Fantasy Sports and Law- An Indian Perspective

Fantasy Sports and Law- An Indian Perspective

  1. INTRODUCTION
    The Fantasy Sports market in India has shown phenomenal growth driven by the overwhelming penetration of the internet and adoption of smartphones. A breakthrough in demand for online fantasy sports was witnessed especially during the 2021 Indian Premier League (“IPL”) which resulted in National Payments Corporation of India (NPCI) restricting UPI transactions under INR 50 for fantasy sports platforms to check and manage low volume transactions which spiked during the IPL. While Cricket continues to be the most popular amongst all fantasy sports, Hockey, Kabaddi, Football, etc are also emerging as the new favourites. At present, there are more than a dozen online fantasy sporting platforms (“OFSPs”) now operating in India with Dream11 being the largest operator and also the first unicorn start-up in the sector. Despite tremendous growth potential, the sector’s legitimacy and legality is marred with uncertainties due to differential laws across the Indian states.
  2. LEGISLATIVE CHALLENGES
    From a legislative perspective, India does not have a central legislation specifically governing online fantasy sports. There is an archaic Public Gaming Act, 1867 (the “PG Act”) that prohibits running and/or owning a public gambling house, which is adopted by multiple Indian states such as Bihar, Haryana, Punjab, etc. to govern online fantasy sports in their respective states. Section 12 of the PG Act though provides an exception for ‘games of skill’ making them legally permissible and outside the scope of gambling (games of chance). Other Indian states have legislated specific state laws to regulate the activity of betting and gambling (games of chance) in their respective states by virtue of the power granted to them under the Indian Constitution (Entries 34 and 62 of List II of the Seventh Schedule). Carve-outs similar to Section 12 of the PG Act have mostly been introduced in each of these specific legislations. Unfortunately, owing to the contrasting approaches to what constitutes a game of skill and a game of chance, betting and gambling laws have been incorrectly applied by many Indian states for regulating fantasy sports. States like Assam, Andhra Pradesh, Odisha, Telangana, Tamil Nadu do not permit fantasy sports (albeit games of skill) that involve payment of a fee by the user while Sikkim, Nagaland and Meghalaya have provisions regarding obtaining different types of license for the same.

