Gaming has always been a popular source of entertainment for players as well as viewers since ages. However, when it came to gaming activities which involved gambling, such activities have always been put through the test of social morals in India. Anti-gambling laws are in force since the British Rule in India and remains to be in force with appropriate amendments being made to the same from time to time. Presently, with emerging technology and greater affinity for the virtual world, gaming standards in India have indeed revolutionised, resulting in greater challenges for the legislators to tackle anti-gambling activities in a virtual environment. One of such challenges has been online fantasy sports in India.
The culture of fantasy sports in India dates back to 2008 when the Indian Premier League took the Indian cricket world by storm which led to the fame of “Fantasy Cricket”. Since then, there was rapid progress in fantasy sports. KPMG India in its, July 2020 report1, noted that the number of users participating in online fantasy sports rose from 2 million in 2016 to 90 million in 2019. Similarly, the Price Waterhouse Cooper India in its May 2019 Report2, noted that the fantasy sports industry has the potential to generate an additional 5000+ direct and 7000+ indirect job in next 2-3 years. With the absence of any legislation in place, fantasy sports might become a victim of cyber-crimes and virtual platforms can be misused for endless purposes. Therefore, it is imperative that rules for governing fantasy sports be crystallised to prevent unnecessary hindrance in the growth of such industry. This article discusses the evolution of online fantasy games, its regulatory and changing legal framework and the prospects for the online gaming industry.
What does not constitute gambling?
Currently, the gambling and betting laws in India are regulated by the Public Gambling Act, 1867 (“Gambling Act”) which criminalises gambling by imposing penalties and other punitive measures. The only exception is Section 12 of the Gambling Act, which excludes the applicability of the statute on the games which involve ‘mere skill'. Skill games are mostly defined as “Games of Skill” or “Game of Mere Skill” under different state legislations in India. The Supreme Court in State of Bombay v. R.M.D. Chamarbaugwala3, has interpreted the word “mere skill” to include games which are preponderant of skill and even if there is an element of chance, if a game is preponderantly a game of skill, it would nevertheless be a game of “mere skill”.
Applying the above interpretation, the Supreme Court has held certain games to be a game of skill. In the matter of K.R. Lakshmanan v. State of Tamil Nadu4 (‘K.R. Lakshmanan Case'), the Supreme court interpreted the provisions of the Madras Police Act, 1888 and Madras Gaming Act, 1930 and while expounding on the assessment to be done while ascertaining the nature of a game, held that horse racing is a game of skill. In the same judgment, the Court referred to the matter of A.P. v. K. Satyanarayana5 (‘Satyanarayana Case') wherein the Court had specified the game of ‘Rummy' as a game of skill while interpreting the provisions of the Hyderabad Gambling Act (2 of 1395-F).
At the state level, there are laws enacted by the State Legislature keeping in mind the provisions of the Gambling Act. Meaning thereby, most of the State Laws has created an exemption for games involving “skill” for the purpose of applicability of their respective legislations. Such Act includes:
- The Bombay Prevention of Gambling Act, 1887
- The Meghalaya Prevention of Gambling Act, 1970
- The Rajasthan Public Gaming Ordinance, 1949
- The Goa, Daman and Diu Public Gambling Act, 1976
- The Tamil Nadu Gaming Act, 1930
All such aforesaid State Legislations have their genesis from the Gambling Act and as such, provisions like Section 14 of the Hyderabad Gambling Act are Section 11 of the Madras Gaming Act 1930 are pari materia to Section 12 of the Public Gambling Act 1867.
Regulatory Landscape of Online Fantasy Games
Before the enactment of the Constitution of India, betting and gambling laws were governed by the Gambling Act. However after the Constitution came into force, union and state were given different subjects to legislate on. Accordingly, as per Schedule VII of the Constitution, betting and gambling fell under the exclusive domain of the state legislature. As a result, differential state legislations governing Online Fantasy Games were enacted, out of which only a few states regularized and legalized the Online Fantasy Games.
- The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015
The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015 (“Nagaland Act”) is the first legislation to enlist “virtual fantasy games” as a “game of skill” under Schedule A of the statute. for the regularisation of online gaming which categorises certain games as as “games of skill”. Schedule A of the Nagaland Act, enlists the games that are to be considered as games of skill for the purpose of the provisions under the Nagaland Act and it includes
The Nagaland Act provides for issuance of license specifically for the purpose of enabling an entity to offer games of skill on a mobile platform, television, or any other online media. Section 7 of the Nagaland Act provides for the procedure for obtaining a license under the Nagaland Act and it mandates procurement of license upon payment of fees as fixed under the statute. The provision also provides for disqualification of the Applicant of the license on the ground of indulging in any online/offline gambling activities in India as well as abroad.
A peculiar feature of the Nagaland Act is the Explanation to Section 2(1) which provides for using the license in any State or Union Territory of India. However, such usage is subjected to scrutiny that the activities are not in contravention of the prevailing laws of the State within the territory of which such activity is taking place. In any case, the Nagaland Act also provides for bringing such activities to the notice of the Licensing Authority of the State of Nagaland by such State and the Licensing Authority will take steps to resolve the issue raised.
- Sikkim Online Gaming (Regulation) Act, 2008
The Sikkim Online Gaming (Regulation) Act, 2008 (“Sikkim Act”) regulates the operation of online games by granting licenses to applicants with prescribed rules and regulations. The online games with respect to which such licenses can be granted include games of skill as well as games with a combination of skill and chance defined under Section 2(d) of the Sikkim Act. The Sikkim Act also makes all the notifications and instructions pertaining to gaming or wagering or betting inapplicable to the online games licensed under the Sikkim Act and further, prohibits all kinds of online games without obtaining a license under the Sikkim Act.
