Game On, Rules Unclear!

Link Legal | View firm profile

The Maze:

The Sports (Online Gaming and Prevention of Fraud) Bill, 2018 (“Sports Bill”) was introduced in Lok Sabha on December 28, 2018, with an aim to prevent and penalize sports fraud, and establish regulatory mechanism for the online gaming sector, which has thereafter lapsed. Meanwhile, the ambiguities with respect to the legal framework of online gaming continues to persist.

Presently, All India Gaming Federation (“AIGF”) and Federation of Indian Fantasy Sports (“FIFS”) are the self-regulating bodies which have issued charters to regulate online sports gaming space applicable to the members of the respective federations. Although these charters aid in streamlining the conduct and governance of the online gaming platforms, however, in absence of any statutory force, these charters are but toothless tigers and are applicable only to the respective members of AIGF and FIFS. Also, there is no consistency in respect of certain key provisions under the charters published by the federations as seen below.

  1. Membership: The AIGF Online Games of Skill Charter (“AIGF Charter”) aims to regulate all games of skill played online in pay-to play formats offered by its members operating in (i) online poker games, (ii) online fantasy sports games, (iii) online rummy, (iv) casual games, and (v) esports (“AIGF Member Platform”). However, the FIFS Charter Online Sports Fantasy Sports Platforms (“FIFS Charter”) aims to regulate only its members operating in online fantasy sports (“FIFS Member Platform”).
  2. User Restriction: The AIGF Charter requires that the AIGF Member Platform must offer its games only to ‘Indian Residents’, which is in line with the definition of ‘person resident in India’ under the Foreign Exchange Management Act, 1999 (“FEMA”). Meanwhile, the FIFS Charter uses the term ‘Indian users’ which paves way for ambiguities for lack of strict defined contours.
  3. Restriction on Foreign cards/ payments: While there is a specific prohibition on payment in terms of any foreign currency including international credit cards under the FIFS Charter in consonance with regulations under FEMA, AIGF broadly prohibits cross border liquidity which reeks of vagueness and uncertainty.
  4. Geographic Restriction and Geographic Exclusion: The AIGF Charter mandates the requirement of geo-blocking mechanism as well as implement user-location verification processes at the time of registration of the participants and prize distribution. Such restrictions are not mandated under the FIFS Charter. However, where the user is from a state that does not permit pay-to-play formats, the FIFS Member Platform is entitled to terminate prizes, forfeit the platform fee, prize pool contribution and all contest accounts.
  5. Personal Information: The AIGF Member Platforms are required to publish terms and conditions, inter alia, privacy policies and other policies regarding protection of personal information. The FIFS Charter is seemingly silent on this subject matter.
  6. ‘Member Personnel’ and Prohibition on Participation: While similar prohibitions with regard to participation by members are placed under both the charters, unlike the FIFS Charter, by virtue of the definition of ‘Member Personnel’ provided under the AIGF Charter, such prohibition is extended to ‘any person connected’ to the AIGF Member Platform having access to proprietary, sensitive or confidential information relating to the services offered by the said AIGF Member Platform is inherently prohibited from participation.
  7. Confidential Information: With regard to the preferential disclosure of confidential information, the AIGF charter puts additional onus on the Member Personnel not to share any proprietary, sensitive or confidential information with any other online game providers. Unlike the FIFS Charter, the AIGF Charter requires the Member Personnel to sign appropriate documentation to give effect to this principle.
  8. Grievance Redressal: The AIGF Charter employs robust complaint redressal mechanism in which a grievance officer is appointed to deal with complaints in relation to breach of the AIGF Charter, healthy trade practices practice or legal provisions. The complaint redressal mechanism is not mandated under the FIFS Charter.
  9. Audits and Consequences of Breach: The AIGF Charter provides for periodic audits of the AIGF Member Platforms to ensure compliance of the terms and conditions stipulates under the AIGF Charter. However, the FIFS Charter does not provide for any deterrent for breach of its provisions.

The Way Out:

NITI Aayog in its Draft for Discussion on ‘Guiding Principles for the Uniform National Level Regulation of Online Fantasy Sports Platform in India’, noted that the fantasy sports industry has the potential to attract foreign direct investment of more than INR 10,000 crore over the next few years as well as generate 1.5 billion online transactions by 2023. Taking note of the promising prospects of the online gaming sector, the Union Budget, 2022 has proposed setting up a task force for the promotion of animation, visual effects, gaming and comics (“AVGC”) sector. The task force is likely to elevate the AVGC sector in India to its full potential, besides building domestic capacity for serving the markets, generating employment amongst the youth and attracting foreign investments.

Recently, the Karnataka Government had banned online gaming in the state by way of an amendment in the Karnataka Police Act, 1963 (“Police Act”), however, the amendment was set aside by the Karnataka High Court, as online gaming does not fall under the purview of the Police Act. Previously, similar attempts made by other state governments have also been set aside by the Indian courts.

It is the appropriate time for the government to enact requisite legislation to codify and provide strict regulatory framework to streamline the conduct of the platforms in the online gaming sector. While the meaning of ‘skill’ and ‘chance’ have been settled by Indian courts, the legal framework must additionally consider addressing the prerequisites and obligations of online gaming platforms, inter alia, relating to licensing, data protection of the users, geographic restrictions and exclusions, applicability of regulations under FEMA, customer grievance mechanism and stringent penalties for breach of such obligations.


AUTHORS:

Ambuj Sonal,
Associate Partner, Link Legal
ambuj.sonal@linklegal.in

Subham Biswal,
Trainee Associate, Link Legal


DISCLAIMER:

The contents of this article are for general information and discussion only and is not intended for any solicitation of work. This article should not be relied upon as a legal advice or opinion.

More from Link Legal