    In December 2020, NITI Aayog published a discussion paper recognising lack of clarity with respect to the categorization of multiple fantasy sports platforms as ‘game of skill’ or ‘game of chance’. There is thus, a need for an objective test to determine the same and a requirement for a uniform set of guidelines to avoid any legal ambiguity with respect to running an OFSP. A principal central policy would help the industry grow, generate new employment opportunities, and invite foreign investment into the country.
  3. JUDICIAL DEVELOPMENTS
    Indian courts have however developed the ‘preponderance of skill’ test in the cases of Andhra Pradesh v K. Satyanarayana  (1968) and Dr. K.R. Lakshmanan v. State of Tamil Nadu (1996) to segregate a ‘game of skill’ from a ‘game of chance’. Simply put, if a game predominantly requires application of mind, and knowledge about, not only the sport but also players and various factors affecting such game, it would be a game of skill even if it does involve an element of chance. Applying the test laid down in the above-mentioned cases, the High Courts of Punjab and Haryana, Rajasthan, and Bombay have clarified that fantasy sports are ‘games of skill’ and do not amount to gambling and the said decisions as briefly discussed below have led to growth of the fantasy sports in India.
    1. Varun Gumber v. Union Territory of Chandigarh (2017) (“Varun Gumber”)
      Varun Gumber registered himself on Dream11 and transferred an amount of INR 50,000 to his account on Dream11 for participating in various fantasy leagues. He lost all the money and being aggrieved by his monetary loss, he filed a petition in the Punjab and Haryana High Court claiming to be a victim of illegal gambling. The court observed that the success in Dream11’s fantasy sports games arises out of a user’s exercise of superior knowledge, judgment, attention and adroitness in understanding the Dream11 rules, acquainting himself with the past performance, physical state and form of athletes available for selection across multiple categories. This involves application of knowledge of the sport and clear judgement. The court held that Dream11 activities cannot be said to be falling within the gambling activities as the same involves substantial skills and thus Dream11 was exempted from the application of provisions, including the penal provisions, under the PG Act.
    2. Gurdeep Singh Sachar v. Union of India (2019) (“Gurdeep Sachar”)
      Gurdeep Singh Sachar filed a petition before the Bombay High Court claiming that Dream11 was violating the PG Act and conducting illegal operations of gambling in the guise of ‘online fantasy sports gaming’.  The court observed that in order to determine whether or not a game was one of chance or skill, would be whether it is predominantly one of skill. So long as the answer is in the affirmative, an element of chance would not render it akin to gambling or betting. The court thus concurred with the observations of the Punjab and Haryana Court in the Varun Gumber case.
    3. Chandresh Sankhla v State of Rajasthan  (“Chandresh Sankhla”)
      The petitioner filed a PIL in the Rajasthan High Court against Dream11 and the state government for promoting gambling amongst the youth. The petitioner prayed to stop Dream11 and their ‘organized crime’ in the country. The court held that the result of the fantasy game did not depend on the winning or losing of any particular team in the real world on any given day. The petitioner himself had also created a virtual cricket team as per his selection and judgement. The court relied on the Varun Gumber and Gurdeep Sachar decisions as well as dismissals to the challenges against these decisions by the Supreme Court, to hold that the issue of legitimacy of fantasy sports is no longer open for debate.
    4. Ravindra Singh v State of Rajasthan  (“Ravindra Singh”)
      The PIL in the Rajasthan High Court sought prohibition of Dream11 for promoting gambling and thus render it illegal. Further the petitioner prays action against evasion of GST. According to him, the platform retains 20% of user bid and the rest 80% is transferred to the winning amount and the GST is only calculated on the 20%. The court relied upon the Varun Gumber, Gurdeep Sachar and Chandresh Sankhla cases and qualified fantasy sports as a game of mere skill and their business protected under Article 19(1)(g) of the Constitution. The court reiterated that Dream 11 platforms’ games are based on skill and do not constitute as gambling/betting.

      Thus, legality of fantasy sports has been recognized by various High Courts in spite of the differing yet ambiguous stances of most Indian states. While there were no appeals filed against the Chandresh Sankhla and Ravindra Singh decisions, there were appeals filed against decision of Gurdeep Sachar case which were mostly dismissed by the Supreme Court barring one filed by State of Maharashtra in which Supreme Court passed an interim order dated March 6, 2020 staying the effect of Gurdeep Sachar making the issue of legality of fantasy sports dubious. The matter was set to be heard on April 24, 2020 but has been inordinately delayed due to the pandemic.
  4. INITIATIVES UNDERTAKEN TO PROTECT USERS
    The Federation of Indian Fantasy Sports (FIFS) is the self-regulatory industry body set up to protect consumer interests and formulate best practices for OFSPs in India. FIFS publishes a charter for the member OFSPs which include operators like DREAM11, MYTEAM11, FANCODE, GURU11, MY11CIRCLE, and others.

    The MIB also issued an advisory asking all private television broadcasters to follow guidelines issued by the Advertising Standards Council of India (ASCI) for advertisements relating to online gaming, fantasy sports etc. It requires that every gaming advertisement must carry the following disclaimer: “This game involves an element of financial risk and may be addictive. Please play responsibly and at your own risk” and such a disclaimer occupy at least 20% of the advertisement space.  The guidelines also require that gaming advertisements do not depict users under the age of 18 years as engaged in playing a game of “online gaming for real money winnings” or suggest that such users can play these games. The advertisements should neither suggest that online gaming presents an income generating opportunity as an alternative to employment nor depict a person playing such games is more successful than others.
  5. CONCLUSION
    Need of the hour is to have a uniform and robust single national policy on fantasy sports and a single regulator (a self-regulatory organisation maybe recognised by the Government) to not only bring clarity to regulators, operators and consumers alike but also support the judicial pronouncements and reduce the burden of courts to serve the larger consumer and business interest of this sector. There is a requirement to overhaul the archaic PG Act to adapt with the dynamic and technical nature of the online gaming as prevalent amongst today’s youth. With an estimated USD 2.8 billion market by 2022, fantasy sports is a sunrise sector in India which is yet to unlock its true market potential to become a leading world player.

