Humans progressed over millennia through major disruptions and discoveries that resulted in large steps forward for humanity. The latest in this line of innovation is the exponential rise of technology.
Over the past few decades, its dynamic nature has disrupted traditional industries. Towards this, it is essential for policymakers to act in a forward-looking manner, understanding the new business models and how they are driving growth.
Regulation provides clarity, helps the market grow and creates standardisation, while also establishing redressal mechanisms. Deployed coherently and optimally, these frameworks help unlock the economic potential of a nascent sector to shape the industry.
By adopting a long-term outlook, policymakers can view disruption in technology as an opportunity. Online fantasy sports platforms (OFSPs) are one such example of disruption that has emerged in the last few years.
They have grown exponentially, with a KPMG report highlighting the participation increase from 2 million users in June 2016 to 90 million in December 2019.
A PriceWaterhouseCoopers report underlines this potential by stating that the industry can create over 5,000 direct and 7,000 indirect jobs over the next three years, in addition to GST revenue worth around Rs 3,500 crore over the next five years.
Furthermore, the OFSP industry has also brought in over Rs 1,000 crore in FDI, a figure likely to grow exponentially moving forward.
Sports and Community Engagement
Apart from the direct benefits that increased investment and job creation provide, the fantasy sports industry is also well placed to support the developing sporting culture in the country.
Investment in grassroot sporting development as well as sponsoring an array of professional sports, are important steps in this regard. We have seen this shift at a nascent level, with leading online platforms sponsoring the IPL and the Indian cricket team.
As the industry develops, such measures should be encouraged to help create a virtuous cycle of investment, where OFSPs boost funding in sport and, in turn, benefit from increased exposure and engagement for their platforms.
Furthermore, many OFSP users have also pointed towards how they began watching new sports after using these applications. A recent study by The Federation of Indian Fantasy Sports and Nielsen stated that 37% of fantasy sports players consume more than 6-8 hours of real-life sports content weekly.
Further, the study finds that 62 percent of fantasy sports players follow competitions even when their teams are not participating.
In a country like India, where cricket is dominant, sports such as kabaddi and hockey have received more attention and viewership in recent years, a trend partially attributed to the growth of OFSPs.
Challenges and Opportunities
Recognising the importance of creating an enabling regulatory ecosystem, the NITI Aayog put forward guiding principles for the industry.
These guidelines laid the foundation for innovation and investment in India by underlining the potential of this sector and outlining challenges, along with elaborating on solutions.
The primary debate revolves around whether these platforms can be classified as games of skills or games of chances and how such cases can be clearly demarcated.
The matter is exacerbated by differing regulations across states when dealing with OFSPs, leading to ambiguity in compliance and acting as an impediment to growth and investment.
Mapping a Way Forward
To this end, there are a few policy measures that can be adopted that will provide regulatory clarity and set the foundation for investment and growth in this space. The Dialogue’s report on ‘The Regulation of Fantasy Sports Platforms in India’ details these measures and helps map a way forward.
The first priority in the short term must be to harmonise regulations across states and bring about some degree of clarity and homogeneity. To do so, the Central Government must frame guidelines so businesses and state governments are provided clear criteria, based on which the regulations will be enacted. This will also pave the way towards the long-term goal of introducing central legislations for the industry.
Developing a clear bright-line test to establish skill or chance predominance will also go a long way towards driving this industry. While most courts in India do follow a similar set of broad criteria based on precedent that is progressive in nature, there is a need for homogeneity in this respect. In a significant move earlier this month, the Supreme Court struck down a PIL seeking the ban of fantasy sports games in the country. The SC held that games of skill were legal and did not meet the definition of ‘gambling’, thereby upholding the October 2020 Rajasthan High Court Judgement.
Another recommendation is establishing a focussed, government-recognised self-regulatory organisation that will help integrate the expertise of various stakeholders within the industry. Their input, along with the light-touch regulation approach, may allow for mitigation of information asymmetry, elimination of bureaucratic delays and develop efficient grievance redressal mechanisms to protect consumer interests.
Appreciating the potential of OFSPs, and understanding the challenges the industry is faced with, are positive initial steps. India has a large market of sports fans, with increasing digital penetration and burgeoning engineering talent. These factors set the foundation for driving forward growth, employment and innovation in this space. It is important for the government to capitalise on this opportunity and move towards establishing an enabling regulatory framework that will ensure this potential can be harnessed to make India a global hub for fantasy sports.
(Kazim Rizvi is the Founding Director of The Dialogue, a public policy think-tank based out of New Delhi. Gautam Kathuria is a graduate in Economics and International Relations and is a Senior Research Associate leading the Fintech and Digital Gaming Verticals at The Dialogue.This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)