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Legal experts in India have warned a bill regulating fantasy sports and esports in Rajasthan state is flawed and called for extensive changes or for the launch of a national scheme regulating skill gaming with stakes.
Rajasthan’s introduction of the Virtual Online Sports (Regulation) Bill 2022 on May 17 seemed to mark a dramatic about-face on the government’s hostility toward online gaming.
First flagged in a budget speech in February by Chief Minister Ashok Gehlot, the draft legislation offered evidence that a series of decisions by state High Courts had begun to convince sceptical state governments and legislatures that regulation of online gaming is preferable to broad prohibition.
Rajasthan previously committed to an outright ban on all forms of online gaming in March 2021, but less than a year later, industry observers were hopeful that one of the nation’s largest states by population could break regulatory ground.
Instead, the current bill restricts regulation to fantasy sports and esports, leaving highly popular online gaming products such as rummy and poker adrift.
But even for the favoured types of gaming, the draft legislation is highly deficient, according to Nishith Desai Associates gaming lawyers Tanisha Khanna and Gowree Gokhale.
The bill “has vague and overlapping definitions, … lacks robust player protection measures, relies on judicial pronouncements to determine statutory treatment of games, [and] vests self-regulatory bodies with excessive adjudicatory and disciplinary powers”, among other weaknesses, they wrote on May 31.
Khanna and Gokhale warned that the bill outsources powers to levy non-appealable statutory fines and other penalties to private, self-regulatory bodies, a process opposed by the Bombay High Court in 2015.
Instead, the bodies should serve as advisory bodies on breaches of licensing and be independent of the gaming industry, they said.
Their analysis concluded that the Rajasthan bill is a salutary example of “haphazard, differential, state-specific treatment of the same games”, a scenario that undermines business certainty and innovation.
Khanna and Gokhale said the ideal scenario is one in which state governments — whose jurisdiction over gambling matters derives from India's Constitution — defer to a voluntary national regulatory authority girded by central government legislation.
The central government has recently signalled an interest in promoting a regulatory template for states in regard to online skill gaming.
It has formed an inter-ministerial panel on this subject and has convened a task force in conjunction with key stakeholders and state governments that include gaming in its remit.
In addition, the central government minister of state and minister of electronics and information technology, Rajeev Chandrasekhar, convened on Tuesday (June 7) a groundbreaking meeting with online gambling industry operators, gaming federation delegates, lawyers and bureaucrats across several ministries to discuss the future of the industry.
But should Rajasthan proceed with its bill, the “above-mentioned inconsistencies and issues must be taken into account, or the law is liable to be challenged before the High Courts”, Khanna and Gokhale wrote.
“In particular, the overarching powers of [self-regulatory bodies] must be regulated.
“While [they] may ensure day to day compliance with the state law and licence conditions by operators, the determination of violations of the law and imposition of penalties should continue to vest with the state.”
DSK Legal lawyers Rishi Anand, Chirag Jain and Shruti Agrawal wrote in an analysis on Wednesday (June 8) that Rajasthan’s bill amounts to an acknowledgment of the progressive national trajectory in online gaming lawsuits and law.
However, the exclusion of skill-based games such as rummy and poker means that its legal framework “is not aligned with its preamble”, or intent.
The authors also noted the bill lacks measures involving user integrity, data protection, advertising, taxation and “best practices” for the industry, nor checks and balances to combat addictive behaviour and scams.
“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,” they wrote.
This would “introduce a more holistic regulatory regime in a sector that has witnessed phenomenal growth over the years and offers vast potential ahead”.
