The advent of the Fantasy Sports Industry

With the emergence of sports leagues in varied formats, there has been an unprecedented surge in the fan following of sports buffs. In addition to this, the increase in the developments witnessed by the sectors of digital innovation and technology pioneered the commercialization of modern sports in the country through online platforms in the form of ‘fantasy sports’. The meteoric rise of fantasy sports is evidenced by the fact that Mumbai based fantasy sports platform ‘Dream11’ became the first gaming startup with a valuation of over USD 1 (One) Billion (more commonly referred to as “the Unicorn”) in India. The Federation of the Indian Fantasy Sports in collaboration with KPMG India estimated[1] that the number of users participating in online fantasy sports in India has grown at a compounded annual growth rate of 212%, increasing to 90 million users in December 2019, from 2 million users in June 2016.

The Cambridge dictionary has defined ‘fantasy sports’ as, “games in which you choose a team of real sports players from different teams and win points according to how well the players play each week”[2] In fantasy sports, the users choose their own virtual teams from a pre-determined pool of players to compete against different other teams involved in a live sporting event created for numerous fantasy games on certain stipulated conditions. Upon finalization of the teams and commencement of the actual sporting event, each team is then awarded ‘fantasy points’ generated by adding the number of points recorded by each individual player in accordance with the statistical performance of such player in the actual game. These fantasy games are generally available in two formats – ‘free to play’ and/or ‘pay to play’.

Determination of game of chance or skill

Whether fantasy sport is a game of skill, or an outcome of chance has been a subject of debate since its inception. The Supreme Court has, like the United States, applied the “predominance test” in various cases while determining the true nature of a particular game. A game of skill is marked by the expertise of the player and the outcome of the game is solely dependent upon the player. While a game of chance is dependent upon random factors and the outcome of the game is a mere matter of chance. The distinction assumes primacy as a mere game of chance would fall under the ambit of gambling.

In the state of Andhra Pradesh v. K. Satyanarayana[3], the Supreme Court clarified that rummy is not a game of chance entirely and stated that all games involving shuffling and dealing out of cards does not follow a set pattern and is rather dependent upon the position of the card in the shuffled pack. “Rummy requires certain amount of skill because the fall of the cards has to be memorised and the building up of Rummy requires considerable skill in holding and discarding cards. We cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill.”

Further in the matter of Dr. K.R. Lakshmanan v. State of Tamil Nadu,[4] the Apex Court held that horse racing is a game of skill as factors like fitness, the skill of horse, of jockey etc. could be objectively assessed by the person placing a bet. and relevant skill of the person placing the bet was held to be the bettor’s ability to assess and place a bet on the proper horse. Therefore, on the lines of the above judgements, the Supreme Court opined that (i) the competitions where success depends on a substantial degree of skill are not `gambling' and (ii) despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of ‘mere skill’ and that the expression ‘mere skill’ would mean substantial degree or a preponderance of skill.

Gambling Regulations in India

“Gambling activities from their very nature and in essence are extra-commercium although the external forms, formalities and instruments of trade may be employed and they are not protected either by Art. 19 (1) (g) or Art. 301 or our Constitution.”[5] In Bimalendu De v. Union of India[6], the definition of gambling was referred to by the Calcutta High Court wherein it was observed that gambling consists of consideration, an element of chance, and a reward. The elements of gambling are the payment of a price for a chance to win a prize. Betting is a refined rendition of gambling wherein a wagering amount is pledged depending upon the happening or non-happening of an event.

Gambling and betting have been included in the state list[7] of the seventh schedule of the Constitution of India. Therefore, the States have been provided with substantial leeway to legislate on gambling and betting. However, the Parliament is also empowered to frame necessary legislation under Article 249 of the Constitution of India if the matter is of national importance and under Article 252 if two or more states agree for the same. The Public Gambling Act, 1867 (“Gambling Act”) was enacted on January 25, 1867, for providing punishment for public gaming and maintenance of common gaming houses. Though enacted prior to the independence, several states have extended the applicability and continued the adoption of the said Gambling Act into their territory. However, other states have also enacted their specific legislation on the lines of the Gambling Act like the West Bengal Gambling and Prize Competition Act, 1957, Bombay Prevention of Gambling Act, 1887, Punjab Public Gambling Act, 1961 etc.

