How New Rules can Benefit India's Online Gaming Industry

The Indian government has proposed new regulations to regulate the online gaming industry, which is seen as a significant move to legalize the industry and create more certainty for stakeholders. While there is no immediate law banning online gaming, the new regulations are designed to establish a more uniform regime and ensure players' safety and transparency.

The Ministry of Electronics and Information Technology (MeitY) recently recognized e-sports as part of mainstream sports and made it the nodal agency for all online gaming-related matters. MeitY released draft amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, in the first week of January to regulate the industry that has revenues of $1.2 billion, according to Invest India.

The proposed regulations will set up one or more self-regulatory bodies for the industry, mandate KYC of players as per Reserve Bank of India norms and establish a grievance redressal mechanism.

While the compliance burden may not be high, there are challenges for gaming companies in the form of age-gating and verification of players by self-regulatory bodies, implementing KYC mechanisms at RBI-mandated levels for small-value customer accounts, and satisfying customer grievances and law enforcement requests within an aggressive time frame. The proposed regulations do not impose a ban on online gaming, but they require companies to comply with higher due diligence requirements and regulatory compliance standards.

Overall, the new regulations are designed to create greater regulatory certainty, legalize the industry's status, and streamline governance processes. The proposed rules are a step in the right direction for the sunrise sector and are expected to spur more entrants, boost investor confidence, and create new jobs.