The Aakhya Weekly #43 | Regulating Fantasy

Apr 14, 2023

In a watershed moment for the online gaming industry in India, the Ministry of Electronics and Information Technology (MeitY) notified new rules to regulate the burgeoning online gaming industry in India, including online real money games.

On 6th April, 2023, MeitY amended the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (IT Rules) to provide a framework for the regulation of online real money games. The amendments lay out a comprehensive framework for the online gaming ecosystem to “address the twin challenges of catalyzing and expanding online gaming innovation and at the same time protecting citizens from illegal betting and wagering online”.

Terming online gaming as a “huge opportunity for India”, the Minister of State for MeitY, Rajeev Chandrashekhar, remarked that “[the government] see[s] the Indian online gaming ecosystem expand and grow into a multi-billion dollar industry.”

Broadly speaking, the government has gone ahead with the promised ‘light-touch’ co-regulatory framework between MeitY and registered self-regulatory bodies (“SRB”), in line with the draft rules released earlier this year. While there is plenty of (excellent) coverage online of a clause by clause comparison of the draft and notified rules (see here and here) as well as its (largely positive) reception by the industry, here, we look at some unresolved questions arising from the notified rules and trends to watch out for as the new regulatory regime is adopted.

What is “user harm”?

An intermediary is expected to make ‘reasonable efforts’ to not host any online game that ‘causes user harm’. User harm has been defined as “any effect which is detrimental to user or child”. In addition, the SRB is expected to publish a framework for verifying an online real money game, which includes ‘safeguards against user harm, including self-harm and psychological harm’ and ‘measures to safeguard users against the risk of gaming addiction’.

Immediate questions arise about the threshold of detrimental impact which will qualify as ‘user harm’. It is likely that any measure of ‘harm’ determined by an SRB will be challenged by affected stakeholders. In addition to the extent of harm, the type of harm is also unclear. Does addiction qualify as user harm? Common sense would imply so. However, will an SRB ever refuse to verify games, or roll back verification of games which are deemed to be too addictive?

What is meant by wagering on the outcome of games?

The SRB can only declare an online real money game as permissible if the game ‘does not involve wagering on any outcome’. While this clearly excludes betting from the ambit of permissible games, it could potentially cast doubts over the future fantasy sports.

Fantasy sports do not involve wagering on the outcome of the overall game, and have been deemed games of skill - as opposed to games of chance - in several high court judgements. However, wagering, as is commonly understood, refers to placing a bet on an uncertain outcome, regardless of one’s level of confidence in the expected outcome. While it undoubtedly takes skill to assemble a winning team in a fantasy sport, winning or losing a game nonetheless hinges on the performance of the players that a user chooses - a real world event whose outcome a player has no control over. Will the ambiguity surrounding ‘wagering’ provide sufficient reason to bring down online fantasy sports, even though they are currently recognised as games of skill?

What happens if a state government requests an intermediary to take down a game?

Per the rules, online games must not “violate any laws for the time being in force”. However, betting and gambling is a state subject in our Constitution. Some states, such as Telangana and Andhra Pradesh, consider even games of skill as gambling activity. In fact, the day after the release of these rules effectively legalising real money games besides gambling, Tamil Nadu banned online games of chance such as Rummy.

How this tussle between states and the Centre proceeds remains to be seen. MeitY, to its credit, stayed entirely out of the games of skill vs. chance debate, sidestepping the conversation by outright banning only gambling. Hinting at things to come, in a recent interview Chandrashekhar said that a central law for online betting and gambling is worth considering, and that the matter is in the hands of the Home Ministry now.

These rules are certainly the biggest development for the online gaming industry in India. The regulatory framework prescribed places constraints on the industry, but also provides it with the much-needed legitimacy and certainty required for future growth. Only at a few junctures do we find scope for trouble to brew, and it is hoped that issues that crop up will be resolved by the adjudicatory mechanisms put in place.

Top Stories of the Week

COVID rears its ugly head

As of yesterday, India has 44,998 active cases of COVID-19. Only a week ago, active cases were a little more than half that figure, at 25,587. Evidently, the country is experiencing a massive surge in cases, with XBB.1.16, a sub-variant of Omicron, being the most widespread vector. In Kerala, Maharashtra, and Delhi, over 10 districts have reported positivity rates of over 10%. Meanwhile, in each of Karnataka, Kerala, Maharashtra, Delhi, Himachal Pradesh, Tamil Nadu, and Haryana, over five districts have reported more than 5% positivity rates.