Further, the Supreme Court in Board of Cricket Control in India v. Cricket Association of Bihar and Others[8], made a reference to the Law Commission to report on the issue of legalisation of betting and the Law Commission on July 05, 2018, through its 276th report titled “Legal Framework: Gambling and Sports Betting Including Cricket in India”[9] (hereinafter referred to as “the Report”) examined whether betting could be legalised in India and made the following recommendations:

(i) Enactment of a model law to regulate gambling and betting in the country;

(ii) Introduction of regulations such as (a) Permits and licenses for the operation of gambling and betting; (b) cap on the number of transactions for the given period of time; (c) cashless transactions between operators and participants; (d) transactions be Aadhar/PAN linked and proper taxation must be imposed on the same;

(iii) Classification of gambling as ‘proper gambling’ for higher stakes and ‘small gambling’ for people belonging to lower-income groups;

(iv) Prohibition of certain classes of persons from participating in gambling sessions, namely, (a) minors; (b) those who receive subsidies from the government and (c) those who do not fall within the purview of applicable tax laws;

(v) Requisite amendments in Foreign Exchange Management Act, 1999 and Information Technology (Intermediary Guidelines) Rules, 2011;

(vi) Classification of ‘match-fixing’ and ‘sports fraud’ as criminal offences with severe punishments.

The Supreme Court Verdict on Dream 11

Dream11 Gaming Zone LLP (hereinafter referred to as “Dream11”) is a limited liability partnership firm incorporated on 10 October 2014 and operates a fantasy sports platform for sports such as cricket, football, basketball, hockey, volleyball and handball etc. Dream11 is a game of skill where a participant creates a team of real players for an upcoming match and competes with other fans for big prizes.[10] The performance of a participant is co-related with the real-life performances in the specified event based on which participants gather points. Depending upon such points the participants are then rewarded accordingly. Participation in the fantasy sports event involves payment of a certain sum by all the participants. The sum so pooled after deductions by Dream11 forms the corpus of the prize money.

The Supreme Court in its order dated July 30, 2021, dismissed the special leave petition[11] filed as public interest litigation seeking a ban on the operation of Dream11 as it is a matter of pure gambling and does not involve skill and upheld the Rajasthan High Court order[12] dated February 14, 2020. Interestingly, the said position was also reiterated by the Rajasthan High Court in Ravindra Singh Chaudhary v Union of India[13] and affirmed the position laid down by the Punjab and Haryana High Court in Varun Gumber v Union Territory of Chandigarh and Ors[14] and affirmed by the Supreme Court on September 15, 2017. In Varun Gumbar (supra), the following was stated by the hon’ble court:

“In view of the finding rendered by the Hon'ble Supreme Court aforementioned, it leaves no manner of doubt that on the scope and ambit of the term game “mere skill” in the context of the present case, in other words, the Hon'ble Supreme Court has held that : (i) the competitions where success depends upon the substantial degree of skill are not gambling; and (ii) despite there being an element of chance, if a game is preponderantly a game of skill it would nevertheless be a game of ‘mere skill’.

The respondent company’s website and success in Dream 11's fantasy sports basically arise out of users exercise, superior knowledge, judgment and attention. I am of the further view that the element of skill and a predominant influence on the outcome of the Dream11 fantasy than any other incidents are and therefore, I do not have any hesitation in holding any sports game to constitute the game of “mere skill” and not falling within the activity of gambling for the invocation of 1867 Act and thus, the respondent company is, therefore, exempt from the application of provisions, including the penal provisions, in view of Section 18 of 1867 Act.” Thus, based on the above judgements, Dream11 has been identified as a ‘Game of Skill’.

