Articles

Legality of Online Fantasy Sports League Games In India

By November 9, 2020 No Comments

A. INTRODUCTION:

Online fantasy sports league games are no longer something that India witnesses as an alien concept. It is an industry that is booming and has witnessed a surge in the Indian market in the recent past and still growing. This surge in the number of users of fantasy sports is due to the increase in digital usage and internet access worldwide. The FIFS-KPMG[1] report clearly states that there has been a drastic rise in the number of fantasy sports users i.e. from 2 million to 90 million in 2016 and currently the market value in India is estimated to be about one billion and is expected to go up to over $5 billion in the next two to three years. It is forecasted that the online fantasy sports league games are to become one of the most potential industry that is going to be very beneficial to its investors as well as it stakeholders and seeing such potential it has become one of the most lucrative industry to invest by several start-ups and entrepreneurs who are looking to invest.

B. WHAT ARE FANTASY SPORTS?

Fantasy sports are online games which enable users to formulate virtual teams choosing amongst real-world players. The users based on skill, performance, fitness, previous performances and records choose players and form virtual teams. The users based on the probability that selected players or the team shall perform well, register themselves and enter into the competition by paying a basic entry fee.  The administration after deduction of an administrative fee, pool the fees collected from various users. These teams formulated by various users compete amongst other virtual teams formulated by other users and depending on the performance of individual players selected the users are awarded points. The users further receive points on the basis of individual player performance for that particular match and also on the overall performance of the team and in consonance to every other aspect rank player and receive distributions from the pool money based on rank.

C. THE LEGALITY OF FANTASY SPORTS:

The Legality of fantasy sports in India is solely dependent on whether the game qualifies to be a “game of skill” or “game of chance”. In case of a game of chance, it falls under the purview of gambling and is therefore restricted by the gambling laws. In India there are primarily two laws that regulate gambling in India i.e. the Public Gambling Act, 1867 (“Gambling Act”) and The Prize Competition Act, 1955. The Gambling Act distinguishes the game of skill as legalized, and game of chance as prohibited. There is no clear definition of a game of skill or what constitutes a game of skill in the Gambling Act, but the Supreme Court interpreted it as games predominantly of skill in the case of R.M.D Chamarbaugwala vs. Union of India[2]. Further, it can be said that games/sports that involve a considerable and substantial degree of skill, falls outside the scope of the Gambling Act and hence considered legal in India. Section 12 of the Gambling Act exempts the application of the section on any game of mere skill.

As per 7th Schedule of the Constitution, Entries 34 and 62 of List II), the state governments are empowered to legislate on betting and gambling. It can be said that state legislation overrides the central Gambling Act. Presently there are two states i.e. Nagaland and Sikkim that have their own state legislation on gambling and betting i.e. The Nagaland Prohibition of Gambling (Regulation) Act, 2008 and The Sikkim Gaming Regulation Act, 2008 respectively. Apart from the aforementioned two states and their regulations, other legislations have failed to contemplate online gambling. Therefore, online gaming operators rely on the principles of the Gambling Act and judicial pronouncements.

D. JUDICIAL DEVELOPMENT OF FANTASY SPORTS IN INDIA:

The legality of online fantasy games has been upheld by various courts in India and they have held that these games are predominantly games of skills. The growth of this industry has stemmed from various judicial pronouncements whereby they have upheld online fantasy sports as games involving considerable and substantial degree of skill which are games that are not within the purview of gambling in India.

In the case of Varun Gumber vs. Union Territory of Chandigarh and Ors.[3] the High Court of Punjab & Haryana found that fantasy sports involve the exercise of considerable skill, judgement and discretion because the participants have to assess the relative worth of each real world player based on their strength and weakness at the time of selecting a player for virtual teams. This assessment determines winning or losing in fantasy sports. Hence, it’s the skill of an individual which predominantly affects the outcome of matches.

