INTRODUCTION

Being able to recreate sports teams and enjoy what it feels to
be on the ground during a real game is something that every sports
fan wishes for. This is a fantasy that has been made possible by
the emergence of ‘Fantasy Sport’. As the Indian Premier
League (IPL) fever is about to take over the country followed by
the T-20 World Cup, fans of the gentlemen’s game are all ready
to hop on to their phones again and make their own virtual teams
and compete with million others. Somehow, that statement
doesn’t seem absurd. With Dream 11, a unicorn in the fantasy
sports platform, having sponsored the biggest cricket league in the
world (IPL 2020), online fantasy sports platforms have jumped
tremendously in popularity and size in India in just a few
years.

The term ‘Fantasy Sport’ refers to online games where
people/users make virtual sports teams and then participate in
contests and leagues that emulate the real-world conditions of the
game. Also known as rotisserie or roto, they are played on the
internet and usually comprise proxies of real players of
professional sports. Most fantasy sports games involve the assembly
of imaginary virtual teams from a pool of real players taking part
in the games, strictly based on their knowledge, experience,
perception of the players and the teams. Users making virtual teams
need to adhere to a certain specific value while making their teams
and enter in the contest through an entry fee. Based on the
performance of the imaginary teams, the users are ranked, which
ultimately forms the basis for their winnings.

The emergence of Fantasy Sports in India is hugely credited to
the popularity of cricket and the fan-following of IPL which
started in 2008 and since then has taken the country by storm.
Cricket, in India, is more than just a sport. It is a religion, a
part of our culture, where players become gods and fans become
worshippers. The Indian Premier League is the most anticipated
event which not only justifies the hype but goes far beyond it. So,
it’s not surprising that fantasy sport to first become an
obsession has been cricket, and the platform ‘Dream 11’, in
particular. This fantasy sports application has grown through leaps
and bounds since it was first introduced in 2008 and also went on
to bag the coveted title sponsorship of IPL ’20, heralding them
to the big ‘leagues’. Demonstrably, fantasy sport is now a
big game of big money and only growing. There is curiosity and
there is rage. The industry is expected to be worth US$ 3.7 billion
by 2024.

Legal and Regulatory Dilemma

Having emphasized the importance and popularity of Fantasy
Sports in India, it is pertinent to mention that the entire market
of fantasy sports stands in a regulatory grey area. There exists
zero concrete legislation with respect to its legality, its
boundaries with gambling and betting, or its taxation for that
matter. With its sudden and humongous rise, there has also been an
increased interest in the legality of Fantasy Sports as to whether
the same amounts to betting/ gambling or it comes under the legally
permitted ambit of “Game of Skill”. This legality issue
with Fantasy Sports is owing to the fact that in most circumstances
these games involve real money transactions and has been often
considered to be on the lines of betting and gambling. Since 2017,
there have been many Public Interest Litigations (PIL) questioning
the legality of the format that these fantasy gaming platforms use.
However, before discussing the PIL’s and the opinion of various
courts on the legality of Fantasy Sports, it is important to
understand that in India, betting and gambling fall under the 2nd
list of the 7th schedule of the Indian Constitution, which means
betting and gambling is a state issue and the states have the power
to govern and regulate the same. There is no centralized
legislation or regulatory framework for Sports in India, lest
Fantasy Sports and this has caused a tremendous issue as the
understanding and regulations of the same are not clear.

Prior to the promulgation of the Constitution of India, betting
and gambling in India were governed by the Public Gambling Act of
1857. After Independence, betting and gambling were listed under
Entry 34 of List II of the Seventh Schedule of the Indian
Constitution, thus empowering the states only to legislate upon the
subject. Similarly, Entry 62 of the same list empowers the states
for legislation for the taxation of betting and gambling as well.
As a result, most states have different sports laws on the
subject, albeit primarily based upon the original 1857 Act. As per
the Public Gambling Act of 1867, all forms of betting, including
online betting, are illegal in India. However, the Act has also
carved out an exception explicitly allowing games of “mere
skill”. Game of skill and a game of chance is the most basic
distinction that courts generally attempt to make when deciding on
the legality of a gaming platform such as fantasy sports and to
distinguish between a game and a gamble. Most gaming enactments of
different states seek to exempt games of skill, whenever
possible.

