Fantasy Gambling

Central government thinktank NITI Aayog released a draft position paper on Friday, titled ‘Guiding Principles for the Uniform National-level Regulation of Online Fantasy Sports Platforms in India’. The document recognises the stupendous growth of digital games and enormous potential for contributing to the nation’s economic development while proposing certain overarching guidelines for bringing clarity, certainty, and stability to the online fantasy sports sector.

Fantasy Springs Resort Casino offers 1,800 of the hottest slots, world-class table games, entertainment, hotel, dining and golf at Eagle Falls. While daily fantasy sports is legal in most states, this is often not official: in 2016, Virginia became the first state to officially legalize it. As such, in many states, the legal status is precarious and almost all operators left Hawaii, for example, after the state attorney general concluded daily fantasy sports constituted illegal gambling. They are one of eight states that are not served by the main daily fantasy sports operators, such as DraftKings and FanDuel, many of which are.

Coming in the backdrop of the digital skill games sector facing several regulatory and judicial headwinds over the last few months, including bans in some states; PILs seeking punitive action against gaming companies and stricter advertising norms suggested by the Information & Broadcasting Ministry; the draft document, which is open for suggestions and feedback until 19th December, envisages the creation of a certain national level safe-harbour for fantasy sports games.

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According to reports, it is likely that a final paper is likely to be prepared by the Ministry of Electronics and Information Technology, which is the line ministry for online activities, post which the final paper might be placed before the cabinet for its approval.

Guiding principles

The paper notes the contribution of online fantasy sports towards revenue generation, stating that online fantasy sports companies has the potential to contribute over Rs. 3,000 crores in GST and Rs. 7,000-10,000 crores in direct taxes over the next five years, while also generating thousands of jobs over the next few years.

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The note also states that the sector possesses the ability to garner more than Rs. 10,000 crores in Foreign Direct Investment (FDI) to the country.

Despite the obvious value addition done by the sector, the report notes that there is a lack of proper recognition for the industry, with companies operating in this space having to take shelter under an undefined exception of ‘games of skill’ provided under most state gambling laws.

Given this ambiguity, the paper goes on to state that 'there is a public interest in the fantasy sports industry receiving Government recognition as an industry and having its own identity. This identity is distinct from other games of skill and legally differentiated from betting and gambling.'

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NITI Aayog’s note goes on to state that there should be national-level safe-harbour guidelines to define and regulate formats of the game, protect the interests of the consumers and ensure transparency and accountability.

To this end, it proposes that the government recognises a self-regulatory body, having an independent board of multi-disciplinary members and have membership of operators cumulatively accounting for at least 66% registered fantasy sports users in India.

Some of the guiding principles proposed by NITI Aayog for fantasy sports companies include (i) requirement to comply with all laws and regulations of India; (ii) obligation to offer only skill-predominant fantasy sports formats, which are either judicially recognised or approved by an independent evaluation committee of a government recognised self-regulatory industry body; (iii) have games that pertain to at least one entire real life event; (iv) offer real money games to only persons above 18 years of age and avoid offering any gambling or betting services, etc.

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The paper also advocates that all fantasy sports providers should comply with standards prescribed by the Advertising Standards Council of India (ASCI)/other relevant bodies and be fair and truthful, while portraying the game only as a means of amusement and not as a source of sustenance or livelihood.

Need for broader discussion

NITI Aayog’s efforts to give recognition to the sunrise gaming sector is certainly a step in the right direction and indicate the forward-looking vision of the current government, which seeks to create digital entrepreneurs, nurture the startup ecosystem and create an Aatmanirbhar Bharat.

The guidelines can also be seen as a good initiative to restore investor confidence of marquee funds who have invested in this sector, but were left with a great deal of uncertainty after a spate of state-level bans on all kinds of online games and ongoing litigations about the legality of game formats in various courts.

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However, there are few concerns with the proposed guidelines, as well, which would hopefully be addressed by NITI Aayog during the wider stakeholder consultation.

First, questions might be raised as to why the guidelines only cover online fantasy games and not other recognised digital skill-based games, which also satisfy revenue generation, employment and other economic arguments advanced in the paper.

The efficacy and rationale of carving out fantasy sports as a sui generis category out of the broader category of digital games of skill is something that needs to be reflected upon and requires detailed consultation.

Secondly, since gambling and betting along with sports, entertainment and amusements are all state subjects, keeping in mind the spirit of cooperative federalism as enshrined in the constitution, it would be worthwhile to engage in wider stakeholder consultation by soliciting suggestions from all state government and union territories as well.

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Given that gaming is currently governed by state legislations where all online skill games for stakes are made illegal by amendments to the State Gaming Acts are banned by a few states, granting immunity from criminal prosecution to fantasy sports providers in such states as envisaged by the Draft Guidelines might only be possible through an amendment to such existing state gaming law by the state legislatures.

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Further, the ministries governing the sector at the central level, i.e. Ministry of Electronics and Information Technology, Ministry of Law & Justice, Ministry of Finance, Ministry of Consumer Affairs, etc. should also be taken on board to ensure that the guidelines are framed after the broadest possible deliberation and consultation.

It would also be ideal if the overarching guidelines proposed by NITI Aayog for all digital games are eventually converted into a central policy framework or legislation by the line ministry along with the formation of an independent regulator.
(Jay Sayta is a law graduate and public policy analyst. He has advised several gaming companies on legal, regulatory, policy and strategic issues. Views expressed are personal.)

[toc]Daily fantasy sports is like gambling.

