[The Viewpoint] An insight into the proposed regulatory regime on virtual online sports in Rajasthan

No protective checks and balances have been introduced to address the concerns of the young population succumbing to gaming addiction and financial fraud, which prompted states to call for a complete ban on online games.
[The Viewpoint] An insight into the proposed regulatory regime on virtual online sports in Rajasthan
Rishi Anand, Chirag Jain, Shruti Agrawal

The Government of Rajasthan released a draft of the Rajasthan Virtual Online Sports (Regulation) Bill, 2022 on May 17, inviting suggestions and comments from relevant stakeholders. The Bill intends to regulate online fantasy sports and different formats of virtual online sports (VOS).

While the Rajasthan Public Gambling Ordinance,1949 is the primary legislation that regulates gaming and gambling in Rajasthan, the State government intends to regulate ‘online gaming’ independently in terms of this Bill. The Bill expressly clarifies that "offering of virtual online sports for money or valuable security by a licensee" will be excluded from the purview of the Ordinance. The operations of lotteries, as regulated under the Lotteries (Regulation) Act, 1998, will also not be governed by the Bill.

Discussed below are some of the salient features of the Bill.

Licensing of virtual online sports (VOS)

The Bill stipulates a licensing obligation on persons offering, organizing or exhibiting VOS in the State of Rajasthan. The term VOS includes within its ambit distinct forms of sports like: (a) e-sports competitions; (b) fantasy sports; and (c) derivative formats, as provided by sports engagement platforms, where the formats of such sports have to be judicially approved by the courts, self-regulatory organizations or the concerned authority.

Any person or online gaming service provider desirous of obtaining such license will be required to apply to the officer appointed by the State government. Further, such license would be granted only to an Indian citizen or a legal entity incorporated/registered in India, and would be valid for a period of ten years from the date of the grant of license, subject to further renewal on payment of license fees.

Administration and regulation of VOS

The Bill puts the responsibility of day-to-day administration and regulation; evaluation and approval of formats; and constitution of the office of Ombudsman, in respect of each class of VOS on ‘self-regulatory organizations’ that are recognized either by courts of competent jurisdiction or by the Rajasthan Virtual Sports Commission. Any industry-led organization desirous of obtaining recognition as a ‘self-regulatory organization’ will be required to make an application before the Commission, which shall be constituted by the State government. It shall also be the duty of such self-regulatory body to formulate a code of ethics and set-up norms relating to advertising, which would be required to be complied with by all the licensees.

Offences and penalties

Any person operating a sports engagement platform in the State of Rajasthan without procuring a valid license would be liable to pay a fine of up to ₹4 lakh for every day of the contravention. Failure to comply with the directions issued by the self-regulatory organization, furnishing incorrect information to the licensing authority and violating norms pertaining to governance would be punishable with a fine of up to ₹2 lakh.

Analysis of the Bill

Acknowledging the need for a progressive regulatory regime for the online gaming industry, the State of Rajasthan has indicated its willingness to regulate (and not prohibit) the online gaming industry by introducing this Bill. While the intent of the government may be appreciated, the legal framework envisaged under the Bill is not aligned with its Preamble, since the Bill sets forth provisions only in relation to fantasy sports, and not other kinds of skill-based games.

Although the government has made an attempt to liberalize the overall framework by delegating the administrative and regulatory powers to self-regulatory organizations, it has failed to provide any specific provision in relation to player protection measures. Further, the requirement to comply with a conventional licensing regime adds to the cumbersome procedural difficulties that are otherwise faced by gaming service providers in other states as well.

Currently, the Bill does not provide any provision in relation to customer grievance redressal mechanism, user integrity, data protection, prevention of gaming addiction, advertising, privacy, tax implications and best practices for other stakeholders including game developers and the overall gaming community. No protective checks and balances have been introduced to address the rising concerns of the young population succumbing to gaming addiction and financial frauds, which has been the root cause behind certain states demanding a complete ban on online games.

The Bill provides that only those online games would be allowed to operate in the State of Rajasthan, the formats of which have been judicially approved by the courts or the respective self-regulatory organizations. This implies that any VOS without judicial backing would not be allowed to be operated, irrespective of it being a game of skill. In the backdrop of judicial precedents legalizing typically all kinds of games of skill (played with stakes), the enforcement of the Bill in its current form is also not clear.

It is pertinent to note that the State government has released the Bill at a time when the Central government is making attempts to address the challenges faced by the online gaming industry by introducing the Online Gaming (Regulation) Bill, 2022 and by setting up an inter-ministerial panel to work on regulations in relation thereto. It is only ideal that the State government also consults with the relevant stakeholders, and makes amendments to the Bill in line with the proposals of the Central government, to introduce a more holistic regulatory regime in a sector that has witnessed phenomenal growth over the years and offers vast potential ahead.

Rishi Anand, Chirag Jain and Shruti Agrawal are Partner, Principal Associate and Associate respectively at DSK Legal.

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