As the IPL fever weathers off and the international cricketing season begins, fans of the gentlemen’s game are all ready to hop on to their phones again and make their own virtual teams and compete with million others. Somehow, that statement doesn’t seem absurd. With Dream 11 having sponsored the biggest cricket league in the world (IPL 2020), online fantasy sports platforms have jumped tremendously in popularity and size in India in just a few years.

Online fantasy sports platforms (OFSP) have grown at a CAGR of 212%, from 2 million users in JuSorry, this file type is not permitted for security reasons.ne 2016 to 90 million users in December 2019.[i] This year was one of the biggest years for OFSPs – with IPL having its highest viewership ever with most fans stuck at home owing to the pandemic.[ii]

That being said, the entire market of fantasy sports stands in a regulatory grey area. There exists zero concrete legislation with respect to its legality, its boundaries with gambling and betting, or its taxation for that matter.

This article is in a series of articles aiming to clarify the debate of skill vs. chance, the differential state laws in India, and the taxation aspects of OFSPs.

What Classifies As A Gamble?

Notably, in India, the only central act that criminalises most aspects of gambling is the age old Public Gambling Act of 1867 (PGA). While it puts restriction on gambling in the country, at the same time, the Act explicitly allows within its purview, games of “mere skill”. The Supreme Court, in State of Bombay v. R.M.D. Chamarbaugwala,[iii] has interpreted the words “mere skill” to include games which are preponderantly of skill, despite having small elements of chance as well.

What constitutes a game of skill was first dealt in State of Andhra Pradesh v. K. Satyanarayana[iv] wherein a game of “Rummy” was held to be a game of skill, requiring memorisation and judgement skills – “it is mainly and preponderantly a game of skill” and hence, could not be criminalised under the Pubic Gambling Act. The question was again brought up in Dr. K.R. Lakshmanan v. State of Tamil Nadu,[v] where horse racing was held to be preponderantly a game of skill. Thus, the ‘preponderant factor test’ or ‘dominant factor test’ came to be.

Fantasy Sports – Skill or Chance?

Before examining the legal stance of whether fantasy sports are games of skill or chance, it is important to understand what these games entail in the first place. Most fantasy sports games involve assembly of imaginary virtual teams from a pool of real players taking part in the games, strictly based on their knowledge, experience, perception of the players and the teams. Users making virtual teams need to adhere to a certain specific value while making their teams, and enter in the contest through an entry fee. Based on the performance of the imaginary teams, the users are ranked, which ultimately forms the basis for their winnings.

The question on the legality of fantasy games, for now, has been settled in by the High Court of Punjab and Haryana which ruled Dream 11’s games to be predominantly based on skill.[vi] Justice Rawal elucidated on a number of reasons for the same. Firstly, the drafting of a virtual team involves the exercise of considerable skill as the user must first assess the relative worth of each athlete against the available selections. Secondly, the imaginary team cannot be a real-world replicate, as it impossible to have more than 7 players from a single team. Apart from these, the user must also pick a ‘captain’ and ‘vice-captain’, constantly monitor the scores, runs, catches, wickets and form of every player as well as the pitch and match conditions. An appeal to the Supreme Court was dismissed.[vii]

However, the opposite took place in the case of The State of Maharashtra & Ors. v. Gurdeep Singh Sachar &Ors.,[viii] where the Supreme Court, upon first hearing, stayed a similar judgement of the Bombay High Court where Dream 11 was considered to be a game of skill.[ix]

Another recent judgement of the Rajasthan HC also considered Dream11 to be a game of skill, relying on the Bombay and Punjab & Haryana High Courts’ judgements.[x]

Thus, the question whether online fantasy gaming platforms publish games of skill, is no longer res integra. The P&H and Rajasthan High Court judgements continue to remain in force, but Supreme Court’s stay on the Bombay High Court judgement has posed certain doubts and the legality of this is all but settled.

Legislative Stance

Meanwhile, the NITI Aayog has recognized the various positive judgements, as well as the legislative void on the issue, noting that the platforms are “having to shelter under an undefined exception to the state gambling and public order laws”. A draft for discussion has consequently been prepared for guiding principles to the OFSPs.[xi]

The draft points out the following impediments to the industry as a result of the legislative void –

  1. There is no objectively definable test to assess and determine whether a game will be characterised as a game of skill or chance. This puts the onus of assessment on the developer of the game itself. Without clarity, innovation and development may be stifled.
  2. The variance of regulation among states poses heavy compliance burden on the platforms.
  3. Differential regulation among states also results in burden for consumers with respect to penal compliance. For example, a user living normally in Delhi may face prosecution if using the app within Nagaland.

