The amended IT Rules do not seem to recognise these are two starkly different industries and call not just for separate laws but separate ministries.
On January 3, the Ministry of Electronics & Information Technology (MeitY) released the “Draft Amendments to IT Rules 2021-in Relation to Online Games” in a measure to regulate the sector that produces online real money games (RMGs) such as rummy, poker, and fantasy sports.
This Bill, however, was controversial in that it inadvertently treated video games and RMGs as a homogenous subject and applied blanket regulatory measures over the two industries. But how are they different, you ask?
From Table 1, it is evident that the business model, consumer engagement behaviour, legal environment, and peripheral operations are totally different between the video games and RMG industries; thus, it is neither accurate nor fair for the two to be clubbed under the same regulatory framework. It calls for distinct measures rather than blanket measures.
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Therefore, at the time, the video games industry used the draft amendments as a rallying call to organise the first large-scale industry representation to raise awareness around the issue. The industry proposed recommendations to the Central government in the form of a letter and a report. While requests for face-to-face stakeholder meetings were declined or ignored, industry representatives did get a confirmation via phone call and text messages that their inputs had been considered and that the revised draft of the IT Rules would reflect this.
Then, on April 6, the revised and final amendments were notified in the Gazette. It is seen that an effort has indeed been made to demarcate video games from online RMGs. The bans and a series of regulatory compliance measures do not apply to video games now. While the industry is thankful to MeitY for being receptive to its inputs, the Ministry has unfortunately not taken cognizance of the finer nuances between the two industries, thus making the demarcation less than ideal. Let me explain by putting forth the new definitions from the notified IT Rules.
* Clause (qa) says “Online Games” means a game that is offered on the Internet and is accessible by a user through a computer resource or an intermediary.
* Clause (qd) says “Online Real Money Game” means an online game where a user makes a deposit in cash or kind with the expectation of earning winnings on that deposit.
* Clause (qe) is a tricky one as it seems to have a proof-reading error. This is what it says—“permissible online game” means a “permissible online real money game or any other online game that is not an online real money game”. I think, however, that what was intended to be said is—“permissible online game” means an online game that is not an online real money game.
* Clause (qf) says “permissible online real money game” means an online real money game verified by an online gaming self-regulatory body under rule 4A.
From these four definitions, a demarcation appears to have been made between games based on whether cash has been deposited “ in expectation of earning winnings on the deposit”. So, that would mean video games are now differentiated from RMGs, right? Not quite!
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On April 6, RMG industry associations and a few RMG and fantasy sports companies issued statements supporting the notified IT Rules, but they were unwilling to use the new definition of “Online Real Money Games” that represented their products/services accurately and continued to use “Online Games” to refer to themselves. This was because they realised that the government’s definition does not legitimise them enough. But, from what one understands, there is nothing that stops them from doing so, as there is no legal enforcement that binds them to use the assigned definitions.
- On January 3, the Ministry of Electronics & Information Technology (MeitY) released the “Draft Amendments to IT Rules 2021-in Relation to Online Games”.
- The Bill was controversial in that it inadvertently treated Video Games and RMGs as a homogenous subject and applied blanket regulatory measures over the two industries.
- Online RMGs have always been controversial as they operate in a grey area where there are widely differing viewpoints on whether such games are gambling and betting or not.
- Beyond 2026, the video games industry is projected to have a significantly higher CAGR (compound annual growth rate) than the RMG industry, as it will increasingly become a producer and exporter of original IPs around the globe.
What must be understood here is that “Online Games” as a blanket term has been used for over a decade in Indian jurisprudence and media to refer to all gaming activity, including real money games and fantasy sports where the element of gambling is involved. Thus, online games and RMGs are associated in a lay person’s mind as being the same. In fact, State governments still refer to RMGs as online games. Moreover, search engines are optimised to show results relating to RMGs and fantasy sports whenever someone searches for “Online Gaming” on the Indian internet.
The rise and rise of Online Gaming in India
The media has played a part in this confusion for the following two reasons: first, over the years, they have interchangeably used online games to refer to both RMGs and video games. Second, and even more importantly, the headline and the text of an article reporting on RMGs has carried a cover image that represents video games and/or e-sports. This has inadvertently spread a false narrative to the lay person by implying that the two are the same.
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This continues even after the government’s notification of the new definitions on April 6. Most media outlets continue to refer to RMGs as “online games” instead of “online real money games” and some still use images related to video games and e-sports even though the article is about RMGs.
The RMG/fantasy sports industry has worked long and hard to create this homogenous image where two starkly different industries—video games and RMGs—might be regarded as one and the same. One cunning method they employed was to legitimise themselves by terming their products as e-sports and video games so that everything got lumped under one head. It was meant to reduce or avoid scrutiny from the government.
““Online Games” as a blanket term has been used for over a decade in Indian jurisprudence and media to refer to all gaming activity.”
Here’s another example to show the seriousness of the problem. No other country combines the market data of video games and RMG/fantasy sports in industry reports. But in India, the latter has worked with analysts and market intelligence agencies, even funded their market reports, to ensure that all data points, numbers, and projections of both video games and RMG/fantasy sports are almost always combined. Even venture capitalists operating in India have done the same with their market reports because they have RMG companies in their portfolios.
Why is this problematic?
