Over the past ten years, there has been a significant development curve in the Indian fantasy sports market. India, with more than 200 Indian operator companies and over 20 crore members, has become the world’s largest fantasy sports market. The proliferation of smartphones and low data costs have been key factors in making fantasy sports more accessible.
This has resulted in questions being raised on the legality of OFS platforms (i.e., OFS platforms encourage pure gambling and are not “games of skill”) before different High Courts in India.
What are fantasy sports?
Fantasy sports, also known as rotisserie sports, is an online game where players play as managers, choosing, trading, and drafting their lineup of athletes. Participants can participate in free competitions or pay to win prizes. This internet prediction game uses actual sporting events and allows players to match up with others.
Since the fantasy sports industry is on a boom and has seen rapid expansion over the past few years its regulation has also been difficult. Different states have different laws regarding these which create confusion among the masses regarding its regulation.
Gambling and Betting
Fantasy sports raise the question of whether they can be considered gambling or betting. Betting involves staking a wagering sum, either in cash or assets, on the assumption of an event’s outcome. The Supreme Court of India stated in the case of Dr. K. R. Lakshmanan v. State of Tamil Nadu & Anr. that gambling involves paying a price for a chance to win a prize. Games can be of chance, skill, or skill and chance combined. A game of chance is determined entirely or in part by lot or luck, while a game of skill relies on the player’s superior knowledge, training, attention, experience, and ability.
The Indian Constitution was not introduced until after the Public Gambling Act of 1867. It forbade the operation of common gaming rooms and public gambling establishments, with the exception of games of skill. However, with the adoption of the constitution, the matters concerning betting and gaming were listed under State List Entry 34. It meant that going forward, laws pertaining to these matters may only be passed by the state legislature.
Game of Skill vs Game of Chance
Games of skill are distinct from games of chance as they are not entirely reliant on chance, as they involve strategies, talent, skills, team formation, and player selection. In contrast, games of chance are purely based on luck and are comparatively easier to win. Fantasy sports, for instance, are considered a game of skill as they involve the formation of strategies and knowledge about players, which are not required in a game of chance. The Punjab and Haryana High Court, in the 2017 case of Shri Varun Gumber v. Union Territory of Chandigarh and Orsii, ruled that fantasy sports predominantly include the skill factor, making them unsuitable for classification as a game of chance.
Rules and Regulations
Public gambling and the operation of common gaming establishments are outlawed under the Public Gambling Act of 1867, which is national law. Nonetheless, “gambling” is a State topic according to the Indian Constitution, hence state governments are in charge of regulating it. The Assam Game and Betting Act, 1970, the Orissa Prevention of Gambling Act, 1955, the Telangana Gaming Act, 1974, the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015, and the Sikkim Online Gaming (Regulation) Act, 2008 are a few Indian States that have passed specific laws to regulate gaming and gambling activities.
Cases in different states-
- The Punjab and Haryana High Court in 2017, in the case of “Shri Varun Gumber v. Union Territory of Chandigarh and Ors”held that fantasy sports predominantly include the skill factor hence they cannot be considered as a game of chance.
- In another Bombay High Court judgment, Justice R.V. More in matter titled as “Gurdeep Singh Sachar v. Union of India, 2019” has predominantly relied upon the analysis and findings of the Punjab Haryana High Court in the Varun Gumber case and also established that Dream11 and the fantasy sports services it provided fall under the definition of a game of skill.
- Further, the Rajasthan High Court passed a similar judgement in “Ravindra Singh Chaudhary Vs. Union of India & ors, 2020” where the court decisively established that fantasy sports, particularly those offered by platforms like Dream-11, are games predominantly based on skill rather than chance.
- Further, the Kerala High Court in “Play Games 24 X 7 Private Limited vs State of Kerala, 2021” quashed an amendment to a government notification issued under Section 14A of the Kerala Gaming Act, 1960 banning online rummy in the State, affirming that it is a game of skill regardless of whether it’s played for money. It was held that stakes do not change the nature of rummy as a skill game, which means it is legally protected as a business activity and not considered gambling.
