In December 2020, NITI Aayog, the Indian Government's policy think-tank published a discussion paper with draft guiding principles for the online fantasy gaming sector1 ("Discussion Paper"). In this document, NITI Aayog has noted that the number of users in the online gaming and fantasy sports sector has significantly increased in recent years, and the sector now has tremendous potential to attract foreign investment, increase innovation and generate employment in India.
NITI Aayog also notes that India's current legal framework on online fantasy sports platforms ("OFSPs") lacks clarity and uniformity. This ambiguity increases the compliance burden on companies and consequently stifles the industry's growth potential. In light of the industry's rapid expansion, NITI Aayog has sought formal recognition for OFSPs in India and has proposed certain guiding principles to help create accountability, transparency and a comprehensive governance mechanism for all stakeholders.
- US Fantasy Sports and Industry: Relying on several industry reports, the Draft Guidelines observe that India has taken over the United States of America as the largest online fantasy sports market by user base. The Discussion Paper notes that many OFSPs in the USA came together in 1995 to form the Fantasy Sports and Gaming Association ("FSGA"), an industry body with a view to represent OFSPs and support legal game-formats of digital fantasy sports ("DFS"). In due course of time, the FSGA has aided growth of DFS in the USA by organizing conferences, engaging with OFSPs, ensuring lawful participation and consumer protection.
- Current Hindrances to Industry Growth in India: NITI Aayog has cited a report published by the Sports Law and Policy Centre ("SLPC"), and has noted that the industry currently does not have any objectively defined test to determine if a particular game can be categorized as a "game of skill" or "game of chance". Further, OFSPs in India are required to engage with individual State Governments to navigate State-specific laws, which increases uncertainty and the cost of doing business.
- Industry Recognition: The Discussion Paper recognizes that it would be essential to secure the DFS industry with uniform guidelines and operating procedures. As per NITI Aayog, this will not only enable the OFSPs to create pan-India platforms but will also help the industry generate employment and attract foreign investment. NITI Aayog has supported suggestions for a principle-based policy implementation for the fantasy sports industry and believes that formal recognition of this sector would enable OFSP operators focus on innovation and achieve scale.
The Way Forward
The Discussion Paper proposes the following guiding principles for implementation by the industry in a structured manner.
- Skill Based Contests: The Discussion Paper requires that all OFSPs only offer contests and games that are based on skill i.e., the chance of winning which depends on the skill of players and not chance. Therefore, the Discussion Paper recommends that OFSPs maintain statistical data of all users and submit this data to a self-regulatory organization ("SRO") in order to demonstrate that these contests and games are skill based.
In case an OFSP intends to offer a pay-to-play variant of a contest that varies from the formats that have been approved by Indian courts, such entity should first obtain approval from an independent evaluation committee that is constituted by the SRO. As per NITI Aayog, this evaluation committee should have the power to set rules or recommend changes to formats that will be binding on OFSPs.
- DFS by Minors: OFSPs should not offer any paid contests and games to users below the age of 18 (eighteen) years. OFSPs should put in place necessary safeguards to protect minors.
- Reflection of Real Scenarios: OFSPs should aim to offer contests and games that emulate real-world games and contests as closely as possible. In other words, new elements of chance should not be introduced, unless such features have been allowed by the independent evaluation committee discussed above.
- Rules and Regulations: The terms of participation for all users of a game/contest should be transparent, and the same terms with respect to rules, opportunities and rewards should be applied to all users uniformly. The users should also have recourse to a redressal mechanism in case of complaints.
- Gambling Services: OFSPs should not offer or advertise gambling services or games of chance on their platforms. The OFSPs are required to implement industry-wide policies to prevent use of their platform for illegal purposes.
- Advertising Standards: OFSPs should ensure that advertising of contests and games on their platforms conform to the advertising standards laid out by the Advertising Standards Council of India ("ASCI"). In particular, such advertisements should not imply or represent that the winnings of a contest are 'assured' or 'guaranteed'. Similarly, participation in fantasy sports should not be represented as a source of sustenance or livelihood.
- Immunity from Criminal Prosecution: The Discussion Paper recommends that the SRO engages with State Governments and secure immunity for OFSPs from criminal prosecution or sanction, so long as these OFSPs comply with the abovementioned guiding principles.
JSA Observations and Comments
The NITI Aayog's Discussion Paper represents a significant step in the right direction and provides much needed guidance and recognition to the stakeholders of this burgeoning industry. NITI Aayog's draft guiding principles and recommendations are logical and appear commercially feasible. Most notably, the think-tank's proposal for a self-regulatory model of governance, rather than top-down regulatory control is a welcome move. We hope this Discussion Paper signals the start of a more uniform and consultative process for the formulation of laws and policy on digital fantasy sports.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.