The Government has kicked into gear to address the situation. Union Health Minister Dr. Mansukh Mandaviya reviewed the public health preparedness and vaccination progress of the states, emphasizing the need for collaboration between the Centre and States, as in previous surges. Mock drills were conducted to test hospital infrastructure. States were directed to identify emerging hotspots by monitoring and ramping up the testing process. States have also been requested to ensure effective implementation of a joint advisory issued by the Union Health Ministry and ICMR, which outlines measures to contain COVID-19 cases through early detection, isolation, testing, and timely management of confirmed cases.

Various States have issued guidelines to curb the spread of the virus. For instance, Haryana has issued an advisory on COVID Appropriate Behaviour,' highlighting the significance of maintaining hand hygiene, social distancing, and wearing masks in public places. Similarly, the Chief Minister of Uttar Pradesh has mandated the adoption of COVID-appropriate behaviour in offices, schools, cinema halls, and railway stations after reviewing the situation with the State Level Covid Advisory Committee. The Brihanmumbai Municipal Corporation has also prescribed guidelines to check the spread of the disease.

Encouragingly, this “wave” of COVID appears not to be too prolonged, with a peak expected in the next 10-12 days. It is also not believed to be much more severe than previous Omicron strains.

A new space policy

In a move widely interpreted as bringing significant clarity to India’s space sector, the cabinet committee has approved a new edition of India’s space policy. Noting that India currently accounts for a mere 2% of the global space economy, the policy stresses on the need to bring private participation in the sector.

Crucially, the policy clarifies the role of India’s space institutions - the Indian Space Research Organisation (ISRO), the Indian National Space Promotion and Authorization Center (IN-SPACe) and NewSpace India Limited (NSIL). With this policy, ISRO shall withdraw from space operation and production activity, focusing its efforts on research and development. This, it is anticipated, shall create room for the private sector to handle the construction and launch of space vehicles, which hitherto occupied much of ISRO’s bandwidth. NSIL shall handle the demand-driven commercial end of the Government’s space activity.

IN-SPACe, meanwhile, shall act as the interface between the Government and the private sector - creating a predictable single-window mechanism for the approval of private entities in the sector. The policy shall also open up ISRO infrastructure and facilities for use by private sector entities for a small charge, allowing them to scale the value chain. This, too, will be facilitated through IN-SPACe.

This Week in Policy

Economy and Taxation

IMF projects a reduction in India’s fiscal deficit for the year 2023 at 8.9%, moderating from the previous year’s 9.6%. India’s debt-to-GDP ratio shall also remain stable, at 83.2%, compared to 83.1% in the preceding year.
UNCTAD projects a drop in India’s GDP growth rate to 6% this year, down from a more robust 6.6% last year - citing monetary policy tightening and slowing Government expenditure. However export demand, in its estimation, has remained robust.
The Government is looking to set up the 16th Finance Commission this year, which shall suggest a ratio in which tax must be divided between the Central Government and State Governments for the five years beginning from April 1, 2026.

Sustainability and Energy

The Government extends a 25 year waiver for transmission charges for green hydrogen projects commissioned before January 2031. The deadline for qualifying for the waiver was previously July 2025.
Solar Energy Corporation of India gets Miniratna Category-I status. This may be awarded to public sector undertakings which have made profit in the last three years continuously, reported a pre-tax profit is Rs.30 crores or more in at least one of the three years, and have a positive net worth.

Emerging Technology and Media

MeitY Secretary Alkesh Sharma chaired a meeting with IT Secretaries of States and Union Territories to deliberate on Digital India Initiatives for improving Ease of Living and Ease of Doing Business for FY2023-24.
MeitY is reportedly building a national blockchain infrastructure, similar to the European Blockchain Services Infrastructure (EBSI), with an emphasis on government use cases along with applications in logistics, infrastructure, shipping, and so on. The project is called ‘Unified Blockchain Framework for offering National Blockchain Service and creation of Ecosystem.’

