Self-Regulating Organizations: Key to India’s Online Gaming Industry

The Ministry of IT in India recently announced draft regulations for the online gaming industry, with a focus on light-touch regulations and the inclusion of self-regulating organizations (SROs) as a key element for ensuring compliance and promoting innovation. This approach has been well-received by industry stakeholders, as it allows for the industry to flourish without over-regulation.

The History of SROs

• SROs are not a new concept, as they have been in use for over a century. The American Bar Association, founded in 1878, serves as an SRO for the legal profession in the United States, setting academic standards for law schools and creating model ethics codes for the profession.
• Similarly, the U.S. Securities and Exchange Commission (SEC) relies on SROs to help fulfill its mission of protecting investors, maintaining fair markets, and facilitating capital formation.

The Success of SROs in the U.S. Capital Market

• The use of SROs in the U.S. capital market has been instrumental in its success over the last century. The SEC, along with SROs like the NYSE and NASDAQ, have enabled the U.S. to consistently dominate the global equity market, with 40-60% of global stock market value. The soft-touch regulations and reliance on SROs to implement regulations have been crucial in this success.

SROs in the Indian Microfinance Industry

• The Indian microfinance industry (MFI) faced crisis in the 2010s, with allegations of coercive debt collection and mass defaults of loans. The Reserve Bank of India (RBI) stepped in to regulate the industry and recognized MFIN, the industry association of microfinance companies, as an SRO in 2014.
• MFIN’s role is to help members adhere to regulatory and industry standards, with a focus on customer welfare and protection. Nine years later, the MFI industry has played a crucial role in the Indian financial inclusion movement, with many companies becoming small finance banks and one even becoming a full-fledged bank.

SROs in the Indian Online Gaming Industry

• India has 400 million gamers, and the gaming market is valued at $2.6 billion in 2022, with a growth rate of 27% year-on-year. However, the majority of these gamers play games owned and operated by global companies from China and the US. It is only in recent years that Indian gaming companies have developed popular games among gamers in India.
• To fulfill the potential of the Indian gaming industry and Prime Minister Narendra Modi’s vision of dominating the global online gaming industry, fostering innovation and having the right regulations is crucial. SROs can play an important role in ensuring the interests of all stakeholders – gamers, industry, game developers, and society – are taken into account.

Synopsis

The use of SROs as a key element in regulations for the online gaming industry in India is a step in the right direction. The history of SROs in other industries, such as the legal profession and capital market in the United States, as well as the microfinance industry in India, shows that they can be a successful tool in ensuring compliance, promoting innovation, and protecting the interests of all stakeholders. The Indian online gaming industry has the potential to flourish, and SROs can be an important factor in achieving this goal.