STATE-WISE LAWS GOVERING PAID/UNPAID FANTASY SPORTS

Sr.No STATE/UT LEGISLATION DETAILS PERMISSIBILITY

STATES

1. Andhra Pradesh
  1. The Andhra Pradesh Gaming (Amendment) Bill, 2020
  2. The Andhra Pradesh Gaming Act, 1974
  • Cyber-space has been included within the scope of a gaming house.
  • The term ‘Instruments of Gaming’, includes all the components, either tangible or intangible that can be used for electronic modes of ‘gaming’.
  • The definition of the term ‘Gaming’ would include
    • Digital records that serve the purpose of registers or records of gaming
    • Any Online transfer of funds for the purpose of participating in online gaming
  • The exception stated for ‘games of skills’ has been removed through the Amendment.
  • Offences under the Andhra Pradesh Gaming Act have been made cognizable and non-bail able.
  • Directors as well as other persons of the company can be held liable for the offenses under the amended gaming act. They can be held liable for punishment and penalty; unless the individual can prove that they had no knowledge or involvement in the contravention act.
Fantasy Sports are not permitted.
2. Arunachal Pradesh The Arunachal Pradesh Gambling (Prohibition) Act, 2012
  • Arunachal Pradesh Gambling (Prohibition) Act 2012 makes gambling in any form illegal in the state.
  • The Act exempts games of skills in Section 13 but only for unpaid games, all other games even merely for entertainment or during festivals require due permission.
Unclear/ lack of information.
3. Assam
  1. The Assam Amusements and Betting Tax Act
  2. The Assam Game and Betting Act, 1970
  3. The Public Gaming Act, 1962
  • The state government followed the practice of issuing gambling licenses from 1939 to 1969 under the Assam Amusements and Betting Tax Act, but discontinued the same after adopting the Public Gambling Act of 1962.
  • No online mode of gambling can be offered in Assam as the state laws prohibit any sort of gambling. Further there is also no exemption for games of skill. The act does not permit staking money on the determination of an unascertained event in relation to sports or games and bans any form of business venture allowing participants to indulge in a game of skills for monetary gains.
Fantasy Sports are not permitted.
4. Bihar
  1. The Public Gambling Act of 1867
  2. The Lotteries (Regulation) Act, 1998
For States which adopted the Public Gambling Act, the Supreme Court case of mentioned above is applicable.
In the case of Varun Gumber vs. Union Territory of Chandigarh the Courts stated that platforms like Dream11 involve considerable skill and judgement the success depends on the users’ superior knowledge and discretion. The ruling was in response to a petition filed by Varun Gumber, who accused the OFSG website of illegal gambling after the Petitioner lost money while playing games on the platform. (Hereby referred as the Varun Gumber case)
Fantasy Sports both paid and unpaid are permitted.
5. Chhattisgarh The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
6. Goa The Goa, Daman and Diu Public Gambling Act,1976
  • Deals with casinos but no special focus on Fantasy Sports or Gambling.
  • The state does not have a transparent law on online gambling despite being a hotspot for offline casinos.
  • The Act deals with exemption to games of mere skill under Section 13 wherever played.
Fantasy Sports both paid and unpaid are permitted.
7. Gujarat The Bombay Prevention Gambling (Gujarat Amendment) Act, 1964
  • In the case of Dominance Games Pvt. Ltd. vs. State of Gujarat while terming poker as a game of chance, the court held that even for game of skill, if played for monetary gains and involves stakes, then the game would be categorised as gambling.
  • In 2020, the High court directed the state to amend and resolve the issue surrounding online games.
  • The Act though, does provide exemption to games of skills
Fantasy Sports are not permitted.
8. Haryana The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
9. Himachal Pradesh
  1. The Public Gambling (Himachal Pradesh Amendment) Act, 1976
  2. The Public Gambling Act, 1867
Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
10. Jharkhand The Bengal Public Gambling Act, 1867 All skill based fantasy sports are considered legal under the Act. Fantasy Sports both paid and unpaid are permitted.
11. Karnataka The Karnataka Police Act, 1963
  • Games of skills are exempted under gambling laws in the State.
  • In 2021, the High Court directed the government to take action on the governing/regulation of online games.
Fantasy Sports both paid and unpaid are permitted, until the proposed law is formulated and enacted.
