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Explained: Niti Aayog's Draft Regulatory Guidelines for Online Fantasy Gaming In India

Gaming addict pays for it with life | Image for representation

Gaming addict pays for it with life | Image for representation

Earlier this month, Niti Aayog proposed a draft paper for setting up regulatory guidelines, including an independent oversight body, that will seek to control how the growing online fantasy gaming sector of India operates.

Online fantasy gaming may not be new, but after Dream11 featuring as the title sponsor of the recently concluded Indian Premier League (IPL) cricket tournament, it has certainly received a shot in the arm in terms of its popularity and growth. Niti Aayog, the technology think tank body under the ambit of the central government, has published draft guideline proposals earlier this month for the online fantasy gaming sector. Among other things, the draft proposal seeks to set up uniform operating grounds for online fantasy gaming players across all states in India. It also seeks to establish an independent oversight body, which will control all operational issues of companies in the online fantasy gaming space in India.

While the proposal remains at the draft stage for now, it finally seeks to validate and establish an industry that can contribute significantly to the growth of homegrown startups. It may also help establish a set of uniform rules for clear regulation in the online fantasy gaming industry, which in turn can help smoothen consumer grievance redressals, as well as enabling operators in this field to pursue product innovations and take the field further. All of this shall come under the ambit of the proposed independent regulatory and oversight body, and the proposal as such can drastically overhaul where India’s online fantasy gaming stands at right now.

Premise for the makeover

The Niti Aayog paper cites major numbers in how online fantasy gaming can contribute to the Indian economy in the coming years. According to Niti Aayog, “The online fantasy gaming sector in India has grown at a compounded annual growth rate (CAGR) of 212 percent – from 2 million users in June 2016, to 90 million users in December 2019. It has the potential to attract Foreign Direct Investment of more than Rs 10,000 crore over the next few years, as well as generate 1.5 billion online transactions by 2023.”

The paper further states, “The fantasy sports industry has the potential to generate an additional 5,000+ direct and 7,000+ indirect jobs in the next 2-3 years. It has the potential to contribute GST revenue of Rs 3,000 crore to Rs 3,500 crore over the next five years, with income tax on winnings and corporate tax paid by OFSP (Online Fantasy Sports Platform) operators expected to contribute between Rs 7,000 crore and Rs 10,000 crore over the next five years.”

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What is being proposed

The key proposals under the draft Niti Aayog guidelines include “uniform operating standards, based on sound principles and best global practices, and the monitoring of adherence to these principles and practices to protect fantasy sports users’ interests.” In other words, Niti Aayog envisions the creation of an independent body that dedicatedly caters to the online fantasy gaming sector – including regulatory postulates for startups to follow, unifying fantasy sports laws from state-specific to a single, countrywide status, offering a single interface for addressing customer grievances, and other related topics.

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This independent oversight body will also offer a protective layer for the startups, from facing repetitive legal sanctions in specific states, or under similar cases from different customers in different states across India. As it stands today, the states of Andhra Pradesh, Assam, Nagaland, Odisha, Sikkim, Tamil Nadu and Telangana have made it illegal for their residents to play online fantasy gaming, with Karnataka reportedly considering a similar ban as well. According to industry experts, it is this banning spree that may be affecting the possibility for the government to open up new revenue channels, which necessitates a move such as Niti Aayog’s push for organising the online fantasy gaming sector from earlier this month.

Gambling or gaming?

For context, online fantasy gaming, often also referred to as ‘real money skill gaming’, is still governed by the Public Gambling Act (PGA) of India, 1867. While this law essentially renders gambling in any form illegal in most states in India, stakeholders in the industry raised ground that online fantasy games and sports require talent and skill, and hence cannot be qualified as gambling. In response to public interest litigations (PILs) filed by various parties against the legalisation of online fantasy sports in the country, various High Courts in India have expressed concerns regarding the lack of clear regulation in the field, stating that such an environment can make it tricky for consumers to seek legal redressal, or for companies to defend themselves legally against arbitrary lawsuits.

Noting this, Niti Aayog states, “Fantasy sports contests do not have independent legal recognition, having to shelter under an undefined exception to the state gambling and public order laws. Formal recognition of the fantasy sports industry and providing for principle-led governance would enable Indian OFSP operators to focus on innovation, achieve scale and expand their operations in a clear and principle-based regulatory environment.”

Underlining the paper’s attempt to establish a procedure of checks and balances, it further adds, “With the recognition of fantasy sports as a game of skill, it is equally imperative to secure the industry and the users of OFPSs from unscrupulous operators, who lure users with games of questionable legality in the guise of fantasy sports. Thereby, they tarnish the image and potential of the industry as well as the consumer’s trust and expectation, that the outcome of a fantasy sports contest will be determined by the superior exhibition of skill relative to participating users.”

In simpler terms, the said regulatory body will help differentiate which online fantasy games qualify as a ‘sport’, and which falls under the ambit of ‘gambling’. Typically, PILs have showed online poker, rummy and other related tournaments as clear cases of online gambling being advertised under esports and fantasy sports, all of which should be made clear by such a regulatory body. The proposal paper has presently been floated to industry stakeholders, and a clear outcome on the matter should come some time in 2021 – a year that may prove to be momentous for online fantasy gaming platforms such as Dream11, Mobile Premier League and others in India.

The focus on regulating and organising a considerably new and more technology savvy can be vaguely equated to the Indian central government’s focus on electronics hardware manufacturing in the long run. Earlier this year, the central government rolled out a production-linked incentive (PLI) scheme for key technology companies and manufacturers to make India their preferred manufacturing hub. A total of 16 companies have been signed up under India’s PLI benefit, all vying for space in a sector that is now being looked at with tighter regulatory spectacles and clear incentives for growth.

While the online fantasy gaming sector is not being incentivised right away under the Niti Aayog proposal, the prospect of uniform central regulation of the field, coupled with the potential for growth in a high revenue, high volume, mobile internet-first sector can serve as an interesting lure for both Indian startups and global fantasy gaming majors. While the key tone of the draft paper by Niti Aayog remains regulatory, industry experts view this move as a positive one geared to evolve a sector that has so far received divisive legal recourses – hence disrupting customer experience and also dissuading a full-scale national growth.

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