Fantasy Sports have enjoyed huge popularity in India in recent times. However, the legality of their operation falls in a grey area due to the never-ending debate of their categorization into games of skill or games of luck. NITI Aayog recently released a set of guidelines for Regulation of Fantasy Sports in India which provides a much needed structure. This article aims to critically analyze the Draft Regulations as well as their potential impact.
Fantasy Sports, gambling, NITI Aayog
Fantasy Sport is a new type of sporting event where players construct virtual teams consisting of proxies of real players of a professional sport. Real life performance of players in games is considered and this is further used to decide their performance in the respective Fantasy Sports. The growth of Fantasy Sports has been largely due to the increasing internet penetration around the world. Online gaming is also becoming widely popular in India with the introduction of cricket-based fantasy leagues like Dream 11 Howzat, Mobile Premier League, etc. The current online gaming user base in the country is estimated to be around 365 million . India's young population, cheap smartphones and affordable internet make it a lucrative market for online gaming businesses, with a yearly growth anticipated to reach 40 per cent .
According to a recent report by FICCI-EY, India's e-sports business is valued as Rs 3 billion in 2021. It is further projected to reach Rs 11 billion by 2025. The report also noted the industry’s potential of producing over 11,000 employment roles. This would add about Rs 100 billion in economic value for India between 2021 and 2025. According to another report by KPMG , the number of fantasy sports users in India would cross 100 million by 2020. Thus, it is clear that the scope of online gaming in India is immense and it needs a proper regulatory framework to generate the maximum possible value for all stakeholders.
CURRENT LEGAL SCENARIO
On September 15, 2017, The Hon’ble Supreme Court dismissed a Public Interest Litigation filed against the order of Punjab and Haryana High Court in the case of Varun Gumber vs. Union Territory of Chandigarh , which legitimized the Fantasy Sports industry by differentiating it from gambling and finding that such games involve “exercise of considerable skill, judgment and discretion.” In 2018, the 276th Law Commission Report affirmed the above opinion and provided the Fantasy Sport Industry legal legitimacy.
Because participants are allegedly wagering on the outcome of a live contest, there appears to be a popular misconception that online fantasy sports are just chance-based activities and that no substantial ability is necessary to play them. This has been the common complaint across numerous cases filed before the Indian courts. Even though heavily misunderstood by the general public, Fantasy Sports are correctly classified as "games of skill" by Indian courts. Sports/games of skill are distinguished from betting/wagering based on the two-fold test established by the Supreme Court of India in R.M.D. Chamarbaugwalla v. Union Of India . According to the facts of the case, the petitioners were in the business of organising “Prize Competitions” in various parts of the country. Prize Competitions were regulated under The Prize Competition Act, 1955 . Section 2(d) of the Act defines Prize Competitions as competitions in which “prizes are offered for the solution of any puzzle based upon the building up, arrangement, combination or permutation, of letters, words, or figures”. The petitoners main contention was the licensing required to conduct such competitions. The Supreme Court held that, to categorize games as “games of skill”, the outcome has to depend significantly on a player's skill and success should also be determined by skill, not just luck. The aforesaid ratio has been followed by courts in recent cases as well.
While States like Nagaland and Sikkim have understood the economic potential of fantasy sports and online gaming by formally passing legislations to regulate such industries, there are some states which have banned online fantasy sports by construing them as online gambling. However, the idea of a uniform pan India legislation to legitimize and regulate fantasy sport in India has recently gained traction subsequent to the ManKiBaat address given by the Prime Minister of India, on August 30, 2020, where he recognized and acknowledged the potential of the Indian Gaming Industry.
OVERVIEW OF NITI AAYOG'S GUIDELINES
In the backdrop of these developments, in December 2020, NITI Aayog released a discussion paper with guiding principles on the Regulation of Online Fantasy Sports Platforms in India . Among other observations, the paper noted that Online Fantasy Sports Platforms (“OFSP”) have tremendous job creation and foreign investment opportunities and need a uniform set of regulations to accomplish these objectives. It also noted that presently Indian law lacks an objective standard to evaluate if a game falls under the "game of skill" or "game of chance" category. Indian OFSPs have to work with various state governments to negotiate their regulations, which adds to the unpredictability and costs of doing business.
