Gaming Laws: Self-regulation on the anvil

January 2, 2021 11:42 AM

As a consequence of multiple legislations being in force, the status with respect to the legality of “online gaming” per se usually varies from state to state

The Indian courts have opined that Dream11, one of the biggest players in the online fantasy sports industry in India, is a platform offering a game of skillThe Indian courts have opined that Dream11, one of the biggest players in the online fantasy sports industry in India, is a platform offering a game of skill

By Shoubhik Dasgupta and Eishan Agnihotri

The online gaming industry in India has grown at an exponential rate in the past five years. From simple quiz based games to online fantasy sports such as Dream 11 to online video games such as Fortnite, there are several formats which are often as a class referred to as “online games” or “online gaming platforms”. While this may not make a lot of difference to the common everyday user, from an Indian law maker’s perspective, having a distinction amongst platforms being classified “online fantasy sports” and “online games” has growingly become an important question to answer.

A glance at the latest judicial developments would reveal that Indian courts and state administrative bodies have begun to take a note of the need to regulate the online gaming space, mainly from the point of view of prohibiting and regulating acts which would otherwise classify as acts of gambling. While this is a great initiative, achieving this is certainly not an easy feat to achieve. If one looks at the current legal framework in India, the Public Gambling Act, 1867 governs and prohibits “gaming” by individuals in ”gaming houses” with a view to derive profits. Further, several legislations have been promulgated over the years by individual state governments to tackle the issue of gambling.

As a consequence of multiple legislations being in force, the status with respect to the legality of “online gaming” per se usually varies from state to state. Also, the formats of the games have often found themselves being scrutinized by various courts to ascertain whether the games being played are games of skill or merely games of chance which would make them acts of gambling. In this regard, one can finally begin to observe the difference in the status of fantasy sports platforms from other online gaming platforms offering games such as cards.

The Indian courts have opined that Dream11, one of the biggest players in the online fantasy sports industry in India, is a platform offering a game of skill. However, the pronouncements of courts while dealing with other games such as cards, vary and are often dependent upon the format of the game being scrutinized. That said, with nobody or authority to regulate the online gaming space, an ever increasing number of service providers and users, multiple legislations promulgated by state governments and a general lack of clarity with respect to the subject matter has led to the courts often directing the governments to evaluate and address the concerns and challenges posed by the online gaming sector.

Some clarity and direction however has recently been provided by the NITI Ayog (“Ayog”). In a draft for discussion published by the Ayog titled “Guiding Principles for the Uniform National-Level Regulation of Online Fantasy Sports Platforms in India” (“Guidelines”), the Ayog has provided several suggestions with respect to the online gaming space. However, the most prominent aspect of the Guidelines is that instead of referring to “online gaming” as a larger class, the Guidelines specifically address the online fantasy sports platforms or OFSPs. The Guidelines while acknowledging the potential of the sector, emphasize on a need to take certain measures for effective regulation.

These recommendations include constitution of a recognized self-regulatory body to govern the OFSP space. The guidelines also state that the formats adopted by the OFSPs should predominantly remain to be a game of skill. Further, in the event an OFSP is desirous of providing pay-to-play options to the users, the users should be 18 years or above in age and the fantasy sport format should be judicially determined to constitute a game of skill and the OFSP should be required to obtain a prior approval from an independent evaluation committee, constituted by the recognised self-regulatory organisation, that will undertake statistical and legal evaluation of such format to ascertain and confirm that such format is skill-predominant in determining the winning outcome. The Guidelines also provide that the OFSPs should refrain from advertising games of chance on their platforms to prevent any potential misuse of the platform.

With respect to the constitution of a self-regulatory organisation, the Guidelines also provide that the body so constituted must be recognised by the government and should be a single-purpose fantasy sports industry body having membership of OFSP operators who, in aggregate, have as their registered users at least 66% of the registered fantasy sports users in India. While this prima facie appears to be intended towards providing OFSPs a platform for representing their concerns to the law makers, the requirement of the body having membership of OFSPs having 66% of the registered fantasy sports users in India may lead to a situation where the dominant players in the industry having the majority of the users end up having significant influence over the organisation as compared to the smaller entities forming part of the OFSP industry.

One of the other interesting suggestion in the Guidelines is that “the self-regulatory organisation should send a communication to all the states requesting them to consider granting to OFSPs immunity from criminal prosecution or sanction in respect of such formats of fantasy sports contests that are compliant with these guiding principles”. This suggests that the Guidelines intend to chart a path for organizing the sector with a special emphasis on a light-touch regulatory framework for the fantasy sports industry.

While this initiative by the Ayog brings a welcome distinction to the online fantasy sports industry from the rest of the available online gaming options, it remains to be seen how effectively self-regulation will be able to address the challenges faced by the OFSP sector.

The authors are counsel and associate respectively at Pioneer Legal

(Disclaimer: This article is meant for informational purpose only and does not purport to be advice or opinion, legal or otherwise, whatsoever. Views expressed in this Article are personal views of the authors. Pioneer Legal does not intend to advertise its services through this article.)

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