Online Fantasy Gaming: Maze of fluctuating and conflicting laws

Even before the pandemic struck India, the country had a steady (and rising) number of online gamers. The pandemic only further expanded the reach of the online gaming industry.

Not only did the number of online gamers increase, but the pandemic also caused acceptability and adoption of online gaming as part of mainstream recreation and entertainment.

According to the mobile app market intelligence firm Sensor Tower, India saw the highest number of game downloads in the world, with 7.3 billion installs, during the first three quarters of 2020.

A major part of the online gaming industry is the much-hyped online fantasy league gaming, which can be played with or without real money on several apps developed by MPL, Dream11, and Nazara. The Indian gaming industry is small in comparison to the global market based on the dollar spent per player.

However, given India’s young demographic, smartphone penetration, rising disposable income, and opportunities created by the pandemic, investors and entrepreneurs are very bullish on the fantasy league gaming sector.

India has already received more than $500 million in foreign investments in online gaming businesses in FY 2020-21. Not only private and venture capital firms, but also retail investors are bullish on the sector. Nazara Technologies Limited’s IPO, the first pure-play gaming company IPO, was oversubscribed by 175 times!

Even with these massive investments, the grass is not all green in the arena. Doing business is tough for entrepreneurs and managers in this sector, as they have to navigate an ambiguous and uncertain regulatory environment.  Gambling or betting is a State subject and each State is permitted to frame its own laws The Central Government, various State Governments, and the judiciary, each have taken different views on the legality of this nascent, rising sector, and wading through differing and changing regimes is often chaotic and destabilizing for entrepreneurs and business managers.

The Central Government had been fairly pragmatic in its approach and sympathetic towards the sector. A discussion paper by Niti Aayog, the Central Government’s top think tank, seeks to provide a level and uniform regulatory regime applicable in all parts of India and acceptable to all stakeholders. The discussion paper seeks to remove any ambiguity on the applicability of gambling laws on the online gaming industry, and set definitive standards and objective criteria which can be applied to each online fantasy game format to determine whether such a format falls within the definition of a game of skill or gambling.

The Supreme Court and various High Courts have consistently ruled that money-based online fantasy gaming is not gambling, and, moreover, that it is constitutionally protected as a fundamental right to livelihood. The courts have reasoned that money-based online fantasy sports are a game of skill, where a player’s success depends on his adroitness, attention, experience, superior knowledge, and training,  and not on mere chance. Therefore, online fantasy sports cannot be classified as gambling or betting.  However, in March 2020, the Supreme Court admitted an appeal against a Bombay High Court judgment, casting a shadow of doubt on the future of the industry.

No State (with the exception of Nagaland and Sikkim) has any dedicated legislation governing online gaming. Several states continue to perceive online fantasy gaming as a form of gambling or betting (despite High Court and Supreme Court judgements to the contrary) to be governed by gambling laws. Gambling laws are woefully inadequate in dealing with the industry’s issues. The central law on gambling is 150-year-old legislation, and most States have adopted a similar iteration of that outdated law. None of these ancient laws was drafted in the context of the age of the internet and sophisticated online gaming formats.  Further, some states such as Andhra Pradesh, Assam, Odisha, Tamil Nadu, and Telangana have gone to the extent of banning real money online fantasy gaming and other States are threatening to follow suit.

Gaming industry entrepreneurs and business managers have to wrestle with the current maze created by an inadequate central law, hostile State laws, and an evolving judicial landscape, instead of being able to focus on their businesses and giving end-users a better experience.

Niti Aayog’s approach in starting a dialogue with all stakeholders and attempting to build a common regulatory platform is commendable. However, much more is needed from the Central Government. The need of the hour is a uniform law specifically recognizing and regulating money-based online gaming. This would not only give the gaming industry the much-needed recognition, respite, and a finite set of guidelines but would also provide the States with a strong and viable alternative to regulate the sector, instead of dealing with the sector through ancient gambling laws.