The Paper proposes numerous initiatives that could be implemented by the OFSP industry to enhance their regulatory and legal compliance. One of these is completely focusing on skill- based contests and taking away or reducing the chance aspect by providing watertight guidelines for OFSPs. It also recommends the establishment of a self-regulatory organization to oversee this area. Other principles include safeguards for minors, transparent rules and regulations, close emulation of real-world games, etc. Another interesting guiding principle provided is the immunity of OFSPs from criminal prosecution which until now was guided by State laws.
There is no doubt that these guidelines are a long-needed step in the right direction. They are rational, financially viable and provide due consideration to all stakeholders. This includes the think tank's suggestion for a self-regulating governance paradigm, as opposed to a top-down regulatory control approach. However, many gaps need to be filled or clarified, which will be elaborated in this section.
Currently, there is no personal Data Protection law in India as the Personal Data Protection Bill, 2019 is still pending before the Parliament. The Bill provides ample protection of personal data from companies collecting such data. It categorizes financial data, biometric data, religious data etc. as personal and sensitive. Until the Bill comes into effect, there should be express regulations regarding the privacy of the players and their financial information instead of the operator providing assurances as it provides unsupervised power to them.
Numerous studies have also found a link between OFSPs and the rise in gaming addiction and eventual mental health problems. There should be provisions to remove players spending an excessive amount of time on the app by way of a time cap. Recently, China released new rules to limit the amount of time spent by minors playing online games. This was done to curb the growing incidences of gaming addiction amongst children. Another important but overlooked concept is that of match-fixing. The cases where athletes are charged with altering their performance to affect the results of OFPS matches should be dealt pari materia to match-fixing penalties of the respective Sports Authority. Currently, India has no laws that categorise match fixing as an independent offence. Cases are mostly registered under Section 420 of IPC which deals with cheating or under various other acts depending on the State’s police. Sports Authorities.
Principle 3 mentions that “all necessary safeguards to protect minors must be instituted”, however, the mechanism for enforcing such safeguards have not been elaborated. Such vague or open-ended restrictions would not act as a strong enough enforcement function to ensure compliance. This is a continuation of the general principles of the Federation of Indian Fantasy Sports (FIFS) which states that its “member companies will not offer pay-to-play formats to underage users.” There is a strong need for providing rigorous mechanisms by which OFSPs would ensure age compliance.
Principle 4 mentions that “A fantasy sports contest should generally relate to and emulate an entire real world officially sanctioned sports contest as closely as possible and not infuse elements of chance that are not present in the real-world contest, provided that this requirement may be waived by the independent evaluation committee in cases it deems fit.” Waiving off such a requirement by the independent evaluation committee should be warranted by a reasoned order in writing, which may be appealed against before the courts. The Regulations must provide a detailed set of objective conditions that have to be satisfied while considering such a waiver. The constitution/composition of the “grievance redressal mechanism” as addressed under Principle 5 should be free from any executive/legislative interference; such a body/committee should be independent and parties aggrieved by any of their orders should be allowed to appeal to the High Courts or the Supreme Court against such orders.
The Draft Regulations by NITI Aayog are an important step towards a uniform OFSP regulatory ecosystem. OFSPs, despite favourable court decisions, were operating on the side of caution given the ongoing regulatory uncertainties. However, despite NITI Aayog’s Guiding Principles, OFSPs still have to operate in an ambiguous framework coupled with public challenges in court and of political interference. A temporary consolidation of existing regulations until the entire framework is established would provide intermediate support in the smooth running of OFSPs. In the long run, these guidelines, after suitable amendments, will play an important role in making India the world leader in Fantasy Sports along with providing a huge boost in investment and job creation. For now, the future of Fantasy Sports looks bright.