That’s the conclusion one will come to after reviewing Rutgers Center For Gambling Studies‘ recent report: The Prevalence of Online and Land‐Based Gambling in New Jersey, Nower, L., Volberg, R.A. & Caler, K.R. (2017).

Of course, whether DFS sites like DraftKings and FanDuel are empirically or legally a form of gambling is a conversation for courts and state legislatures.

“Whether or not DFS is gambling is beyond the scope of this report,” the researchers note. However, the report clearly shows DFS players exhibit many of the same traits as traditional gamblers (and have a high crossover rate).

That’s not the best news for the DFS industry.

As it tries to gain approval in statehouses across the country, DFS has waged a war against the word “gambling.” The industry likes to refer to itself as a skill-based game that has little in common with traditional forms of gambling. DFS proponents use analogies like chess, the stock market, spelling bees, and bowling leagues, and it sells itself as good, clean fun.

The Rutgers study indicates it has some things in common with traditional forms of gambling.

The fallacy of skill-based gambling

Before delving into the prevalence report’s DFS findings, I want to offer up some thoughts on peer-to-peer skill-based games with wagering components.

In a previous column, I asked if poker players and other advantage gamblers weren’t skewing problem gambling data.

But there’s a second piece to this puzzle. Are so-called skill-based games a driver of problem gambling behavior, and/or are they magnets for problem gamblers?

Poker, DFS and other games are sold as skillful. We’re led to believe that if players are smart and diligent enough they will have no problem beating the game.

The problem is these games are played against other players, so skill is only relative to that of others. This isn’t a case of practicing Mike Tyson’s Punchout hour after hour every day and finding the right patterns and strategies to defeat each boxer. In DFS and poker, the opponents are also capable of improving.

Because of this, and because of the rake/fees taken by the house, there can only be so many winners. If blackjack were beatable with perfect strategy (suppose blackjack paid 2-1), then every skilled player would be a winner; they could all adopt the same strategies and beat the house.

Poker and DFS may be skill games, but for 95 percent of players, their skill won’t translate to wins.

But because of the way the games are sold and because of variance, players can convince themselves they are skilled enough to win. Maybe right now they’re just unlucky, or they’re close to being skilled enough to win and just have to work harder, they can rationalize to themselves.

It’s not hard to see how this mindset could lead to addictive behavior.

With that out of the way, let’s move on to the study’s findings.

DFS is like day-trading?

The researchers explained the reasoning behind their inclusion of DFS (and day-trading) thusly:

“A majority of activities listed in this study are historically classified and widely accepted as “gambling,” because they involve spending money on activities with an uncertain outcome and the possibility of winning or losing that can result in harm. However, other activities elude precise classification and are largely context and jurisdiction‐dependent.

“Stock trading, for example, is traditionally viewed as a skill‐based investment, focused on compounding earnings over time. The advent of day‐trading, however, shifted the focus from investment to the exciting and immediate activity of taking greater, short term financial risks on options and futures for the potential of larger payouts but also larger losses.

“Similarly, traditional fantasy sports games were originally season‐long competitions based on the actual performance of players and were exempted from the Unlawful Internet Gambling Enforcement Act of (2006) (UIGEA) because they relied in large measure on the knowledge and skill of the players.

“… Given the lack of consensus over where high risk stocks and daily fantasy sports fall in the gambling spectrum, they are included in this study in a separate section.”

DFS findings don’t paint a pretty picture

According to the Rutgers study, “A total of 336 respondents (out of 1,500) endorsed participation in daily fantasy sports (DFS) in the past year.”

In all but seven instances, DFS players also took part in traditional gambling. That means 98 percent of DFS players in the survey also gambled on gaming machines, bingo, live casino table games, other games of skill, sports and horses.

According to the report, 84 percent of DFS players gambled on non-DFS games once a week or more, placing them in the high-frequency group. Ninety-five percent of DFS players landed in the high-frequency/high-risk for problem gambling group.

With a 336-person sample, further research will be needed. But on the surface it appears DFS players share much with traditional gamblers. And when it comes to addiction in general, they’re far more likely to succumb than traditional gamblers, as seen in this chart.

Mental health problems?

One of the stranger findings is the high level of mental health disorders among the DFS group.

The report states, “Notably, DFS players also reported higher levels of substance use, behavioral problems and mental health issues than other non‐DFS gamblers.”

“… half the sample used tobacco, four‐fifths used alcohol, and one‐third reported binge drinking and using illicit drugs. DFS players were more than twice as likely as other gamblers to endorse problems with overeating, nearly four times more likely to have problems with sex and pornography, and five times more likely to exercise excessively. More than one‐fourth of DFS players reported serious mental health issues in the past 30 days, twice as many as other gamblers.”

The report also states DFS players were “13 times more likely to report suicidal ideation” than traditional gamblers. They are also “nine times more likely to have attempted suicide compared to other gamblers.”

According to the study, “these findings suggest that DFS play is highly correlated with problem and disordered gambling and a host of other mental health problems.” Policymakers should consider that data, the study suggests.

“Policy decisions regarding DFS regulation should anticipate a very high prevalence of gambling problems in this group and the negative consequences that typically accompany those problems such as employment, legal, relationship, financial, health and mental health problems. It is important to ensure there are prevention, education, and treatment resources developed for and available to this population.”

Final thoughts on DFS and problem gaming

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The only thing the report proves about DFS is that more research is needed.

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If DFS players are just as, or more, likely to fall victim to the mental disorders that plague problem gamblers, then similar responsible gaming procedures should be put in place.