12. Kerala The Kerala Gaming Act, 1960 After terming online betting as social evil, the Kerala High Court declared online rummy ‘illegal’ in February 2021. The decision comes after the Kerala High Court directive that had urged the state government to take measures against the online rummy businesses. The court has banned all games of chance until an appropriate regulatory regime is established and regulations are framed by the state government. Fantasy Sports both paid and unpaid are permitted, until an appropriate regulatory regime is established and regulations are framed by the state government for game of skill and game of chance.
13. Madhya Pradesh The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
14. Maharashtra The Bombay Prevention of Gambling Act, 1887
  • The state laws prohibit gambling and operation of a gambling house and states that individuals found indulging in gambling or present in a gambling house can be charged.
  • However, in the case of Gurdeep Singh Sachar vs. Union of India, the Court stated that unlike the act of betting, end results in a fantasy sport does not depend on results of an actual match. The court upheld the legal status of fantasy sports in India and categorised them as a game of skill.
Fantasy Sports both paid and unpaid are permitted.
15. Manipur The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
16. Meghalaya The Meghalaya Regulation of Gaming Ordinance, 2021
  • The Meghalaya government has formally legalized games involving both skill and chance, while explicitly stating that rummy, poker, teen patti, and even prediction of sporting events are games of skill. Companies can now offer games of skill and of chance (includes roulette wheel of fortune) — both of which have been defined and recognised broadly — with the necessary permissions and oversight of the state government, through the Meghalaya Gaming Commission and also appoint an adjudicating officer to manage and settle offences.
  • The authorities under the new law seek to regulate as well as differentiate between game of skill and game of chance by adopting the practice of issuing licenses for all form of gaming. The term of these licenses are expected to be for a period of 5 years.
  • The Meghalaya Prevention of Gambling Act, 1970 will continue to remain in force, but the provisions governing games of skill and games of chance would not be applicable once the game is licensed under the Ordinance.
Fantasy Sports both paid and unpaid are permitted.
17. Mizoram The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
18. Nagaland The Nagaland Prohibition of Gambling and Promotion and Regulation of Gaming Act, 2015
  • The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015 is one of the most recent statutes. The Act provides for a clear definition of game of skill to be one “where there is preponderance of skill over chance, including where the skill relates to strategizing the manner of placing wagers or placing bets or where the skill lies in team selection or selection of virtual stocks” and includes
  • “Virtual team selection games’ and ‘virtual fantasy games’ for the first time were given legislative recognition and considered under “game of skills” through the 2015 Act.
State Government for paid online games.
19. Odisha The Orissa Prevention of Gambling Act, 1955 The Orissa Prevention of Gambling Act, 1955 bans all forms of games for money including betting where a “person intentionally exposes money or things of value to the risk or hazard of loss by chance”. There have been no amendments since then to include e-sports or fantasy sports. Paid Fantasy Sports are not permitted.
20. Punjab The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
21. Rajasthan The Rajasthan Public Gambling (Prevention) Bill 2021
  • In 2020 the Rajasthan High Court in both Ravindra Singh Chaudhary v. Union of India (D. B. Civil Writ Petition No. 20779/2019) and Chandra Sankhla v. State of Rajasthan (2020 SCC Online Raj 264) declared Fantasy Sports to be games of “mere skill” and Dream11 platforms shall not be considered under gambling/betting.
  • The Government has approved The Rajasthan Public Gambling (Prevention) Bill 2021 in order to ban online gambling and betting.
  • This law exempts mere games of skill and distinguishes them from games of chance or a combined game involving both, unless it is carried out in a gaming house.
Fantasy Sports both paid and unpaid are permitted.
22. Sikkim
  1. The Sikkim Online Gaming (Regulation) Act, 2008
  2. The Sikkim Online Gaming (Regulation) Amendment 2015
  • The 2008 Act does not specifically define fantasy sports but includes “sports betting on games, which involve prediction of the results of the sporting events and placing a bet on the outcome, either in part or in whole, of such sporting event, and including football, cricket, lawn tennis, chess, gold, horse racing, etc”.
  • Under the new Act certain online games are allowed including betting. However such online games or OFSGs have been restricted through the 2015 amendment to physical premises of gaming parlours and with operation within the state only.
Fantasy Sports are essentially not permitted

