Future of Games of Skill in India

Future of Games of Skill in India

The topic has been chosen based on my predilections in general and also because it required me to: I have been wanting to start a website based on a sport-centered game of skill. And although I’ve run into my own set of operational problems, there are some fundamental challenges that belie this sector. But before we dive into a recourse of the happenings in the field, I’d like to first discuss why I chose this topic.

I come from a middle class family background where the desire to achieve great success is immense but the appetite for risk, not so much. With such a background I must first commend my father who has been a staunch believer in measured risk taking. It has allowed him to grow his wealth by a good factor as opposed to being dependent on government service salary. Taking a leaf out of this, I tried my hand at professional risk taking of a very specific sort: trading in the financial markets, specifically the oil market. Now that I couldn’t perform very much there is a story for another day but my experience there was quite enlightening. I learnt the importance of risk management and research and how it applies to real life situations. But more importantly, my biggest takeaway was that the best traders, much like the best of any field, are very similar to the best sportsperson who have a burning desire to be the very best they can be. So it is no surprise that they follow and idolize the high performers of other fields especially if these fields happen to be the ones that hog the limelight like arts and sports. With these tenets in mind, I’ve tried to create a game based on the model of financial markets but which banks on the expectations of people on a sporting event, let’s say for the time being, cricket. This made me delve into the world of games of skill since even if my model is different, many other models exist and it pays to take a look at their stories.

Maybe before that I’ll just clarify for you the difference between games of chance and games of skill: games of chance have absolutely no input from the player e.g. lottery and hence are more often than not highly regulated or even barred from private activity (many lotteries were state run for a long time); games of skill have an element of human judgement and although the weight-age of skill and chance can be debated, the proprietor of the model should be able to prove mathematically and empirically that it is possible to stay consistently profitable e.g. in horse race betting, if you do your research and bet smartly, you can churn out a tidy profit over a long period of time. Also rummy and most recently, Dream 11. The need for this classification is to protect the participants from being drawn into a deathly spiral of losses and thus financial ruin.

Now that we have the distinction clear in our heads, we move onto the sub-topic that takes the center stage: Dream11. The fantasy league gaming recently shot to fame due to clever advertising and also sponsoring the IPL 2020 season. But they essentially began almost a decade ago, at a time when the concept of fantasy gaming was unheard of. It works on a rule based points scoring system. Your aim as a player is to select your best 11 players from the given 22 so that the total points amassed as a summation of each players’ individual points is your tally and helps decide your rank. Based on the rank, you get paid off, if your rank is good enough, that is. As the rank approaches 1, your payoff on the entry fee starts getting exponentially higher. Dream11 gets to keep their fixed fee from the pooled in entry fees but they usually compensate for the no show of participants of a bumper headline contest which is usually open to thousands of users. Private pools can also be arranged but they need an invite and the fee charged by D11 is higher.

This seemingly simple model is a profit machine in isolation if you do not take into account customer acquisition expenses. D11 is yet to make a profit in its 10 year long history but it is characteristic of hypergrowth business models of startups. Such has been the growth that D11’s competition includes about 70 odd similar sites which operate on more or less similar models. However there is another angle to this seemingly commodity service market: a user can simultaneously be playing on multiple platforms, in order to hedge/spread his bets, so to say. That essentially means, till the sector gains mainstream popularity, D11 does not need to be alarmed by growing popularity of other players in the market. So much so that D11 has a venture capital arm of its own and invests in other gaming startups.

So what new is happening in the sector? Well the more pertinent question is what is about to happen. A curious trend is emerging in the recent times, one of more scrutiny and less consistency, one of show me the man and i’ll show you the law-esque machinations. Sure there have been reforms aiding the MSMEs but the lawmakers and law guardians seem to be clueless about the sectors that are in the nascent stage. Sure OTT platforms need to be brought into the ambit of what’s right and what’s not since the access to a smartphone and cheap internet data connection is no longer a far cry. But let’s take the case of cryptocurrency. There has been a lot of talk as to whether India should ban cryptos. This is not new. Whenever the establishment has felt threatened by a new upstart, it has reacted rather gracelessly. Cryptocurrencies that were essentially invented to circumvent the too big to fail banks in myriad types of essential transactions are being challenged by governments for their legality not knowing that cryptocurrencies are really under their jurisdiction. The freedom to choose any currency for transaction is a matter of personal and collective societal choice. Any attempt to thwart the use of cryptos thus amounts to fundamental human rights violation. However, recently the great banking institution of India, the RBI came out with a working paper mulling over a possible centre-backed cryptocurrency, essentially murdering logic from the get go.

But how is this connected to games of skill? Well, just like OTT platforms and crypto, games of skill are also currently under a cloud of suspicion. The scenario in countries like the US, UK or Australia is pretty mature where although the scrutiny is high the bureaucracy is transparent. In India it hasn’t gotten much attention from the lawmakers in general due to the small size of the pie the organized sector has been able to capture but it can be argued that may change soon. There had been a HC order which ruled in favor of D11 when a lawyer argued that he lost all his money because the app/company did not disclose all risks completely. While the full court order transcript is long, it can be summarized as “being stupid is no crime but is an impediment in using apps like D11”.

More recently, there was a call to regulate games of skill due to a news floating around about a teenager who wasn’t able to recover his losses and committed suicide. The news turned out to be a hoax but the underlying message was put across. A debate ensued but the calmer voices argued there’s no need to clamp down on business models we don’t know the advantages of. On the other hand, the other stakeholders are no saints either, having formed a self-governed model which means the conflict of interest is nauseating, to say the least. A more inclusive yet sensible way could be forming a sandbox regulation model which means a committee is formed that first observes the happenings and doesn’t impose undue restrictions early on but starts forming an opinion over the general direction of rules and regulations once the sector matures.

The government has a lot to gain from letting a nascent industry grow and prosper, in the right sense. It needs to play the role of regulator and also profit by appropriate taxation rather than thwart every new business model under the pretext of ignorance. The reason the US has been able to prosper and be a brain drain source is the availability of capital and solid dependable social institutions. While India is on that path, thwarting new ideas may not be conducive. All depends on the dialogue of the government, law guardians and the people. And all we can do is ask for a fair treatment and fight for it.