[This is the second part of a two-part post authored by Mitali Kshatriya, a fourth-year law student at RMLNLU, Lucknow. Part I can be found here]
In Part I, the article highlighted the incongruous legislative framework for regulating real money gaming sector followed by the possibility of introducing central laws for regulating the sector. In Part II, the article aims to highlight various regulatory measures which can be adopted to mitigate adverse effects of real money gaming without impeding the growth of the sector.
Mandatory licensing requirements for game operators providing gaming services is the first step in identifying and regulating various aspects of their operation. States of Nagaland, Sikkim and Meghalaya require gaming operators to register itself before offering gaming services in the state. Foreign jurisdictions like United Kingdom, Spain, Malta, etc., requires online gaming operators to obtain license before operating in the country.
For licensing the gaming operator has to comply with a host of regulations – for example, U.K. has a comprehensive policy called the License Conditions and Codes of Practice which sets out the requirements that all licensees must meet in order to obtain the license. The policy includes requirements such as software licensing, customer identity verification, holding customer/player funds in separate bank accounts, etc.
Ensuring Integrity of Software
The State of T.N. in its submissions in the Junglee judgement (Page no. 7) expressed its concern over real money games being manipulated by the gaming operators to adversely affects the players. Such manipulation can take place in a number of ways – the software being employed to distribute random cards can be rigged to favor certain players; or a human players can be playing with an AI trained software deployed by the gaming operator which might have advanced machine learning tools to guess the moves of the players involved. Therefore, it is important to ensure that the software of gaming operators do not disadvantage its players.
Integrity of gaming software can be checked by auditing of the operator’s software by independent or government authority. For example, the License Conditions and Codes of Practice requires gaming operators to requires the gaming operators to make sure that the outcomes they produce are ‘acceptably’ random (RTS requirement 7A). Whether or not a gaming software is acceptably random is decided by statistical analysis of output produced by the gaming software by accepted testing methods. Similarly, Danish Gaming Authority requires (Page no. 8) games which involve simulation of physical objects (dice, roulette wheels, etc.) to provide true and fair outcomes in accordance with expectations to this physical object. The Authority further requires (Page no. 7) that gaming outcomes should be independent of the characteristics of the customer’s equipment and communication channel.
A big concern of state government across the board has been that allowing games like poker and rummy might result in large scale gaming addiction. Another foreseeable problem is players incurring debts to continue playing games for stakes.
One of the methods to combat addiction can be requiring the gaming websites to limit number of rounds a player can play. For example, China has put limits on gaming hours of minors in order to combat gaming addiction. However, given the vastly different kinds of games played for stakes there might not be a suitable one size fits all solution. For example, Fantasy Sports which are generally dependent on live sport events cannot be played for the same number of hours as rummy or poker.
Further the issue of players incurring debts can be checked by putting a cap on the amount of real money stakes allowed per player in a given time period. It can also be tackled by mandating gaming companies to deploy AI tools to gauge spending capacity of its users by correlating various data sets like a person’s phone model, their age, where they are based etc. to identify and stop overspending by users. Sweden requires gaming operators to observe ‘duty of care’ (Page no. 17), i.e., to identify excessive gamers and bar them from participating any further. However, identifying spending capacity and other problematic behaviors requires constant monitoring which can have serious privacy implications. To allay privacy concerns, center can follow Sweden’s approach by introducing list of permitted purposes for which personal data (Page no. 23) of a player can be processed.
Center can also mandate gaming operators to provide self-exclusion option to players. Self-exclusion is a method by which players who are addicted to gaming or spend too much time or money in gaming can ask gaming operators to bar them from playing for a given period of time. For example, in Queensland, Australia the Interactive Gambling (Player Protection) Act 1998 (Page no. 91) allows players to serve self-exclusion notice to gaming operators. Once such notice is served the effects of notice can only be revoked after 24-hours of serving such notice and if not done in 24-hours then only after 1 year has passed since serving the notice.
An important part of ensuring that common people understand the risks involved with online gaming is to ensure that their advertisements are not misleading and contain proper disclosures. Steps to check misleading advertising were taken by the ASIC in 2020 when it published Advisory on Advertisements on Online Gaming, Fantasy Sports etc. The guidelines require the gaming platforms to inform the players that the game carries financial risk and may be addictive in nature. Further, the guidelines prohibit the gaming platforms from depicting playing the game as an alternative source of income.
Mandating ‘Know Your Customer’ or KYC for users can play a very significant role in implementing regulatory efforts. For example, compulsory KYC can help in ensuring that users below 18 do not play real money games. KYC can also help in tackling addiction by providing gaming platforms with information on its users which will enable them to assess the user’s spending capacity. It will also help in making sure that a user does not breach any gaming hours or spending limits by using different user IDs.
The two major impediments to the growth of online gaming sector are: lack of uniformity in state legislations and imposition of complete bans. These issues can be done away with by enacting a central regulatory framework. The center can take cues from foreign jurisdictions which have legislations aimed to combat side-effects of real money gaming. Real money gaming is a billion-dollar industry and judicial trends have shown that they cannot be completely outlawed. Therefore, regulating the sector will not only boost economic growth but also provide consumer protection to the players.