Indian State govts ban online games - So what happens to fantasy game platforms?

After Andhra Pradesh and Telangana, the Indian State of Tamil Nadu has banned online gaming "to avoid incidents of suicide and protect the people from the evils of online gaming".

The State government has passed an ordinance that bans “electronic transfer of funds” used for wagering or betting, distributing the winnings, prize money besides punishing the persons who are running the company which conducts online gaming by wagering and betting.

Now, another Indian State, Karnataka, is also said to be mulling a similar ban on online gaming.

The general feeling in India is through online gaming, innocent people, mainly youngsters, are being cheated. And in a few case, they are also alleged to have been pushed to suicide.

There are many public interest litigations in many Indian courts against online games claiming that "they cause behavioural and mental changes,  prevent other hobbies, lead to poor academic performance, lethargic nature leading to weight gain. Gaming addiction can slow down brain growth and negatively affects eyesight and also results in insomnia."

Online gaming expected to be billion dollar industry

It should be said that that even as online gaming companies --- which in this context is a thinly-veiled euphemism for gambling and betting platforms --- have been gaining in popularity, they were also kind of playing with the greys in Indian law. 

In India, gambling is highly regulated --- only clubs are given licences to mainly run card games --- and betting is allowed only in horse racing and here too there are many restrictions.

But the real worry is for the fantasy league games, which have mushroomed in recent times thanks to the IPL and cricket fever. The recently-concluded IPL's title sponsor itself was a fantasy league platform.

But the Indian online gaming industry is projected to become a one billion dollar industry by 2021.

According to a recent study (done by Federation of Indian Fantasy Sports (FIFS) in collaboration with KPMG), there are around 100 million fantasy sports users in India today. The Indian Online Fantasy Sports (OFS) industry has been growing at a rapid pace registering a 212% CAGR in the user base between 2016-19.

About 74 percent of the users play fantasy leagues one to three times a week. 

According to the report, close to 20% of the active users on OFS platforms are paid-users while 30-40% users play OFS on more than one platform.

The online fantasy sector operators' gross revenues stood at over Rs 2,400 crore for the FY20 from Rs 920 crore in FY19. 

The sector also saw a 160% increase in revenue, from INR 920 Cr in FY19 to Rs 2,400 crore in FY20.

As India is a mobile-first country, more than 90% of online gamers play games on their phones. In 2019, around 5.6 billion mobile gaming apps were downloaded in India – the highest in the world and representing nearly 13% of gaming apps globally.

Ambiguity in law

The legality of fantasy sports in India is dependent on whether the game qualifies as a 'game of skill' or a 'game of chance'. Games of chance fall under the ambit of gambling and are thereby restricted by state gambling laws. However, games involving considerable and substantial degree of skill (mathematically, more than 50%) fall outside the scope of gambling laws and hence are legal in India.

Fantasy gaming platforms claim that picking a team of players is not a game of chance but is based on skill and knowledge.

But this 'games of skill' argument is what has made courts to allow horse racing and card games such as rummy and poker so far. But when State governments are banning them, then question marks are bound to hover the future fantasy league platforms.

There are enough hints already that fantasy league apps may run afoul of law. Recently, The Madurai Bench of Madras High Court issued notices to Indian cricket team captain Virat Kohli and BCCI Chief and former Indian cricket team captain Sourav Ganguly for their involvement in online sports app advertisements.

The plea against them alleged that they are promoting and endorsing unethical immoral online gambling.

Also, it is being reported that the Advertising Standards Council of India (ASCI) is working on guidelines for online real money gaming companies. They are expected to come up with new guidelines to make advertising of real-money games more responsible, and ensure that users are aware of the risks associated with such games.

In any case, Google’s Play Store and Apple’s App Store rules do not allow online gambling. And Paytm First Games was embroiled in a controversy regarding the same recently.

Legality needs clarity

With the growing number of users that pursue fantasy sports as a serious profession, the rules around these games need to be determined carefully. Analysts say this can be achieved either by adopting industry-wide guidelines or an assessment of individual game formats by a supervisory body. 

In the end, the growth of fantasy sports and retention of users on a platform will depend on the degree of skill and competitiveness offered by the game format and the platform. 

For that, laws need to clearly spell out what is skill and what is not.

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