Online RMGs have always been controversial as they operate in a grey area where there are widely differing viewpoints on whether such games are gambling and betting or not. This confusion is so prevalent that across legislations there has been no consensus on what constitutes gambling or betting. It has created a power tussle between the Centre and States, which has often resulted in bans on all online games because some State governments are faced with the dangers of online gambling and betting.
Online gaming market in India (FY21)
Users: 433 million
Revenue: INR 136 billion
As in the case of Tamil Nadu, citizens lose huge sums of money in online games that involve gambling or betting; they lose their savings, resort to borrowing, run up huge debts and there have been several cases of suicides. It is mandatory for every RMG and fantasy sport to provide a disclaimer stating that their games can cause financial loss and addictive behaviour and to carry out anti-addiction measures. But, as the problem becomes more severe, controversies and bans have increased.
Online gaming market in India (FY25)
Users: 657 million
Revenue: INR 290 billion
This is why the video games industry appealed to MeitY to use the terminology of “Video Games” to define the products and services of this industry, a carve-out that would have prevented interchangeable definitions. One may ask why the video games industry is making such a big deal of definitions and terminologies, but there are sound, well-founded reasons for it.
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First, by a lack of clear distinction and demarcation, the negative sentiments associated with online real money games are unfairly cast over all video games, thus affecting the social perception of video games among parents, teachers, media, and others.
Second, there is concern among international video game corporations who want to invest in Indian game companies, as they do not wish to be seen in the same light as the online RMG industry, and this has discouraged investment, co-production, and strategic partnerships that can help the industry grow.
The only comfort in all this is that the existential threat of attracting blanket bans and unfavourable compliance burdens has been removed by the latest notification. Rajeev Chandrasekhar, Minister of State for Electronics & IT, clarified in a press meeting on April 6 that video games have zero regulation and/or compliance burden on them within the ambit of the newly notified IT Rules, as all the regulatory prescriptions are squarely targeted on online RMGs only. Essentially, video games have been given a clean slate. But the video games industry believes the existence of regulation is better than no regulation. Let me explain why,
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In section 4C of the notified IT rules, at the very end of the document, “user harm” is defined as any effect which is detrimental to users. But what is “harm” exactly? How is it quantified? What will be considered detrimental? There are no clear definitions or a codified approach for any of this. Extremely broad and arbitrary clauses like these are alarming for the video games industry as they can result in overnight bans for any game out there.
“No other country combines the market data of video games and RMG/fantasy sports in industry reports.”
At a nascent stage
The video games industry is in its nascency and requires clarity and stability in regulations with little to no room left for uncertainty if it is to grow healthily, more so when the government regularly issues statements claiming that video games are an integral part of digital India’s economic goals.
Why should the government care about video games? Table 2 presents the economic and growth numbers for the video games industry. It excludes data from online RMGs.
Beyond 2026, the industry is projected to have a significantly higher CAGR (compound annual growth rate) than the RMG industry, as it will increasingly become a producer and exporter of original IPs around the globe. Many of these IPs will be based on the Indian ethos, which ties in with the government’s soft power initiatives—“Brand India”. In fact, by the next decade, Indian character brands and IPs will become a part of global pop culture. The benefits don’t stop here. In game streaming, Indian audiences are the most engaged, spending an average of 5.5 hours a week watching influencers play video games, a space that could soon overtake OTT streaming. Why, even the purchase of laptops, desktops, and smartphones is heavily motivated by their capacity to handle high-graphics video games.
The government acknowledges this, but to realise the sector’s potential, it is crucial for MeitY to first carve out a separate category and adopt the definition of “Video Games” and second, to clearly define “harm” in Section 4C in such a way that there is nothing left to interpretation. If MeitY does not immediately carry out this amendment, the Centre should at least ensure that the video games industry gets the treatment that the e-sports industry received. In December 2022, the Ministry of Youth Affairs and Sports was named the nodal agency for e-sports. Being housed in an entirely different Ministry has helped the esports industry in two ways.
First, it restricts RMGs and fantasy sports from calling themselves e-sports, thus protecting the sanctity of professional athleticism, sportsmanship and pride involved in e-sports. Second, e-sports organisers and their athletes now have better access to sports-related quotas, incentives, policies and opportunities.
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Similarly, the consensus in the video games industry is that it should be housed in the Ministry of Information & Broadcasting. First, the I&B Ministry has historically been the nodal agency for all culture, entertainment, and art sectors such as films, TV series, streaming, and OTT, etc. And video games fit perfectly within the ambit of the I&B Ministry’s operations. Second, going forward, animation, visual effects, gaming, comics, and extended reality (AVGC-XR) is going to play a bigger and bigger role in entertainment and broadcasting. In fact, the I&B Ministry is already looking into realising this goal via the AVGC-XR policy. Thus, including video games within the I&B Ministry is a logical step as it enables better access to sector specific policy benefits and opportunities.
Going forward, video games are expected to be a significant contributor to the projected $1 trillion digital Indian economy. So, I want to end with a question. If MeitY can bypass the old definitions of “Games of Skill” versus “Games of Chance” and set up a new regulatory framework to deal with betting and wagering online, then why can’t MeitY simply carve out video games as a distinct industry? It will benefit everybody—the consumers, the industry, and the government.
Harish Chengaiah is the founder of Outlier Games, a game company. He also leads the policy advocacy for the video games industry in India and represents more than 50+ game companies when consulting the State & Central governments.