Over the past several years, the Indian Fantasy Sports (FS) industry has seen substantial expansion. With the help of smart investments, the sector today serves more than 13 crore registered consumers and has a market size of over INR 34,000 crore. The industry's reach has increased significantly over the past five years to become the largest in the world, and in our sports-obsessed country, client acquisition is only accelerating. The number of athletic events that Fantasy Sports platforms provide is growing as low data prices and rising smartphone adoption make them more accessible. Sports leagues including football, cricket, and kabaddi have attracted large numbers of followers, and the FS sector has benefited from the resulting rise in viewership. FS platforms have responded by upgrading the fan experience to that of an active team manager, making tactical decisions while leveraging real-world sports expertise to construct the greatest possible virtual squad. This goes beyond simple spectatorship in the stands or in front of the television.

To guarantee that the industry's fast expansion is restrained by a responsible approach to governance, the financial services sector is likewise embracing structure and order. Through self-regulation, FS operators have created frameworks to guarantee that ethical and open standards are upheld by all of the industry's participants, sustaining the expansion of the sector. The NITI Aayog's recommendation to include a stable and loosely enforced regulatory framework will strengthen the capacity of FS operators to shape the narrative surrounding their activities and support the growth of the Indian sports sector.

After the release of apps like Dream 11 and My 11 Circle, the popularity of fantasy games has skyrocketed. The Indian fantasy sports market is expected to reach $ 2.5 billion in 2022, according to a FICCI-EY analysis. Dream 11 reported a 2.6x rise in income from operations, going from Rs 775.5 Crore in FY 19 to Rs 2070.4 Crore in FY 20. The IPL game (Cricket)'s popularity in 2008, coupled with affordable rates and a high rate of mobile phone ownership, have all contributed to the industry's explosive expansion during the past five years in India. There will be 150 Fantasy operators by 2020, up from 10 in 2016. From 2 million users in 2016 to more than 100 million in 2020, the number of people playing fantasy sports surged by 50X.

What is fantasy sports?

Users compete on real-world statistical performances of these individuals, based on one full legally sanctioned sports match, on Fantasy Sports digital sports engagement platforms by building virtual teams using proxies of real players participating in an upcoming match (or match-day). With the ability to trade, sign, or remove a player of their choice, users may assume the position of a coach or manager of a club. Before a game begins, the teams are locked and the changes are locked. Others are more interested in the competition and strategy involved, while some are more interested in a deeper connection to the sports than just watching them.

Since it is based on actual athletic events, provides genuine involvement with sports, and doesn't entail any simulated games, FS has a distinct value proposition. Therefore, it is not unexpected that the structural boundaries are imperceptible to the average person and that there is frequently misunderstanding about what financial services (FS) actually is outside of the sector. In the present day, it boils down to name traditions, generational disparities, and etymology.

Legal validity of Fantasy sports in India

The Public Gambling Act does not apply to games of skill in India. A significant turning point in the growth of fantasy sports in India was the High Court of Punjab and Haryana's ruling in favour of Dream11 in the case "Varun Gumber vs. UT of Chandigarh & Ors," where it was determined that taking part in a fantasy sports competition required "material and considerable skills by the user in "drafting" of a virtual team and "playing a fantasy game."

Another significant step is the verdict made by the Supreme Court on July 30, 2021, which upholds rulings made by other High Courts and rules that the result of fantasy sports depends more on ability and knowledge than chance and does not promote gambling, betting, or wagering.

The Supreme Court's affirmation of the decision and rejection of a follow-up petition increased industry confidence and brought about legal stability. FSPs are permitted to operate lawfully across India, with the exception of the states of Assam, Odisha, Andhra Pradesh, and Telangana, where state laws forbid individuals from playing online games (whether they use skill, chance, or a combination of both). In line with Article 19(1) (g) of the Indian Constitution, operators that offer FS in compliance with the FIFS Charter are protected as engaging in a lawful commercial activity.

With legal assurance that skill in fantasy sports prevails over chance, FSPs attempted to grow their market share in India and actively participate in the ecosystem by forming connections with sporting organisations, events, and athletes.

The High Courts of Punjab, Rajasthan, and Haryana all emphasised the fundamental characteristics of FS in their judgements, and FSPs have reacted forcefully to defend these aspects of the system. The guidelines that FSPs must adhere to in order for contests to maintain the "talent over chance" principle are set forth in the Federation of Indian Fantasy Sports' Charter for FSPs. These include limiting FS competitions to international or officially recognised real-world matches, ensuring that FS competitors cannot change their teams after a set and announced deadline, requiring the number of players and the composition of the team, basing competitions on an entire real-world match, and avoiding problematic practises like automatic selection of team members.

Conclusion

The fantasy sports industry is an industry which is expected to grow exponentially in India and has been recognised for its potential growth and the investment opportunity along with job creation in this sector. However there are some shortcomings also coming in with this sector due to the government's decision to tax the industry at a higher rate.

The GST council is looking to not tax just the income that the platforms are accumulating but the entire value of transactions that are being deposited with them by the players. This, in turn, will cause the tax burden to increase multifold. Industry insiders and executives warned that it may slow the expansion of online gaming companies and compel fantasy sports companies to provide smaller prize pools. It may compel Indian online gaming enterprises to go abroad, taking their employees and money with them. As a result, businesses in India would have to charge even higher percentages of commission to stay in business, which would result in players receiving much less money than they do now through competitions. Numerous gamers and consumers will turn to offshore betting services as a result of the prize pool decrease.

Hence, online skill-based games must be treated differently from gambling or betting since the formats and revenue models of such platforms differ hugely from the games of chance. The Indian Online Gaming Industry needs a GST regime that can protect and promote this sunrise sector. The Online Gaming Industry and the Central Government have to find a way to strike a balance considering the massive potential of this growing sector.

Suggestions-

  • A centralized policy framework is needed to regulate the fantasy sports sector in India.
  • A robust plan of GST should be levied where the mechanism exactly defines the rates and other fees for earnings and deposits from fantasy sports game.

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