The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, commonly referred to as the Intermediary Rules 2021, were introduced to regulate the functioning of intermediaries, including social media platforms, gaming platforms, and other digital services. These rules aim to ensure transparency, accountability, and compliance with Indian laws, especially in cases involving sensitive activities like online real money games.

What Are Online Real Money Games?

Online real money games involve monetary transactions where players stake real money in games such as fantasy sports, rummy, poker, and others. These games can be classified as either:
1. Games of Skill: Legal in most states of India (e.g., chess, rummy, fantasy sports).
2. Games of Chance: Often equated with gambling, these are prohibited in most states (e.g., roulette, betting).

Applicability of Intermediary Rules 2021

Under the Intermediary Rules 2021, gaming platforms hosting real money games are categorized as intermediaries. Intermediaries are entities that enable interactions between users but do not take responsibility for user-generated content unless they fail to comply with due diligence requirements.

Key Provisions of the Rules
1. Due Diligence (Rule 3):
Intermediaries must exercise due diligence in their operations, which includes monitoring content, verifying user identity, and addressing grievances.
2. Significant Social Media Intermediaries (Rule 4):
Platforms with more than 50 lakh users are considered “significant” and are subject to stricter compliance measures.
3. Content Removal (Rule 3(1)(d)):
Platforms must remove content that violates Indian law within 36 hours of being notified by authorities.

Key Responsibilities of Online Real Money Gaming Platforms

Online real money gaming platforms must adhere to specific requirements under the Intermediary Rules to maintain compliance and ensure user safety.

1. Transparency in Terms of Service (Rule 3(1)(a))

Platforms must clearly outline their terms of service to users, including:
• Rules of gameplay.
• Risks involved in real-money transactions.
• Policies for refunds, withdrawals, and account closures.

Example:
Platforms like Dream11 and RummyCircle explicitly state that users must be above 18 years of age and disclose the financial risks involved in participating in their games.

2. Grievance Redressal Mechanism (Rule 3(2))

Platforms must appoint a Grievance Officer to handle complaints. The officer:
• Must acknowledge complaints within 24 hours.
• Must resolve complaints within 15 days.

Example:
A user on MPL (Mobile Premier League) who reported a transaction failure had their issue resolved within the stipulated time through the grievance officer.

3. User Identity Verification (KYC Compliance)

To ensure transparency and prevent misuse, platforms must verify the identity of users through Know Your Customer (KYC) norms. KYC verification typically involves:
• Aadhaar or PAN card authentication.
• Bank account linking for deposits and withdrawals.

Example:
Platforms like Paytm First Games mandate KYC for all users engaging in real-money transactions.

4. Age and Location Restrictions

Platforms must:
• Restrict access to minors by requiring age verification.
• Ensure compliance with state-specific gaming laws.

Example:
States like Telangana, Andhra Pradesh, and Tamil Nadu have banned real-money gaming platforms, regardless of whether they are based on skill or chance. Platforms must geoblock users from these states.

5. Content Moderation (Rule 3(1)(b))

Platforms must ensure that hosted games and associated content:
• Do not promote illegal gambling.
• Comply with the laws of India.

Example:
Platforms offering games of chance, such as betting apps, have been banned in states like Telangana and Andhra Pradesh, while fantasy sports platforms continue to operate under the pretext of games of skill.

Legal Framework for Online Real Money Games

The legality of online real money games is determined by Indian laws and judicial rulings, which classify games as either games of skill or games of chance.

1. Game of Skill vs. Game of Chance
   • Games of Skill: Games where the outcome is determined by the player’s skill and knowledge are generally legal.
   • Example: Fantasy sports (like Dream11) and rummy are considered games of skill.
   • Games of Chance: Games where the outcome is based entirely on luck or randomness are often categorized as gambling and prohibited in most states.

Case Law:
In K.R. Lakshmanan v. State of Tamil Nadu (1996), the Supreme Court ruled that horse racing and rummy involve substantial skill, making them legal under Indian law.

2. State-Specific Regulations

Indian states have the authority to regulate betting and gambling activities under the Constitution of India.
• Prohibited States: Telangana, Andhra Pradesh, Tamil Nadu (ban online real-money games, including skill-based games).
• Permissive States: Goa, Sikkim, Nagaland (allow regulated real-money gaming with licenses).

Example:
Platforms like RummyCircle operate in states where games of skill are allowed, but they geoblock users from prohibited states.

3. Taxation on Winnings
   • Winnings from real-money games are taxable under the Income Tax Act, 1961.
   • Platforms must deduct 30% TDS (Tax Deducted at Source) for earnings above ₹10,000.

Example:
If a user wins ₹1,00,000 on Dream11, the platform deducts ₹30,000 as TDS before crediting the winnings.

Penalties for Non-Compliance

Non-compliance with the Intermediary Rules can lead to severe consequences for gaming platforms:
1. Loss of Safe Harbor Protection (Section 79 of the IT Act):
Platforms lose their immunity as intermediaries and become liable for user actions.
2. Platform Ban:
Non-compliant platforms may be blocked by the government under Section 69A of the IT Act.
3. Legal and Financial Penalties:
Authorities can impose fines or initiate criminal/civil proceedings.

Example:
In 2022, several illegal betting apps were banned by the Indian government for failing to comply with state regulations and federal laws.

Implications for Users

As a user, you must be cautious when engaging in online real money games. Here are some tips to stay safe:
1. Verify Platform Legitimacy:
Ensure the platform complies with Indian laws and follows KYC norms.
2. Understand Risks:
Read the platform’s terms of service and be aware of the financial risks.
3. Report Issues:
Use the grievance redressal mechanism to report fraudulent transactions or unfair practices.

Conclusion

The Intermediary Rules 2021 provide a robust legal framework for regulating online real money games in India. While these rules promote accountability and user safety, they also require platforms to adhere to strict compliance measures. Users must exercise caution and choose platforms that comply with the law to avoid legal or financial complications.

By understanding these rules and their implications, both users and platforms can ensure a safe and transparent gaming environment in India.

For further legal advice or inquiries, feel free to reach out.