- The Telangana Gaming Act, 1974
Post the enactment of the Telangana Gaming (Amendment) Act 2017, The Telangana Gaming Act 1974 (“Telangana Act”) has expressly included online gaming under its applicability. Prior to the Telangana Gaming (Amendment) Act 2017, Section 3 of the Telangana Act has, at some occasions, been interpreted to include online gaming but the Telangana Gaming (Amendment) Act 2017 expressly categorised ‘online gaming' as a prohibited activity thus, completely prohibiting online gaming in all respects. Section 3 of the Telangana Act provides for the imposition of penalty on persons who indulged themselves in online gaming in any manner.
Legality of Fantasy Sports in India - Skill versus Chance debate
Fantasy Sports are games of skill in which contestants assemble a roster of athletes in a given sport and create their own virtual teams made up of real-life athletes. The outcomes of Fantasy Sports are based on actual aggregated performance statistics of those athletes in real matches. For an uncertain period, gaming laws in India were only guided by the central Gaming Act and other concurrent state legislations as discussed above, the majority of which are silent on online gaming. Subsequent to the enactment of Nagaland Act, the legal development of fantasy sports in India routed through judicial pronouncements. The debate between game of chance and game of skill has been the main contention in all the legal challenges concerning the validity of online fantasy sports. In 2017, for the first time, the debate was finally put to rest by the Hon'ble Punjab & Haryana High Court (“P&H High Court”) in the matter of Varun Gumber v. Union Territory of Chandigarh6 (‘Varun Gumber Case'). The P&H High Court while deciding a Civil Writ Petition filed by the petitioner who alleged to be the victim of the online betting site that operates by the name of Dream 11, stated that Dream 11 does not fall under the category of gambling activities as it involves substantial skills. The P&H High Court was of the view that Dream 11's success comes from its users' exercise of superior knowledge, judgment and attention and thus, Dream 11 has a predominant influence of the element of skill. All of such observations were made by the P&H High Court while relying on the judgment of the K.R. Lakshmanan Case.
A similar judgment was passed by the High Court of Bombay in the matter of Gurdeep Singh Sachar v. Union of India7 (‘Gurdeep Singh Sachar Case') wherein an advocate had filed a petition in the nature of public interest litigation on the ground that the activities being carried by Dream 11 attract penal provisions of the Gambling Act and such activities are also evasive in terms of adhering to the provision under the Central Goods and Services Tax Act, 2017. The High Court of Bombay, while relying on the ratio given in the K.R. Lakshmanan Case, held that the activities being carried out by the Dream 11 Fantasy Private Limited were not in the nature of gambling and was rather a game of ‘skill' and not a game of ‘chance'. The Gurdeep Singh Sachar Case was challenged before the Division Bench of the High Court of Bombay as well as before the Supreme Court8 and the judgment was upheld at both the stages of litigation.
Similarly, in the matter of Chandresh Sankhla v. State of Rajasthan9, the High Court of Rajasthan, while relying upon the ratio laid down in the Vinod Gumber Case, held that Section 12 of the Rajasthan Public Gambling Ordinance, 1949 is pari materia to Section 12 of the Gambling Act as well as Section 11 of the Madras Gaming Act, 1930. The court further held that fantasy games of Dream 11 involves ‘substantial skills' and thus, can not be said to be falling within the gambling activities.
Conclusion - Way Forward
The fantasy sports industry in India has seen humongous growth in recent times due to the surge in digital usage. The growth spells out the sector's immense potential for India, from an investment, revenue as well as employment perspective. The contribution of sports enthusiasts can turn around many sports in India that were brushed aside earlier and contribute to their growth.
However, due to the uncertainties created by differential legislations, the fantasy sports industry has found itself surrounded by various legal battles in the past causing hindrance to its ease of doing business. To curtail the same, the industry requires to set-up policies and procedures like high standards of corporate governance, transparency, integrity and accountability. A substantial amount of check in the form of licensing and registration should be placed on the companies desiring to enter into the industry, so as to ensure that the scope for malpractices and any illegality is completely ruled out, while at the same time letting the industry flourish.
In such a peculiar legal regime, self-regulation may be the ideal way forward. The establishment of an autonomous self-regulatory body, composed of industry stakeholders and guided by independent experts, will help ensure free and fair gameplay and development in the fantasy sports sector. In this context, the proposals made by Niti Ayog to self-regulate fantasy sports may prove to be a stepping stone towards uniform legislation for self-regulation. These initiatives would not only improve consumer protection but will ensure the development of an industry outlook that contributes to the welfare of the entire country.
1 The Business of Fantasy Sports (July 2020)
2 Federation of Sports Gaming- Report on Taxation of Online Fantasy Sports Gaming Market in India (May 2019)
3 State of Bombay v. R.M.D. Chamarbaugwala (1975) SCR 874
4 K.R. Lakshmanan v. State of Tamil Nadu (1996) 2 SCC 226
5 A.P. v. K. Satyanarayana (1986) 2 SCR 387
6 Varun Gumber v. Union Territory of Chandigarh 2017 Cri. L. J. 3827
7 Gurdeep Singh Sachar v. Union of India SCC OnLine Bom 13059
8 Special Leave Petition (Criminal) Diary No. 43346/2019
9 Chandresh Sankhla v. State of Rajasthan 2020 SCC OnLine Raj 264
Originally Published by RPV Legal, February 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.