International Trade and Foreign Affairs

The Government of India is on track to finalise the structure of ‘Trade India’ (name to be confirmed), a single trade body for export promotions, along the lines of Japan External Trade Organisation (JETRO).
The next round of talks for the India-UK Free Trade Agreement is to resume on 24 April 2023.

Healthcare

The Supreme Court has directed the Union Government to formulate a national model and prepare standard operating procedures for managing the menstrual hygiene of school-aged girls. States and Union Territories were also directed to ensure an adequate number of girls’ toilets and that low-cost sanitary napkins are available to students.
The Health Ministry has included the vaccine ‘Covovax’ to its CoWIN portal, as a heterologous booster dose against COVID-19 for adults.

Banking, Finance and Insurance

The RBI has issued a detailed framework for ‘green deposits’ by banks and NBFCs to encourage lenders to offer green deposits to customers, to aid them in achieving their sustainability goals and alleviate ‘greenwashing’ concerns.
SEBI asks Alternative Investment Funds (AIFs) to provide direct plan options to investors in a bid to boost funds allocation to the sector.

Retail, E-commerce and FMCG

India's annual retail inflation for March rose at the slowest pace in nearly 15 months and was below the central bank's upper tolerance level for the first time this year. Due to softer food prices, it eased to 5.66% from 6.44% in February.
Gujarat government has taken up an exercise to formulate a policy to boost exports from the state. A state-level export promotion authority will be formed for the same.

Logistics and Infrastructure

The Union shipping ministry is working on a ₹5,000 crore package to encourage the construction of inland vessels and ships to develop a blue economy and achieve self-reliance. As part of the plans, the government will provide viability-gap funding (VGF) for companies ready to build these vessels.
With an aim to relieve traffic congestion in the national capital and adjoining areas, the Ministry of Road Transport and Highways has initiated 16 road projects covering 862 km with an estimated expenditure of ₹62,181 crore.

Tracking the G20

In a relatively slow week for India’s G20 presidency, the 2nd meeting of G20 Development Working Group (DWG) concluded successfully at Kumarakom, Kerala. The deliberations conveyed broad support for India's ambition and priorities for the DWG. Consensus emerged on the urgency for multilateral efforts and the key role for the G20 in addressing the contemporary developmental challenges, including the need for collective efforts in contributing to the implementation of the 2030 Agenda and acceleration of SDGs.

Upcoming Events

Talk on ‘National Security Implications of the Current Energy Crisis’

April 17 | 20, Rouse Avenue Institutional Area, New Delhi

ORF is organising a talk on ‘National Security Implications of the Current Energy Crisis’ on 17th April in New Delhi. Energy security not only entails securing energy supplies but also securing these at affordable prices. In the current volatile global context, Prof Brenda Shaffer from the Naval Postgraduate School will address the national security implications of the current energy crisis. More Information

Seminar on ‘New Age Risks’

April 19 | FICCI, Federation House, New Delhi

FICCI is organising a seminar on ‘New Age Risks’ on April 19, 2023, at FICCI, New Delhi to discuss the trend of traditional risk parameters and emerging risks which might impact industry and overall working environment. The event will also see the launch of “India Risk Survey 2022 Report”. More Information | Registration Link

A Few Good Reads

Brahma Chellaney studies China’s increasing belligerence, and highlights why its moves on Arunachal Pradesh should not be taken lightly.
India’s middle classes are always smaller than they appear to excited multi-national corporations streaming in. Writing for Mint, howindialives.com looks at the problems in locating this elusive class.
As a decadent, divided entity, Europe is in no position to emerge as the world’s third superpower, writes Noah Smith.
It is harder, by an order of magnitude, for a computer to beat mediocre humans in general, real-ish circumstances, than to beat the very best humans in specific contexts (such as chess). AI and crypto, combined, will soon do the former with everything, writes Venkatesh Rao.
Check out Carnegie’s list of foreign policy podcasts that are worth a listen.

Tweets of the Week

The IMF looks into the crystal ball:

What did we learn from the US intelligence leaks? Shubhangi Sharma summarises:

A remarkable achievement by IIT Madras’ speech lab:

Key Notifications and Reports

The IMF has released three reports this week: the World Economic Outlook Report 2023, the Global Financial Stability Report 2023, and the half-yearly edition of its Fiscal Monitor report.
The UNCTAD has released its Trade and Development Report Update for the month April 2023.

The Aakhya Weekly