In the case of Gurdeep Singh Sachar vs. Union of India,[4] the High Court of Bombay took the similar view as taken by the High Court of Punjab & Haryana in Varun Gumber vs. Union Territory of Chandigarh and Ors. The Court also observed that unlike in betting, winning or losing in fantasy sports was not dependent on any team winning or losing in the real world.

A Special Leave Petition[5] against the judgements of Varun Gumber vs. Union Territory of Chandigarh and another Special Leave Petition[6] Gurdeep Singh Sachar vs. Union of India was filed before the Supreme Court wherein the Supreme Court dismissed the SLP’s and upheld the reasoning of the High Court of Punjab & Haryana and High Court of Bombay.

E. GLOBAL PERSPECTIVE:

The subject of deciding an element of skill in online fantasy sports isn't exceptional to India. Extensive research on the worldwide perspective on this issue will uncover that such games are commonly viewed as games of preponderant skill.

In Humphrey v. Viacom[7], it was argued by the petitioner in this case that registration fees taken by the fantasy sports constitute wager and the winners are dependent largely on chance. the petitioner’s argument was rejected on two-fold reasons. Firstly, entry fees were not wagering as “the entry fees are paid unconditionally”. Secondly, fantasy sports were a game of skill where success depended on the participant’s skill in choosing his team and players for the tournament. In another case, FanDuel v. Schneiderman[8], statistics suggest that fantasy sport player actions having direct consequences on the fantasy sports and well informed and skilled players performing better than non-skilled players, which led the court to believe that online fantasy sports are games which are predominantly of skill.

These aforementioned cases clearly show how international developments on the point of online fantasy sports, are in tune with the position taken by various High Courts in India.

F. PRESENT SCENARIO OF ONLINE FANTASY SPORTS IN INDIA:

  1. On 6th March 2020, the Hon’ble Supreme Court of India, has stayed the judgement passed by the High Court of Bombay in the case of Gurdeep Singh Sachar vs. Union of India. Therefore, this stay casts a doubt for the time being over the legality of online fantasy sports in India.
  2. Google recently removed from its playstore, the Paytm App on 18th September 2020 stating the reason that Paytm flouted its gambling policies. The vice president of Android Security and Privacy said that they don’t allow online casinos or support any unregulated gambling apps that facilitate sports betting. This incident brings the spotlight on the growing popularity and questionable legality of online gaming platforms like Paytm Fantasy Sports.

G. CONCLUSION:

In light of what is set out above and the lawful points of reference from the judicial pronouncement, both globally and in India, it may be very well contended that online fantasy sports are games in which achievement relies on a generous level of skills. It is additionally appropriate to take note of that, not all online fantasy sports have been held to be a game of skill. There are different elements that a user/player would need to evaluate remembering the various conditions and scoring measurements set out to influence the consequence of online fantasy sports. Taking in consideration the reasoning of various courts, analysis of the conditions or the rules within which a user is required to draft their team, viz., restrictions on the number of players from a single team, upper caps and limits, etc., play a critical role in analyzing the element of skill involved in fantasy sports games. Hence, each fantasy sports game needs to be analyzed on a case to case basis applying the principles discussed above.

Authors: Prashant Jain, Co-Founder & Partner; Jaisis Das, Associate

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. For any queries, the authors can be reached at (i) prashant@samistilegal.in (ii) jaisisdas@samistilegal.in.

[1] Link: http://www.sportslaw.in/reports/FantasySportsPublication-Web.pdf

[2] AIR 1957 SC 628

[3] CWP No. 7559 of 2017.

[4] Criminal P.I.L No. 16 of 2019.

[5] SLP (Crl.) Diary No. 9295 of 2019

[6] SLP (Crl.) Diary No. 42282 of 2019

[7] Humphrey v. Viacom, 2007 BL 38423 (D.N.J. 2007).

[8] FanDuel v. Schneiderman, N.Y. Sup. Ct., 161691/2015

Leave a Reply