As it stands, every state in India, except Goa, Sikkim, and the
Union Territory of Daman explicitly prohibits any sort of gambling,
betting, or wagering on games of chance. The states of Assam,
Andhra Pradesh, Nagaland, Odisha, Sikkim, Tamil Nadu, and Telangana
have placed restrictions on games of skill as well. Hence,
users/people from these states are not allowed to participate in
Fantasy Sports such as Dream 11 where there is real money
transaction involved.

In India, in the absence of a governmental regulatory body, it
is the Federation of Indian Fantasy Sport (FIFS), a self-regulatory
body, which focuses on the standard of operation and protection of
the interest of the consumers dealing in fantasy sports. The
renaming of the Indian Federation of Sports (IFS) to FIFS brings
out the eagerness of the board to focus on e-sports along with
fantasy as opposed to focusing on all skill-based games. The trend
for Fantasy Sport has been in existence in the country since the
past decade with several gaming applications such as FanFight, My
Team 11, and Mobile Primer League (MPL). However, the obsession of
this ‘fantasy’ grew more with the emergence of Dream 11 and
its connection with the highly commercialized “Indian Premier
League”.

GAME OF SKILL vs. GAME OF CHANCE

It is imperative to understand the distinction between a game of
skill and a game of chance as fantasy sports’ status is hugely
affected by these definitions.

A game of skill is when a player needs to invest their time in
learning, practicing, and mastering their skill in order to win.
Success in such games is dependent on how aware one is of the rules
and popular practices and how efficiently one plays. Over time the
player can become an expert and ensure success. Physical real-world
sports are primarily games of skill and not of chance. A Game of
chance is where chance predominate skill and there is a major
factor of luck or chance that affects the outcome of the game.
Because the deciding factors are incidental, there is no way of
predicting who or what will win. In the real world, however, the
divisive line is blurred and most games have an element of both
skill and chance. For example, most card games are games of chance
with also some element of winning by a player’s skill.

The Courts in the country have used a simple way to majorly
distinguish between the two: a game of skill can be mastered over
time whereas a game of chance cannot, as it depends on the
happening or non-happening of a particular event. Games of Skill
are allowed in most parts of the country while games of chance are
completely prohibited throughout the country and are treated as
immoral and illegal. Notably, in India, the only central act that
criminalizes most aspects of gambling (Game of Chance) is the
age-old Public Gambling Act of 1867. While it puts restrictions on
gambling in the country, at the same time, the Act explicitly
allows within its purview, games of “mere
skill“. The Supreme Court, in State of Bombay v.
R.M.D. Chamarbaugwala has interpreted the words “mere
skill” to include games that are preponderantly of skill,
despite having small elements of chance as well. What constitutes a
game of skill was first dealt in State of Andhra Pradesh v. K.
Satyanarayan wherein a game of “Rummy” was held to
be a game of skill, requiring memorization and judgment skills -
“it is mainly and preponderantly a game of skill” and
hence, could not be criminalized under the Pubic Gambling Act. The
question was again brought up in Dr. K.R. Lakshmanan v. State
of Tamil Nadu, where horse racing was held to be
preponderantly a game of skill. Thus, the ‘preponderant factor
test’ or ‘dominant factor test’ came to be. This test
identifies and recognizes that most games contain both chance and
skill, however, the dominance of one factor over the other is to be
treated as the deciding factor to determine whether it falls under
the game of skill or chance.

Fantasy Sports – Game of Skill or Chance?

The general stance taken by various courts and other
stakeholders in the fantasy sports industry, with respect to the
legality of fantasy sports is that it is a Game of Skill and hence
is legal. In the short while that fantasy sports have been
popularized in the country, there has been a flurry of decisions of
various high courts considering fantasy sports as games of mere
skill. The question on the legality of fantasy games first fell on
and was settled in by the High Court of Punjab and Haryana which
ruled Dream 11’s games be predominantly based on skill. The
Court elucidated on a number of reasons for the same. Firstly, the
drafting of a virtual team involves the exercise of considerable
skill as the user must first assess the relative worth of each
athlete against the available selections. Secondly, the imaginary
team cannot be a real-world replicate, as it is impossible to have
more than 7 players from a single team. Apart from these, the user
must also pick a ‘captain’ and ‘vice-captain’,
constantly monitor the scores, runs, catches, wickets, and form of
every player as well as the pitch and match conditions. A
subsequent appeal against the order to the Supreme Court was
dismissed. In another similar judgment of the Bombay High Court,
the Hon’ble Court quashed a PIL and stated that fantasy online
sports do not amount to gambling or betting since there is skill
exercised by the users in judgment and attention of players and
teams and moreover, the result is not dependent on the winning or
losing of a particular team in the real game. Similarly, in another
case, the Rajasthan HC also considered Dream11 to be a game of
skill, relying on the Bombay and Punjab & Haryana High
Courts’ judgments and also held that online fantasy gaming
platforms publish games of skill, is no longer res Integra.

