The consumption of fantasy sports has risen to an all-time high in the recent past. A study conducted by KPMG reveals that the revenue of the online gaming industry is expected to grow at a CAGR of 22.1 per cent during FY 2018-23 and the industry is predicted to reach INR 118.8 billion. We have already seen Dream11 becoming a unicorn, and it won’t be surprising to see the industry showing tremendous growth in the years to come.
Understanding fantasy sports
In 2001, fantasy sports first touched the Indian soil via ESPN Super Selector, which involved picking a cricket team of eleven players within a limited budget. In the span of just two years it became extremely popular during the 2003 ICC Cricket World Cup, that it attracted around 5,00,000 contestants. Fantasy sports is based on an individual’s ability to draft fantasy teams based on various criteria depending upon the actual list of players playing a certain match on a given day. It is on the basis of the performance of the players in the actual match, the users are provided points depending upon their selection of the fantasy teams. Post completion of the actual match, the users are ranked on the fantasy sports platform based upon the points they have obtained. The contests could be paid or unpaid, and the same is available across various sports – with the highest demanding sport being cricket. The users who participate also stand a chance to win cash prizes, which largely depends upon the nature of the contest they have entered into.
Legal evolution of fantasy sports
The debate around fantasy sports has been on whether the same qualifies to be a ‘game of chance’ or a ‘game of skill.’ The former falls explicitly under “gambling” and the same is barred by the Public Gambling Act, 1987. Gambling activities fall under List II of the Seventh Schedule of the Constitution of India and therefore, states have exclusive authority to formulate laws around gambling. In 2015, Nagaland had introduced a licensing regime for skill games under the Nagaland Prohibition of Gambling and Promotion and Regularisation of Online Games of Skill Act, 2015. Prior to this legislation, fantasy sports were not expressly recognised as a “game of skill” under any Indian legislation or judgment. The Nagaland Prohibition of Gambling and Promotion and Regularisation of Online Games of Skill Act, 2015 recognised the concept of “virtual sport fantasy league games” and “virtual team selection games” as a game of skill. Interestingly, a few states such as Telangana, Assam, Odisha among others, do not recognise gambling activities distinct from the game of skill, and therefore, playing fantasy sports amounts to gambling in such states. Nevertheless, it cannot be disputed that all games are based on chance or luck, but are based on one’s skills and cognitive abilities, and hence are legally permitted in India. Whether a particular game qualifies to be a game of skill depends upon its modalities. The modality of Dream11(a popular fantasy sports application) was challenged before the Hon’ble Punjab & Haryana High Court and the Hon’ble Bombay High Court and both the judgments upheld that Dream11 is a ‘game of skill’ and not a ‘game of chance.’ The argument put forward by Dream 11 before the Hon’ble Punjab & Haryana High Court was –
“The success in Dream-11 ‘s fantasy sports games arises out of a user’s exercise of superior knowledge, judgment, attention and adroitness in understanding the Dream-11 rules, acquainting himself with the past performance, physical state and form of athletes available for selection across multiple categories, assessing the relative worth of an athlete and the anticipated statistics arising out of the athlete’s performance in the underlying real-world event and devising an overall strategy in selecting and playing the Dream-11 game. Therefore, the element of skill has a much greater and predominant influence on the outcome of the Dream-11 fantasy sports game than any incidental chance.”
The Punjab & Haryana High Court held that playing Dream11 requires a substantial amount of skill set and even though there are elements of chance in the game, if a game is preponderantly a game of skill, it would nevertheless qualify to be a game of “mere skill.” Similar reasoning was also followed in the cases of Andhra Pradesh v. K. Satyanarayana & Dr. K.R. Lakshmanan v. State of Tamil Nadu, where the Hon’ble Supreme Court interpreted the phrase “game of mere skill” to mean “preponderantly a game of skill.” In the former case, the Hon’ble Supreme Court held that the game of Rummy is not entirely a game of chance, while in the latter the Apex Court declared horse-racing to be a game of skill. Further, games such as rummy and betting on horse races have been characterised as a game of skill since it involves elements of ‘skills’ more than ‘chance.’ The Law Commission of India in its 276th Report, recognised fantasy games within the ambit of “gaming” as opposed to “betting.”
In 2019, a criminal public interest litigation was initiated against Dream11 before the Hon’ble Bombay High Court where the petitioners argued that the activities of Dream11 amounts to gambling and the same is undertaken to evade Central Goods and Services Tax (CGST)/Integrated Goods and Services Tax (IGST). The Bombay High Court relied on the judgment of the Punjab & Haryana High Court upholding that Dream11’s activities as legal, and since, there is no gambling/betting involved, there cannot be an evasion of CGST/IGST by Dream11. The Bombay High Court further held that GST is payable only on the consideration which is payable/collected on the goods and/or services on the platform at the rate of 18 per cent. The Hon’ble Rajasthan High Court, relied on the reasoning of the High Courts of Punjab & Haryana and Bombay to hold that the issue of the legitimacy of fantasy sports games cannot be made a subject to debate. However, recently, the Hon’ble Supreme Court of India issued notice to the parties in the proceedings filed by the State of Maharashtra and stayed the decision of the Hon’ble Bombay High Court in the Gurdeep Singh case, throwing some uncertainty on the issue at hand.
Regulation of Fantasy Sport Games
Only a few states such as Nagaland and Sikkim require licensing prior to the conduct of any online gaming activity. Presently, fantasy sports is self-regulated by industry bodies such as the All India Gaming Federation, ensuring ethical functioning of the game. Recognising the need for a comprehensive legislative framework to regulate the online gaming industry, the Hon’ble Madras High Court in the case of D. Siluvai v. State, acknowledged that such a regulation would encourage investment in the sector and lead to technological advancements and revenue generation.
Going by the trend, the future of fantasy sports both in terms of legality and retention of users will be dependent upon the degree of skill sets required to play the game and its competitive nature. Given that there is a high plethora of rulings from the High Courts of India on the subject matter, it is unlikely that the Hon’ble Supreme Court is going to take a different position on the same.
ABOUT THE AUTHOR
Mayank Barman is a law student at the Department of Law, University of Calcutta.
In Content Picture: Pixabay
Kindly note that the views and opinions expressed are of the author and not of the Indian Journal of Law and Public Policy.