Today’s Economic Times carries a promising news on a group conducting online fantasy games in India and getting a fancy market valuation in international market. NITI Aayog got its publication titled “Guiding Principles for the Uniform National-level Regulation of Online Fantasy Sports Platforms in India” on its website and invited suggestions or views from all stakeholders including me, you and others. The last date lapsed in January 2021 but it is still not too late to know about its publications which is too reproduced below:
Let us refresh ourselves with the enlightened suggestions of NITI Aayog to learn the facts.
What is special with online fantasy sports platforms which resonate with millions of youths of India or the world with excitement, sense of fulfillment or an achievement without winning even a single chance?
NITI in its preamble says” At the forefront of the gaming industry’s growth within India are Online Fantasy Sports Platforms (OFSPs) that offer fantasy sports contests. In such contests, sports fans get the opportunity to engage actively with the sport of their choice and draft and compete with their virtual teams containing counterparts of real-life players from upcoming matches, score points based on such players’ on-field performance and compete with other fans.”
The OFSP industry in the US and Canada saw its user base grow from 18 million in 2006 to 59.3 million in 2017 as per the FSGA’s records.
What about India?
KPMG India in its report: The Business of Fantasy Sports (July 2020), noted that the number of users participating in online fantasy sports in India has grown at a compounded annual growth rate of 212%, from 2 million users in June 2016 to 90 million users in December 2019. The number of OFSP companies has also exponentially risen from around 10 in 2016 to more than 140 in 2019.
As per the report, this growth in users has translated into the tripling of the growth of revenues of the online fantasy sports industry, i.e., from around INR 920 crore in the financial year 2018-2019 to INR 2470 crore in the financial year 2019-2020. Yes, an amazing performance and a brilliant future.
Some more actual results quoted from reliable sources.
Pricewaterhouse Coopers India’s report: Federation of Sports Gaming – Report on Taxation of Online Fantasy Sports Gaming Market in India (May 2019), noted that the fantasy sports industry has generated over 3000-3400 jobs directly and indirectly through 100-200 ancillary companies that provide research, tutoring, and analytics services to fantasy sports users and coach them to draft their teams.
The fantasy sports industry has the potential to generate an additional 5000+ direct and 7000+ indirect jobs in the next 2-3 years.
The PWC India Report also notes that the OFSP industry has generated more than INR 250 crore of revenue for the advertising industry and estimates this figure to rise to INR 2000 crore over the next few years.
Some more of unheard-of startling information for the economy as whole.
According to the KPMG India Report, the fantasy sports industry is estimated to have paid GST to the tune of INR 166 crore, which is estimated to increase to INR 445 crore.
The PWC India Report estimates that the fantasy sports industry has the potential to contribute GST revenue of INR 3,000 crore to INR 3,500 crore over the next 5 years.
Estimated Industry Scenario
Additionally, income tax on winnings and corporate tax paid by OFSP operators is expected to contribute significant revenue to the exchequer, with the combined industry contribution estimated to be between INR 7,000 crore and INR 10,000 crore over the next 5 years. As noted in the PWC India Report, the fantasy sports industry has received around INR 1,000 crore in foreign direct investment (FDI).
As per publicly available reports, the OFSP industry in India has seen investment from venture capital and private equity funds such as Kalaari Capital, Tiger Global Management, Think Investments, Kae Capital, Multiples Alternate Asset Management, and Steadview Capital Management and technology and gaming conglomerates such as Nazara Technologies and Delta Corp.
The industry estimates that the fantasy sports industry has the potential to attract FDI of more than INR 10,000 crore over the next few years. As per industry estimates, the fantasy sports industry has the potential to generate 1.5 billion online transactions by 2023.
With the massive FDI support being received by Indian economy, one no longer doubts the prognosis of any economist.
So, you may get convinced that In furtherance of the aforesaid, the NITI Aayog organized a consultation on September 14, 2020 involving the participation of eminent persons from the industry and the legal fraternity to discuss and deliberate on the impediments to growth for the industry and the measures that may be considered to best support the industry with a focus on compliance with the rule of law, good governance, fostering innovation and growth, and allowing the benefit of market forces to help India become a global leader for OFSPs.
I do hear that the consultation also considered the need for consumer protection and the public interest in the institution of a grievance redressal mechanism that addressed consumer disputes in an adequate, efficient, and affordable manner.
The participants in the consultation unanimously agreed and achieved consensus on the following principles and recommendations:
Let us look at their recommendations in our language.
What should be the guiding principles for Online Fantasy Sports Platforms in India?
“All formats of fantasy sports contests offered by OFSPs should remain skill- predominant. In case an OFSP operator wishes to offer a pay-to-play variant of contest that varies from the fantasy sports format judicially determined to constitute a game of skill, it should first obtain approval from an independent evaluation committee, constituted by the recognized self-regulatory organization, 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.”
So, the most prominent principle has to evolve around skill-predominance as the prime requisite in any platform. This obviously rules out gambling as the center of the industry.
I fully endorse their recommendation that the self-regulatory organization 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. With the minimum levels of information at state level some in authority may be tempted to initiate legal proceedings against genuine OFSPs.
To the claim that emerging technologies are already causing largescale shift across several sectors driving innovation, entrepreneurship, and job creation and that one such sector that has witnessed noticeable growth in recent years is Fantasy Sports, one has to agree. With a little child of even 1-2 years being exposed to a cellular phone in a country where a large population are yet to reach literacy level, modern industrial revolution due to high technology has reduced the time for reaching of benefits to a large population. Fantasy sports, is not necessarily a gambling sport but one which would be skill- based offering same facilities, scope or rewards to all who undertake them.
One has to agree even reluctantly that the world has become smaller and India would enormously get benefits from modern developments. I have explained reasonably the newly evolved Fantasy sports as one of the newest babies to enlighten us. Let it have an organic growth with proper laws, customs or self-imposed rules to reach the widest population equitably.
My clear intention is to inform you the salient features of the newly evolving fantasy sports which by name attracts every- one. But I relied on NITI’s web publication as the source. It is very clear that it is definitely not a legal advice. Neither taxguru.in nor me is responsible for any consequences. Proper legal aid is the only course for knowledge.