As a result, the NITI Aayog has currently proposed a self-regulatory organisation for the industry, supervised by an independent oversight board. This organisation would further constitute an independent evaluation committee which would be responsible for determining the ‘skill’ level in the game. This may be coupled with a national light-touch regulatory framework. The draft has also put forth draft guiding principles, which include compliance with advertising guidelines, age limits, and communications to states for requests of immunity.

Broader Problems

The issue with legalising online fantasy gaming platforms ultimately falls on the concept of what one may consider chance and to what degree it can be allowed within the purview of the PGA. The SC had already given the green light to ‘rummy’, deeming it to involve considerable skill. What about blackjack? Blackjack too involves significant memorisation and counting skills, as well as considerable social skills. In fact, an entire movie was made on a true story of a group of MIT students who used their math skills to beat the casino.[xii] Games like poker are also heavily debated to involve significant skill.[xiii] If all of these are skill-based games, the PGA itself would be deemed nugatory –which is what the 276th Law Commission has recommended to do away with.

Conclusion

There exists a clear need for legislative interference in the issue. Without clear guidelines as to what constitutes a game of skill or a game of chance, innovation in the field is seriously stifled. Unicorns like Dream11 are left to the mercy of judicial interpretation, without strong precedents. Moreover, platforms like Paytm and MPL (Mobile Premier League) have recently involved prize monies and contests in esports titles such as Call of Duty, as well as iconic board games like Ludo – which are yet to test the boundaries of chance and skill. The author strongly agrees with the stance of the NITI Aayog that an independent body needs to be set up to monitor every such game and prepare strong guidelines as to the classification of skill-based and chance-based games. The sooner, the better!

Author:  Suyash Bajpai, 3rd Year student of BBA LL.B. (Hons.) of National Law University Odisha, Cuttack under guidance of Anubhav Gupta, Principal Associate- Taxation at Khurana & Khurana, Advocates and IP Attorneys < https://www.khuranaandkhurana.com/>.  In case of any queries please contact/write back to us at [email protected] and/or +91-9971433007.

[i] Federation of Indian Fantasy Sport and KPMG (2020) rep <https://fifs.in/wp-content/uploads/2020/07/Business-of-fantasy-sports_Final.pdf> accessed December 8, 2020

[ii] James N, “IPL 2020 Had the Highest Viewership Ever” (Business LineNovember 10, 2020) <https://www.thehindubusinessline.com/companies/ipl-2020-had-the-highest-viewership-ever/article33068221.ece> accessed December 11, 2020

[iii] State of Bombay v. R.M.D. Chamarbaugwala AIR 1957 SC 699.

[iv] State of Andhra Pradesh v. K. SatyanarayanaAIR1968 SC 825.

[v] Dr. K.R. Lakshmanan v. State of Tamil Nadu AIR 1996 SC 1153.

[vi] Shri Varun Gumber v. Union Territory of Chandigarh and Ors. CWP No. 7559 of 2017 (P&H High Court).

[vii] Shri Varun Gumber v. Union Territory of Chandigarh and Ors. Diary No. 27511/2017 (15.09.2017) (SC).

[viii] The State of Maharashtra &Ors. v. Gurdeep Singh Sachar &Ors. SLP(Crl) No.2213/2020 (06.03.2020) (SC).

[ix] Gurdeep Singh Sachar v. UOI &Ors. CRLPIL ST No. 22/2019 (30.04.2019) (Bombay High Court).

[x] Chandresh Sankhla v. State of Rajasthan &Ors.D.B. Civil Writ Petition No. 6653/2019 (Rajasthan High Court)

[xi] NITI Aayog, “Guiding Principles for the Uniform National-Level Regulation of Online Fantasy Sports Platforms in India: Draft for Discussion” NITI Aayog <https://niti.gov.in/sites/default/files/2020-12/FantasySports_DraftForComments.pdf> accessed December 11, 2020

[xii] Goldman N, “How MIT Students Broke the Bank in Vegas” (ABC NewsJanuary 7, 2006) <https://abcnews.go.com/Primetime/story?id=131939> accessed December 11, 2020;“21” (IMDbMarch 28, 2008) <https://www.imdb.com/title/tt0478087> accessed December 11, 2020.

[xiii] However, one variant of poker, “Texas Hold’em” was considered to be primarily a game of chance in Dominance Games Pvt. Ltd. v. State of Gujarat and Ors., (2018) 1 GLR 801.

Author Bio

Qualification: LL.B / Advocate
Company: Khurana & Khurana, Advocates and IP Attorneys
Location: New Delhi, IN
Member Since: 15 Dec 2020 | Total Posts: 2

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