Frequently Asked Questions

1. Does this judgement of the Supreme Court legalise ‘sports betting’ in India?

Any form of public gambling or gambling in a ‘common gaming house’ is illegal under the Public Gambling Act, 1867. Further, there are no rules or regulations governing any form of betting or gambling in India. The judgments of the Supreme Court is limited to the classification of Dream11 as a ‘game of skill’ only and does not entail laying down any guidelines pertaining to sports betting.

2. Is Fantasy Sport regulated in India?

The first recognition of fantasy sport as a game of skill was in the Nagaland Prohibition of Gambling and Promotion and Regularization of Online Games of Skill Act, 2015. It also introduced a licensing regime for the same. Further, NITI Aayog, published a discussion paper enumerating guiding principles, to be implemented and overseen by the recognised self-regulatory organisation for the fantasy sports industry. However, at present, there is no specific central legislation governing the fantasy sports sector in India.

3. Are there any organisations for fantasy sports?

Federation of India Fantasy Sport (FIFS) is a self-regulatory body, formed in 2017, to protect the interest of consumers in the fantasy sports industry in India. It aims to standardise practices in fantasy sports and protect the interests of both users and service providers. However, FIFS has not yet been recognised as an official body governing the fantasy sports industry and in absence of legal recognition, the effectiveness of such an organisation is doubted.

Conclusion

The rise in the developments in the fantasy sports industry has gained immense popularity among varied age groups. With a classification of Dream11 as a ‘game of skill’, the fantasy sports platforms have an opportunity to offer sports enthusiasts across the country to showcase their knowledge in sports through such platforms. However, the fantasy sports platforms are still at their nascent stage and without any specific regulation and with geographical access with no bounds, this industry still faces many hurdles which need to be catered to:

(i) The fantasy sports industry is growing at a swift pace and without any regulatory body and specific legislation, the industry has the potential to grow in an erratic manner. Thus, it becomes a challenge to seek compliance from such platform of the existing applicable laws;

(ii) Fantasy sports platforms use photographs, details of different players and carry out their statistical analysis of such players. Therefore, such platforms must take prior consent from such players, comply and make necessary provisions against any infringement of intellectual property of any party;

(iii) The players participating in leagues organized by such fantasy sports platforms belong to different age groups and jurisdictions. Therefore, it becomes quintessential to implement necessary safeguards for the protection of minors;

(iv) Sports having nature of skill must only be included in such platforms to eliminate any scope of chance or wager;

(v) The fantasy sports platforms must not offer services pertaining to gambling and betting services in any form and must incorporate suitable measures to ensure the same.

Further, the Assam Game and Betting Act, 1970 and Orissa Prevention of Gambling Act, 1955, does not explicitly exclude ‘games of skill’ from the ambit of gambling. Telangana Gaming (Amendment) Act, 2017, and Andhra Pradesh Gaming (Amendment) Act, 2020 impose restrictions on online games like ‘Rummy’ which has already been categorized as games of skill. Though the judgement of the Supreme Court has eased restrictions for Dream11, it is still unclear as to whether online fantasy sports platforms can operate without any legal implications.

[1] Business of Fantasy Sports (July 2020)
[2] https://dictionary.cambridge.org/dictionary/english/fantasy-sport
[3] AIR 1968 SC 825
[4] AIR 1996 SC 1153
[5] State of Bombay Vs. R.M.D. Chamarbaugwala A.I.R., 1957 S.C. 699
[6]AIR 2001 Cal 30
[7] List II Entry 34, 7th (Seventh) Schedule of Constitution of India
[8](2016) 8 SCC 535
[9] https://lawcommissionofindia.nic.in/reports/Report276.pdf
[10] https://www.dream11.com/games/what-is-dream11
[11] No(s). 18478/2020 (Avinash Mehrotra v State of Rajasthan)
[12] Chandresh Sankhla v State of Rajasthan (D.B. Civil Writ Petition No. 6653/2019)
[13] MANU/RH/0499/2020; 2020[42] G.S.T.L. 195, 2020(4)RLW3322(Raj.)
[14]MANU/PH/1265/2017; 2017C riLJ3827, 2017(4) RC R(Criminal)1047