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The Game Within

Niti Aayog's consultation paper on fantasy sports advocates self-regulation, but legal and regulatory uncertainties remain a drag for an industry that has the capacity to attract Rs 10,000 crore FDI in the next few years
Rukmini Rao | Print Edition: March 7, 2021
The Game Within
Illustration by Raj Verma

Gaming apps are not new to run-in with the legal system. Take the latest Kerala High Court notice to some celebrities for endorsing these apps, or a November 2020 Madras High Court notice to BCCI chief Saurav Ganguly and Indian cricket team captain Virat Kohli for endorsing fantasy apps. The Madras High Court notice was in response to a plea filed by an advocate after a youth killed himself as a result of losing money on these applications.

While law in India distinguishes between games based on skill and those based on chance, and prohibits the latter for stakes, in December 2020, government think-tank Niti Aayog released a draft discussion paper seeking comments on guiding principles of Online Fantasy Gaming Platforms (OFGPs).

While law in India distinguishes between games based on skill and those based on chance, and prohibits the latter for stakes, in December 2020, government think-tank Niti Aayog released a draft discussion paper seeking comments on guiding principles of Online Fantasy Gaming Platforms (OFGPs).

The aim is to bring regulatory clarity to a segment that has the potential to generate substantial business in years to come. The draft, among other things, has proposed the setting up of a self-regulatory governing body for industry players with an independent oversight board and customer redressal mechanism.

The industry, which believes that the right regulations can help fantasy sports attract Rs 10,000 crore foreign direct investment and create as many as 10,000 jobs, should have been thrilled. But it was cautious. The reasons - the legal complexities involved and multiplicity of industry federations; ambiguity in some of the recommendations; and an industry divide between fantasy sport and other online gaming players with the latter saying that the regulations are undermining their interests.

Online Bet

Prime Minister Narendra Modi, in a meeting on the toy industry last year, called for tapping the potential of the gaming sector, largely dominated by international companies. A latest Deloitte report says the gaming industry can touch $2.8 billion by 2022, with real money gaming, fantasy sports and esports segments leading the growth.

A KPMG report, 'Business of Fantasy Sports', says number of users participating in online fantasy sports in India grew at a compounded annual growth rate of 212 per cent between June 2016 (two million) and December 2019 (90 million). It says revenues of the online fantasy sports players grew from Rs 262 crore in FY18 to Rs 924 crore in FY19 and Rs 2,470 crore in FY20.

The sector has so far been regulated by state laws with online fantasy game operators also relying on broad principles laid down in these legislations and precedents. Rameesh Kailasam, CEO, IndiaTech.Org, which represents consumer internet companies and investors, says the urgency to streamline the segment stems from its fast evolution, increase in foreign investor interest and fluidity of the legal framework. "In this country, if there is no law, the business is neither legal nor illegal, and if a court upholds your business, it becomes legal. This vertical has gone through that," he says.

The Niti Aayog paper looks at creating a separate category of online fantasy sports that will stand out from other skill games as well as betting and gambling. It also calls for a single self-regulatory organisation for the fantasy sports industry whose governance will be undertaken by an independent oversight board. "These guiding principles may be treated as a uniform 'regulatory sandbox' and recalibrated based on innovations and developments in the sector," it says. Arun Prabhu , Partner, TMT (technology, media and telecom), Cyril Amarchand Mangaldas, says the guidelines will bring the much-needed predictability in regulatory positions. "This will stop fly-by night operators from muddying the waters with non-compliant formats," he says. Sai Srinivas, Co-founder and CEO, Mobile Premier League, which recently raised $95 million in a Series D round and is valued close to a billion dollars, says a joint representation on the draft has been sent to Niti Aayog by major players in the industry such as Paytm First Games, My11Circle, Junglee Games and Winzo. "One major issue is the ambiguity, which comes with most sunrise sectors. As esports and fantasy grow, we can expect regulations to start solidifying. Niti Aayog has taken the first steps and we welcome them," he says.

The OFSP (online fantasy sports platforms) industry body, the Federation of Fantasy Sports (FIFS), earlier known as the Indian Federation of Sports Gaming, was set up in 2017. It has nearly 35 members. Dream 11 is a founding member. Other members are Fancode Myteam11.com, Mobile Premier League and Indian Fantasy League. Former Chief Information Commissioner Bimal Julka, who joined as chairman a few months ago, says, "These guidelines provide equal opportunities to all operators, protect consumer interests and curb possible malpractices. They will provide impetus to responsible growth." A former judge of the Supreme Court, Justice A.K. Sikri, is the Ombudsman and Ethics Officer.

While advocates of self-regulation claim benefits like transparency, quicker dispute resolution and consumer trust, the success of such a body will depend on factors such as participation of all stakeholders, credibility of the regulating body and unbiased outreach. A leading lawyer in TMT practice who did not wish to be named says, "If an organisation where large players have control and are on board, with voting rights, it becomes difficult for other players to submit themselves. There is always the chance of emergence of break-away factions. This is where government sanctioning and monitoring comes into play."

Creating Distinction

A well-settled position of law puts rummy, bridge and horseracing in skill gaming bucket. Several court decisions have put fantasy sports on the same footing. But where this distinction converges with the former is when the element of money is involved like pay-to-play, putting them all under real money gaming.

Following an advisory by the Information and Broadcasting Ministry, the Advertising Standards Council of India (ASCI) recently released guidelines for real-money gaming companies. The guidelines asked them to give a disclaimer about financial risks and addiction. It also mandated that advertisements for these games cannot target minors, or present gaming as a possible source of livelihood, or link it to success. ASCI said within seven weeks of the guidelines coming into effect (December 15), it had processed complaints against 81 entities. Around 75 per cent were from consumers. "In terms of platforms, a majority were from Instagram (39) and YouTube (37). Cricket (55) and rummy (15) received the greatest number of complaints in terms of types of games," it said.

The Gaps

The Niti Aayog's draft seems to be deficient in addressing the complexity of the 'real-money' element, say experts. While it briefly touches upon the 'pay-to-play variant' of fantasy sports getting prior approval in cases where winning is largely dependent on skills, the question of how much money is too much is debatable.

Other gaming federations such as The Online Rummy Federation and the All India Gaming Federation have shared with Niti Aayog their concern over non-inclusion of the entire online skill gaming ecosystem and just limiting itself to fantasy sports.

Bhavin Pandya, Co-Founder and CEO, Rummy Circle, says the draft seems not just incomplete and short-sighted, even the consultation process of Niti Aayog was far from inclusive. While fantasy sports is less than one-third of the entire skill gaming industry, "There is this perception that playing some of the games for money is leading to problems in the society and perceptively fantasy sports wants to steer clear from this even as games of skills," he says, pointing to the whole emphasis on the uniqueness of the fantasy sports segment.

There is no doubt that with many celebrity sports stars more open to endorsing some of these platforms and user base likely to increase with on-ground sporting activities slowly coming back, not to forget the advertising revenues, the distinction could well be a perception battle. Still, keeping the flock together will be the industry's biggest challenge.

@rukminirao

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