(License is given to platforms with operation only in Sikkim and played within premise of a gaming café, for practical purposes bans all existing platforms).

23. Tamil Nadu The Tamil Nadu Gaming Act, 1930

Tamil Nadu Gaming and Police Laws (Amendment) Ordinance 2020

The Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021

  • In the case of D. Siluvai Venance v. State, the Madras High Court has called for stricter regulations for online games. The Court expressed concern over the huge involvement of youth in fantasy sports where prize money lured them into immoral and illegal activities. The Court also issued notice to Indian Cricket Team Captain and MPL ambassador Virat Kohli and My11Circle promoter and former Indian Cricket Team Captain Sourav Ganguly, for promoting fantasy sports.
  • Following this, the government promulgated an Ordinance in 2020 to expand the scope of current gambling laws and include the cyberspace.
  • The Amendment Act introduced in Tamil Nadu Assembly on 4th February 2021 also specifies that the ban would be effective for games of mere skill if played for wager/bet/money or any other stake (Section 11).
Fantasy Sports is permitted if it’s not paid.
24. Telangana
  1. The Telangana Gaming Act 1974.
  2. Telangana Gaming (Amendment) Ordinance, 2017
The state law prohibits any games involving the act of raising stakes on the determination of an unknown result of an event including on a game of skill. A 2017 Amendment states that if a game partly depends on skill and partly chance then it cannot be termed as game of skill.
The government under the Telangana Gaming (Amendment) Ordinance, 2017 has prohibited any gaming which involves any monetary transaction.
Fantasy Sports is permitted if it’s not paid.
25. Tripura
  1. The Tripura Gambling Act, 1926
  2. The Public Gambling Act, 1867
Skill based fantasy sports have been considered Legal under the Act Fantasy Sports both paid and unpaid are permitted.
26. Uttar Pradesh The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
27. Uttarakhand The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
28. West Bengal The West Bengal Gambling and Prize Competitions Act, 1957 Skill based fantasy sports have been recognised as legal under the Act. Fantasy Sports both paid and unpaid are permitted.

UNION TERRITORIES

1. Andaman and Nicobar Islands The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
2. Chandigarh The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
3. Dadra and Nagar Haveli and Daman and Diu The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
4. Delhi The Delhi Public Gambling Act, 1955 It is defined as a game of mere skill. Fantasy Sports both paid and unpaid are permitted.
5. Jammu and Kashmir The Jammu and Kashmir Public Gambling Act, 1920
  • No specific regulations for Fantasy Sports/Online Gambling.
  • Legal status of games of skill is unclear.
  • The statute prohibits betting or wagering of any kind.
Fantasy Sports both paid and unpaid are essentially permitted due to unclear laws.
6. Ladakh The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
7. Lakshadweep The Public Gambling Act, 1867 Refer to the Varun Gumber Case Fantasy Sports both paid and unpaid are permitted.
8. Puducherry The Pondicherry Gaming Act, 1965 No specific regulations for Fantasy Sports/Online Gambling. Fantasy Sports both paid and unpaid are essentially permitted due to no specific legislation banning the same.

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