Fantasy sports: Is India ready for the game of skill?

fantasy sports can drive sports viewership, economic growth
For an industry as vibrant as fantasy sports, self-regulation is the ideal mode of governance to ensure sustained innovation and responsible conduct from the operators.

Fantasy sports: “Making a team on a fantasy sports platform requires a user to demonstrate a range of skill which is considerably higher than what is required by a mutual fund manager to handle a portfolio.”

This was conclusively determined and demonstrated in a joint report by researchers from Massachusetts Institute of Technology and Columbia University in August 2020. Similar findings were earlier echoed by researchers from IIM Bangalore in their study in December 2019 which was published in a Harvard Business School publication. It states that there is enough evidence to conclude that performance in fantasy sports is skill-dominant. The Indian Judiciary too, has, time and again, authoritatively held that fantasy sports are skill-predominant and that a ‘game of skill’ is distinguishable from gambling and, therefore, enjoys protection under Article 19(1)(g) of the Constitution.

Despite the abundance of empirical evidence and the rulings of multiple Indian courts, fantasy sports have had to perennially prove that they are skill predominant and do not resemble gambling or betting.

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Fantasy sports are non-addictive, distinct from online gaming

Industry reports indicate that the average ticket size for an online fantasy sports contest is Rs 35 and more than half of all users win back their participation fee or more. About 99.1% of all users of online fantasy sports have either won or lost less than Rs 10,000 in their lifetime.

This demonstrates that sports enthusiasts engage with fantasy sports to enhance their viewing experience and not for monetary gratification. In fact, over 80% of all online fantasy sports users participate in contests for free, purely as a means of entertainment and to engage with the sport they love in a more intimate and real-time manner. The average time a user spends on any online fantasy sports platform is restricted only to the time that is required by the users to make a virtual team. Once the team is selected, the user only engages with the real-world sporting event and not the fantasy platform.

Furthermore, unlike online games which look to simulate a fictional environment, online fantasy sports emulate real-life sporting events. This further distinguishes them from online games as users of online fantasy sports cannot enter or participate in contests whenever they wish, since these contests rely on an underlying sporting event taking place.

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Fantasy sports increase sports viewership

Fantasy sports transform the users’ experience by making them active participants in the real-world sporting events, elevating them from being just passive viewers. This enhanced user experience has made sporting events across the country far more appealing than before, even for sports that have unfortunately been on the periphery of user engagement for far too long. A report by Kantar and Federation of Indian Fantasy Sports (FIFS) reveals that 60% of fantasy sports users tend to watch more sports than before and about 59% of them started consuming new types of sports because of their interest in fantasy sports.

The meteoric rise in popularity of fantasy sports in the country has not only been pivotal in increasing viewership for sports, but they are also emerging as a growth driver for the Indian economy. On its current growth trajectory, the industry has the potential to cumulatively contribute over Rs 10,000 crore in taxes to the Indian government and create an additional 12,000 jobs, through direct and indirect employment, in the course of the next few years. This sunshine sector is also pegged to attract another Rs 10,000 crore in foreign investment in the next few years.

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Need a governance framework

Under the current regulatory regime, or lack thereof, online fantasy sports platforms have had to seek shelter under undefined exceptions to the gambling and public order laws of various state governments. Operators of fantasy sports are required to engage with state regulators who often advocate for state-specific regulations. The variance and ambiguity in state regulations increases the compliance burden for the operators and adversely impacts their ability to scale and innovate. This also has a negative bearing on the industry’s ability to attract further foreign direct investment, generate employment opportunities and contribute revenue to the public exchequer.

A formal recognition for the industry, through a uniform national-level regulatory framework is necessary to ensure that the industry continues to grow responsibly and benefit the Indian economy. It is in this light that it is encouraging to see NITI Aayog release the draft “Guiding Principles for the Uniform National-Level Regulation of Online Fantasy Sports Platforms in India”. The paper from NITI examines the current state of affairs for fantasy sports and endeavours to eliminate all extant legal ambiguity around the industry.

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Self-regulation key to responsible growth

For an industry as vibrant as fantasy sports, self-regulation is the ideal mode of governance to ensure sustained innovation and responsible conduct from the operators, and to protect users’ interest. NITI Aayog’s proposition to set up a single self-regulatory organisation (SRO) recognised by the government, is noteworthy. A self-regulatory mechanism will ensure that the OFS industry functions in a manner that continues to benefit and protect the interests of the consumers while maintaining a governance framework that deters unscrupulous operators.

To ensure that the self-regulatory body remains fair and transparent, it is vital that an independent oversight and evaluation committee is set up for implementing the uniform guidelines and ensuring that all operators adhere to them. Such an independent committee must be composed of reputed persons with demonstrable experience in governance, law and administration. Besides making sure that the guidelines are effectively enforced, the committee will also be able to strengthen dispute redressal mechanisms by ensuring accessibility and fairness.

Prime Minister Narendra Modi unveiled his Aatmanirbhar Bharat vision last year, which is a call to make India an integral part of the global economy by leveraging self-reliance to enhance its competitiveness. Disruptive technology-based solutions are being looked at to drive this vision. Fantasy sports, where India has already surpassed the US in terms of user growth, are best placed to help achieve this vision by ensuring that applications developed in India succeed and flourish across the world.

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A safe harbour for fantasy sports

NITI Aayog must be commended for placing fantasy sports in play for policy discourse and paving the way for setting up a safe-harbour for the industry to innovate and grow responsibly.

The draft guiding principles released by NITI Aayog have provided fantasy sports the much-needed impetus. If legislated into acceptance, a distinct industry will emerge. A uniform national-level principle-based governance framework may be deployed to regulate with a light touch. Such progressive and supporting reforms from the government will allow fantasy sports to thrive and perhaps even make India the global hub for the industry. Sports lovers and the economy will benefit from the establishment of a free and regulated industry of online fantasy sports.

(Shailesh Haribhakti is corporate leader based in Mumbai. He is a chartered and cost accountant, and writes regularly on the Indian economy and public policy.)

Shailesh Haribhakti

Shailesh Haribhakti is a Chartered and Cost Accountant, an internal auditor and a certified financial planner. He is a board chairman, audit committee chair and independent director at some of the country's most preeminent organisations. He is a thought leader on the Indian economy and public policy.