to be outlawed.

Also Read | Families of online gambling victims in Tamil Nadu live in shame

Operating amidst regulatory oversight is expected to increase transparency in this sector. “This will benefit users, too, as a certain level of safeguards will be standardised,” an industry insider said. “Once the rules are in place and the self-regulatory bodies approve the game formats, then transparency is inherent in that kind of structure. So, it certainly will be beneficial to the end user. The consumer will also have the confidence that they can raise their issues and get them addressed,” said E-Gaming Federation Secretary Malay Kumar in an interview with Frontline. “For now, the broad structure is very supportive,” he added. “The fine print will evolve once the self-regulatory bodies are established  There will be consultations on the details and aspects of regulations.” Under the IT Amendment Rules, 2023, self-regulatory bodies must include safeguards against “user harm” in verifying RMGs. The rules have listed self-harm, psychological harm, measures to safeguard children, and safeguards against addiction and financial losses. Certain provisions, such as allowing RMGs to operate for about “three months” without pre-verification, have caused a little alarm. A retrospective verification might not align with the goal of protecting user interests as real money is involved in these games.

“Some stakeholders are concerned whether games such as rummy may get classified as illegal or not permissible because of the lack of clarity on what amounts to “wagering”.”

The 2023 Rules also have guidelines on advertisements. However, several advisories and guidelines already exist on that front but have not received oversight till now. Guidelines like those from the Advertising Standards Council of India (ASCI) already exist to prioritise “consumer interest”. However, there is overwhelming evidence of several RMGs having routinely violated the current guidelines/advisories on advertisements or indulged in irresponsible behaviour. For instance, during the 2022 IPL season, ASCI released a press note stating that “in March alone, 285 social media ads of online real-money gaming companies were identified as being in violation of the ASCI code”.

Aggressive marketing is a go-to route for acquiring new and retaining old users. Such is the annoyance that a survey by LocalCircles comprising “33,000 responses from citizens located in 322 districts of India” reported that 91 per cent of respondents asked for a “ban on unsolicited SMSs promoting online and fantasy games”.

On legitimacy and harm

Eliminating harm to users in online RMGs is a lofty goal, and minimising the harm hinges upon various tangible and intangible factors. It requires expertise and understanding across the board: gaming technology, manipulative mechanisms, psychology of addiction, demographics, and socioeconomic and cultural influences, to name a few. 

Legalised and regulated games can also be addictive and harmful if manipulative tactics underlie the algorithms and user interface. Even Candy Crush is addictive as the difficulty level shoots up and gives a dopamine boost by creating a sense of challenge, said Shashidhar K.J., a technology policy researcher with Digital Futures Lab. “It’s a lot more tricky and needs more understanding from regulators. Focus on player agency, focus on principles such as house always wins, and evaluate where the harms are arising from. When we advocate for player/user agency, we should ask whether the player has enough agency to affect the ultimate outcome of the game,” he said.

Also Read | Editor’s Note: Gaming? Or gambling?

Shashidhar elaborates with a poker example. The algorithm knows a lot about the players: their moves, when they are bluffing, when they might fold, etc. The regulators should look in this direction to see if such information is being used against the player.

As we foray into regulating something set to grow much more, we are not anticipating future requirements in a rush to regulate the space, said Aditya Deshbandhu, a lecturer in the Digital Media Sociology department in the University of Exeter, UK, speaking to Frontline. “We have always been reactive and shortsighted with regulatory mechanisms.”

Skill vs chance

The RMG lobby has, meanwhile, strived to distance itself from the “gambling” tag. It has sought to associate itself with the “online gaming” tag, which has irked the pure online gaming industry where money (cash or kind) is not a winning component. But now, after a series of conflicts and conversations, all games involving deposits and winnings have been classified as RMG by MeitY (lead article by Harish Chengaiah on page 6).

The skill versus chance nuance formed the core argument in recent times in several court cases that the RMG platforms have fought to get classified as not gambling. There is always an “overlap” between chance and skill, and most online real money games in India contain elements of both, and courts have looked at “preponderance” of skill or chance during litigations. The categories game of skill and game of chance, however, find no mention in the IT Amendment Rules, 2023.

This is not unique to India. Even in the US, in states such as Nevada, legal battles were fought by daily fantasy sports platforms to shed the “gambling” tag. Nevertheless, Nevada declared daily fantasy sports as gambling, whereas other states, such as Illinois, treat some of these games as “games of skill.”

Some experts, however, say the “skill vs chance” nuance is splitting hairs to confer legitimacy. In this context, it appears that State-level bans might continue to exist. On April 10, Tamil Nadu listed online rummy as a prohibited game. The gaming companies and their federations are relying on court rulings to insist that “games of skill” cannot be arbitrarily banned by States. Rummy was classified as a “game of skill” in some High Court and Supreme Court rulings.

One of these judgments is from 1968 when the Supreme Court ruled rummy as a “game of skill.” Though there are more recent precedents, Tamil Nadu differs from this classification and has categorised it as a “game of chance”, stating that online rummy needs a different understanding than the offline one.

If we have to regulate or frame laws suited for a future that is rapidly arriving on our doorstep, it might help to begin by calling a spade a spade.

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