The Ministry of Electronics and Information Technology (MeitY) last week notified the IT Rules to regulate the online gaming sector in India. With the notification of these Rules, it is now absolutely clear that online gaming is within the exclusive domain of the Central Government’s regulatory purview and states would only legislate on matters pertaining to betting and gambling. This marks a milestone for the online gaming industry that was grappling with challenges in the absence of a nodal ministry and a national regulatory framework. MeitY was appointed as the nodal ministry for Online Gaming in December 2022 by the way of amendment to the “Allocation of Business Rules”.
Gopal Jain senior advocate, Supreme Court of India said, “The rules give the much awaited legal recognition across the country to the online gaming industry thus laying the foundation for its accelerated growth and reinforcing India’s tech-leadership. Additionally, the rules ensure that there is a clear distinction between online gaming and games which are in the nature of betting, gambling and wagering. The rules were introduced after conducting extensive stakeholder consultation by the MeitY.
With these rules, any attempt by the states to regulate online gaming will defeat the intent of these rules and will not withstand judicial scrutiny and will be against the constitution.”
He further added, “This will also hopefully provide clarity and help address the current conundrum on GST that the industry has been grappling with.
Rajeev Chandrasekhar, Minister of State for Electronics and IT commented “State governments’ regulating online gambling is not required any more after the IT rules for online gaming have been notified.”
Importantly, all States and several central government ministries were consulted before the notification of these Rules. The process started off in May 2022 with the formation of the Inter-ministerial Task Force (IMTF). The task force included government think-tank Niti Aayog’s CEO as well as secretaries of home affairs, revenue, industries and internal trade, Ministry of Electronics and Information Technology (MeitY), information and broadcasting and sports. This was followed by an extensive stakeholder consultation with the State Government wherein representatives from 13 states and UTs were present. The final IMTF report was submitted after incorporating inputs from all these representatives, post which MeitY was appointed as the nodal ministry.
For several years, the lack of clarity has led to a conflict between state and central prerogatives and resulted in several court precedents upholding the legitimacy of online skill gaming platforms doing business in India. The industry has also faced legal challenges in States like Tamil Nadu, Telangana, Assam, Orissa, Rajasthan and Madhya Pradesh in the past, and many courts have repeatedly upheld the constitutional protection afforded to online games which are not in the nature of betting, wagering or gambling.