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Analyzing the Legality of Fantasy Sports in India

Written by Mayur Kulkarni

Research Associate at Law & Order (Aug-Oct 2020)

Third Year, B.Com LLB. Gujarat National Law University


Source: SiliconIndia


Disclaimer: Please note that the views expressed below represent the opinions of the article's author. The following does not necessarily represent the views of Law & Order.


Introduction


Fantasy sports/games are apparently the latest fad in India. Accordingly, to a KPMG report,[1] there are more than 140 fantasy sports platforms with over 90 million users. Its market stands at a staggering $ 2.2 billion and is expected to reach $ 5 billion by 2021.

Having said this, the current legal position of fantasy sports is that it is largely unregulated but it is regarded as a legal practice across India, except in a few states such as Odisha and Assam.

Further, there is no general definition of a fantasy sport. However, the definition provided to the Punjab and Haryana High Court by Dream11.com, a fantasy cricket platform is a good starter. It reads as follows:


“Any fantasy sports game is a game which occurs over a pre-determined number of rounds (which may extend from a single match/sporting event to an entire league or series) in which participating users select, build and act as managers of their virtual teams (constituted of real players or teams) that compete against virtual teams of other users, with results tabulated on the basis of statistics, scores, achievements and results generated by the real individual sportspersons or teams in certain designated professional sporting events. The winner of such fantasy sports game is the participant whose virtual team accumulates the most number of points across the round(s) of the game."[2]


Furthermore, as there are no legal instruments dealing with fantasy sports exclusively, courts have applied the Public Gambling Act, 1867 [PGA] and the Prize Competition Act, 1955 [PCA] to decide issues arising out of fantasy sports. The PGA criminalizes all acts of gambling/betting. Nonetheless, it differentiates between betting on a ‘game of chance’ and betting on a ‘game of skill’. A ‘game of skill’ falls outside the scope of the PGA and is hence allowed.[3] Therefore, under the current legal regime, for fantasy sports to be legal, they must be a game of skill and not a game of chance.


What qualifies as a ‘game of skill’


The Supreme Court in State of Bombay v. R.M.D. Chamarbaugwala[4] interpreted the words ‘mere skill’ to include games which are preponderantly of skill and even if there exists an element of chance, such games would still qualify as games of skill. On the other hand, a game is a game of chance if it decided entirely by mere luck and the result of which is completely uncertain and doubtful, and a person cannot apply his/her mind to determine its result.[5]


Consequently, if a fantasy sport is a game of chance or a game of skill depends on its individual modalities.[6] However, the courts have used the ‘predominance of skill’ test to determine which games are in fact games of skill.[7] Games involving considerable and substantial degree of skill say more than 50% can be qualified as games of skill.


The ‘predominance of skill’ test also referred to as the ‘dominant factor’ test requires the determination of whether chance or skill ‘is the dominating factor in determining the outcome of the game’.[8]

In recent years, the courts have dealt with the legality of the fantasy sports games, especially with the regard to the legality of the games offered on Dream11.com. in the case of Varun Gumber v. Union Territory of Chandigarh,[9] Varun Gumber (Petitioner), filed writ petition alleging that he had lost money while participating in the games offered on the Dream11.com. the Petitioner said that it was only after participating in these games that he realized that the games offered on Dream11.com are games of chance and not games of skill and is therefore gambling.


However, the Punjab and Haryana High Court rejected these arguments placing reliance on the facts that the users of Dream11.com are required to have considerable skill and discretion while picking their team;[10] they are required to study the rules of the game and the point system offered by the platform[11] and moreover, the user succeeds based on the user’s superior knowledge and judgment regarding cricket and not entirely based on chance.[12].

It further held that skill had an important influence on the outcome of the games offered by Dream11.com. Hence the High Court held that games offered on Dream11.com were ‘games of skill’ and were therefore legal. Similar interpretation was given by the Bombay High Court in the case of Gurdeep Singh Sachar v. Union of India.[13]

Judicial confusion over the proper test to determine a ‘game of skill’


Although the ‘predominance of skill’ test to determine ‘game of skill’ is well established, there seems to be an air of confusion about the precise elements of the test. This is evident in the Supreme Court’s observation in State of Andhra Pradesh v. K. Satyanarayana.[14] [Satyanarayana] Here the Court seems to have established a two-pronged test to determine the game of skill. The first prong being the ‘predominance of skill’ test and the second prong is whether the operator of the game is making ‘a profit’ from any game for stakes i.e., anything more than the nominal charges required to offset the operational charges of the operator.


The Court in Satyanarayana seems to suggest that the operator must not make any profits out of the games he/she offers as this would characterize the game as gambling, even though the games in themselves are merely ‘games of skill’.

Similar observations were made by the Madras High Court in Director General of Police v. Mahalakshmi Cultural Association[15]. Here the Court held that rummy which was recognized as a game of skill in Satyanarayana, amounts to gambling when played with stakes and when the operator made profit by offering such a game. Similar observation was made in the case of Gaussian Pvt. Ltd. v. M/s Monica Lakhanpal[16]. Recently, the Gujarat High Court in the case of Dominance Games Pvt. Ltd. v. State of Gujarat,[17] has also held that poker which is a game of skill when played with stakes may be considered as gambling.


Having said that, there have been several judgments,[18] after Satyanarayana that have disregarded the ‘profit making’ or the ‘playing for stakes’ test by treating it as obiter dicta. Therefore, there exists confusion about the appropriate test to determine ‘game of skill’.

Conclusion


Since the fantasy gaming industry is booming in India there are urgent requirements on two fronts. First, on the judicial front, the courts must adopt a single test to determine the ‘game of skill’. In this regard the author is of the opinion that the profit making or playing for stakes test propounded by Satyanarayana is ill founded. This is because, the PGA excludes all ‘games of skill’ from its purview there must be no bar on the operators making profits by offering such games that are legal in themselves. Secondly, on the legislative front, there is an urgent need to come up with legal instruments to define and regulate fantasy sports or games so as to protect the interests of all the stakeholders involved in the industry.


[1] IFSG-KPMG, The Evolving Landscape of Sports Gaming in India (March 2019). [2] Varun Gumber v. Union Territory of Chandigarh and Ors., 2017 SCC OnLine P&H 5372. [3] Section 12, Public Gambling Act, 1867. [4] AIR 1957 SC 699. [5]Dr. K.R. Lakshmanan v. State of Tamil Nadu, AIR 1996 SC 1153. [6] Ibid.; State of Andhra Pradesh v. K. Satyanarayana, AIR 1968 SC 825. [7] State of Andhra Pradesh v. K. Satyanarayana, AIR 1968 SC 825;Kizakke Naduvath Suresh v. State of West Bengal, 2016 SCC OnLine Cal 8206. [8] Supra note 4. [9] Supra note 2. [10] Supra note 2, ¶19. [11] Ibid. [12] Supra note 2, ¶20. [13] Gurdeep Singh Sachar v. Union of India, (2020) 72 GSTR 75 (Bom). [14] State of Andhra Pradesh v. K. Satyanarayana, AIR 1968 SC 825. [15] 2012 3 Mad. L. J. 561. [16] Suit No. 32 of 2012, Delhi District Court. [17] (2018) 1 GLR 801. [18] Dr. K.R. Lakshmanan v. State of Tamil Nadu, AIR 1996 SC 1153; D. Krishna Kumar v. State of Andhra Pradesh, 2003 Cr. L.J. 143.

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