How to achieve effective self-regulation for fantasy sports
February 25, 2021 8:06 AM
The traditional advantages of self-regulation, when juxtaposed with government led regulation, are amplified in the context of fantasy sports
The guiding principles adopted by the paper however, do little to resolve the tension created by such state-level regulation.
By Sohini Banerjee and KS Roshan Menon
The recent NITI Aayog draft discussion paper on online fantasy sports platforms (‘OFSPs’) represents a critical development in advancing the debate on appropriate regulation for the fantasy sports industry. On the subject of appropriate mode of governance, the paper has favoured a light-touch regulatory framework characterised by self-regulation. Further, the NITI Aayog has proposed establishing a single purpose self-regulatory organisation (‘SRO’) for the fantasy sports industry, consisting of member OFSPs who meet certain criteria. The above proposals constitute a welcome move. In this article, we take a closer look at the NITI Aayog’s recommendations on self-regulation, and suggest the manner in which such regulation may be leveraged in enabling the fantasy sports industry.
Self-regulation refers to a regulatory arrangement where a group of firms or individuals exert control over their own membership and behaviour by enforcing norms and setting standards. The traditional advantages of self-regulation, when juxtaposed with government led regulation, are amplified in the context of fantasy sports. The constitution of an SRO in an industry as dynamic and technical as fantasy sports would enable leading entities in the sector to come together and frame principles for responsible innovation and user protection.
Such principles may be informed by relevant considerations such as technical feasibility, promotion of innovation and protection of consumers’ interests. The OFSPs that are members of the SRO would enjoy the incentive as well as possess the required technical expertise to frame the principles needed for responsible innovation. Moreover, the SRO would be best placed to respond in a speedy manner to the emerging needs of the sector, and keep up with the rapid innovation taking place. Thus, the adoption of self-regulatory processes in the fantasy sports industry would be beneficial for industry, consumers, the government, and the economy at large. It is therefore evident that the regulatory objectives outlined by the discussion paper promise stability and growth for the fantasy sports industry. However, on scrutinising the contents of the discussion paper, we have identified two key concerns that impede the adoption of robust self-regulation and frustrate the objective of light-touch regulation.
First, we believe that the presence of divergent state laws may not allow self-regulation for fantasy sports to flourish. Extant laws have often adopted a negative attitude towards the industry – with laws such as the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015 introducing licensing requirements for OFSPs, adding to their compliance burden. Such legislation is likely to come into conflict with self-regulation, which seeks to promote responsible innovation and enhanced market coverage.
The guiding principles adopted by the paper however, do little to resolve the tension created by such state-level regulation. The principles require OFSPs to comply with “all applicable laws, regulations and rules in force in India” indicating a lack of resolve towards reforming state laws on fantasy sports. Further, by requiring the SRO to simply ‘request’ state governments to grant OFSPs immunity from criminal prosecution in the event of compliance with the guiding principles, the discussion paper fails to adequately empower the SRO to lead on resolving conflicts caused by disaggregated frameworks. By failing to articulate strong mechanisms for facilitating co-operation between relevant authorities and the SRO, the recommendations are unable to provide a platform for such authorities to come together and pursue a uniform national policy for fantasy sports.
Second, a careful examination of the paper suggests that the proposed governance model for fantasy sports may not end up being ‘light-touch’. Instead, the proposed model sets up a ‘multi-tier’ regulatory framework, with the industry potentially being subject to three levels of regulation at the national, state and SRO level. The absence of a will to suitably amend or repeal competing legislative frameworks, coupled with the lack of strong mechanisms that permit the SRO to usefully supplement extant frameworks, risks making fantasy sports regulation burdensome for OFSPs. Moreover, such regulation may not permit industry players to lead on defining principles for responsible innovation and determine appropriate governance frameworks.
These issues are not however, without remedy. While the recommendations advanced by the paper are subject to revision, we maintain that the way forward does involve a ‘light-touch’ regulatory framework, driven by self-regulation. For the same, it is critical that the Centre begins consultations with State Governments to ensure that they exercise regulatory restraint in governing fantasy sports. With respect to self-regulation, it is important that the SRO leads on the proposed ‘light-touch’ framework. Entrusting the SRO with the responsibility to formulate a detailed code- containing violations, guidelines and enforcement policy- can be a useful first step towards achieving robust self-regulation for fantasy sports in India.
Sohini Banerjee is a Research Fellow and K.S. Roshan Menon is a Research Scholar at Shardul Amarchand Mangaldas & Co. The authors are grateful to Mr. Siddharth Nair and Mr. Karun Prakash for their comments. The views and opinions expressed in this article are those of the authors and does not necessarily reflect the views of Shardul Amarchand Mangaldas & Co.