- The Karnataka High Court in the matter titled as “All India Gaming Federation Vs. State of Karnataka, 2022” strike down significant portions of the Karnataka Police (Amendment) Act, 2021, which banned online gambling and skill-based gaming platforms. The court held that the amendments banning online gambling and skill-based gaming platforms violated fundamental rights guaranteed under the Indian Constitution, including those related to trade and commerce, liberty, privacy, and freedom of expression.
- Tamil Nadu government had passed Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022 to prohibit Online gambling and to regulate Online games in the State of Tamil Nadu.
- Nagaland licenses online skill games, Meghalaya has a licensing regime for online skill games, and Sikkim licenses both online games of chance and skill.
- However, this act was challenged in the Madras High Court but the Court in “All India Gaming Federation v. The State of Tamil Nadu, 2023” refused to strike down the act in its entirety, but ruled that the prohibition would apply only to games of chance and not to games of skill such as rummy and poker.
- The Indian Supreme Court has acknowledged fantasy sports like Dream11 as games of skill protected under Article 19(1)(g) of the Indian Constitution. The Rajasthan High Court has also noted that online gaming is not betting or gambling and has provided interim relief to an online gaming platform. The Indian Constitution grants citizens the fundamental right to practice any profession, trade, or business. To maintain compliance and avoid potential risks, gaming start-ups should consult with lawyers knowledgeable about gaming and starting businesses. Staying updated with regulations and legal developments is crucial for gaming start-ups to avoid problems and comply with the law.
Key requirements and documents to comply with
- Gaming licenses and approvals- Depending on the type of games you might need licenses and approvals from regulatory bodies like the All India Gaming Federation (AIGF) or state-level gaming authorities. The Ministry of Electronics and IT (MeitY) in India has released preliminary rules for online gaming in 2023, requiring games to register with a self-regulation organization and only operate legally under approved rules. The rules prohibit betting on game outcomes and mandate verification through KYC procedures. The Central government has assigned MeitY to oversee and control the online gaming and e-sports sectors in India. The rules also outline a system for addressing complaints and ensuring fairness in the gaming industry.
- Compliance with State Laws: Ensure your fantasy gaming app follows the laws of the state(s) you plan to operate in. Comply with any restrictions on the types of games allowed, the age of participants, and responsible gaming practices.
- Terms of Use and Privacy Policy: We will have to draft clear terms of use, privacy policies, and disclaimers for your users. These documents should outline the rules of the game, data usage, and any associated risks.
- Advertising Standards and Regulations: An organization in India called the Advertising Standards Council of India (ASCI) has created rules for how advertisements about online gaming should be made. They also made rules for ads about online games. These rules help to prevent ads from being confusing or inappropriate, especially when they’re shown to minors.
- Terms of Use and Privacy Policy: We will have to draft clear terms of use, privacy policies, and disclaimers for your users. These documents should outline the rules of the game, data usage, and any associated risks.
Conclusion
Overall, the Indian judiciary appears to be supporting the fantasy sports and online gaming industries based on recent rulings. Foreign investment is not permitted in the gaming or betting industries. For this reason, international investors hoping to invest in and profit from the rapidly expanding online gaming and fantasy sports industries now have clearer skies thanks to a finding from the SC stating that a site such as Dream11 in its current shape is not a gambling and betting platform.
Dream11 is legitimate business in India and does not fall under the Public Gambling Act, 1867. According to the Federation of Indian Fantasy Sports (FIFS) – the country’s first and only self-regulatory Sports Gaming industry body, games of skill are excluded from the definition of most gambling legislations and therefore are legal to play. However, what is to be done when a minor child starts using his school fees or picnic money etc for playing online games involving money and then gets addicted to it and loses money and self-belief?
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