A stay order by the Supreme Court against the order of Bombay
High Court ruling fantasy games as a game of skill, in 2020, had
put the contention out in the open again. While the same is still
pending, the Hon’ble Supreme Court very recently in August
2021, upheld the legality of fantasy sports format in an appeal
made against the aforementioned Rajasthan High Court order. These
observations by the High Court and the Apex Court are instrumental
in legitimizing the business of fantasy sports and reducing the
ambiguity around the industry. Moreover, it also emphasizes the
dire need for a centralized regulatory framework and the need for
the Central Government to collaborate with the State Governments to
remove extant ambiguity and allow for the growth of the fantasy
sports industry.

CURRENT CHALLENGES TO FANTASY SPORTS

Impossibility of Regulation

The laws that deal with this issue of betting and gambling and
Fantasy Sports thereof has been derived from the archaic
legislation of Public Gambling Act which came into force, way back
in 1857, and hence evidently, did not possibly envision betting and
gambling to possibly be on a national or international level – it
was perceived to be in houses and clubs and casinos. Neither the
states envisioned so, and nor did the Constitution. However, with
the advent of the internet and rapid technological advancement, the
Seventh Schedule of the Constitution itself has come of age. The
Schedule does not envision what happens when a residuary subject,
which comes under the Union’s legislative authority ( that of
information technology), conjoins with a state subject ( that of
gambling). Similar issues have arisen with the draft Data
Protection Bill as well.

In such a situation, the subject of online fantasy gaming,
gambling, and betting, should be left with the Centre due to the
lack of states’ control over it. Today, if one wants to enter
contests on Dream11 while living in Odisha (or any other state
where it is prohibited), they can do so easily by just entering an
incorrect address while signing up for the platform. One can even
sign up for gambling websites easily, and there is no provision for
any penalties for any such user in any of the state act on the
subject. Laws need to be significantly overhauled in order to have
any prevention of online betting and gambling, which pose increased
risks due to their ease of access.

Heavy Compliance Burden For Platforms

On the other hand, the current wide disparity in state laws
poses huge compliance burdens for these online fantasy sports
platforms which operate at a massive scale – some even
internationally. This is best seen in the case of Sikkim and
Nagaland, where licenses are offered for the operation of online
platforms, yet the biggest players have not jumped on board. There
have also been issues as to whether various state legislations are
adept at regulating online gaming and several courts throughout the
country have urged state governments to look into the issue of
online gaming and possibilities of regulating the same.
Additionally, apart from legal compliance, differential laws
further result in users having varied rights and remedies against
the platforms, resulting in ambiguity and confusion for the users
when it comes to dispute resolution. While the debate of whether
online fantasy sports platforms host games of skill or chance has
been settled to be of the former, there still exists no clear
guideline as to what may constitute a game of skill. Ludo, for
example, is being played online prize monies – which lies squarely
in the grey area still. Without a clear guideline or test,
innovation is stifled to a great extent as what may be legal and
the core of one’s business today would be held to be criminal
tomorrow.

PRESENT SCENARIO

Recommendations of Niti Aayog

The NITI Aayog, a public policy think tank of the Government of
India, has recognized the various positive judgments on legality of
fantasy sports, as well as the legislative void on the issue,
noting that the platforms are “having to shelter under an
undefined exception to the state gambling and public order
laws”. A draft for discussion has consequently been prepared
for guiding principles to the Online Fantasy Sports Platforms
(OFSPs).

The draft points out the following impediments to the industry
as a result of the legislative void –

1. There is no objectively definable test to assess and determine
   whether a game will be characterized as a game of skill or chance.
   This puts the onus of assessment on the developer of the game
   itself. Without clarity, innovation and development may be
   stifled.




2. The variance of regulation among states poses a heavy
   compliance burden on the platforms.




3. Differential regulation among states also results in a burden
   for consumers with respect to penal compliance. For example, a user
   living normally in Delhi may face prosecution if using the app
   within Nagaland.

As a result, the NITI Aayog has currently proposed a
self-regulatory organization for the industry, supervised by an
independent oversight board. This proposed organization would
further constitute an independent evaluation committee that would
be responsible for determining the ‘skill’ level in the
game. This may be coupled with a national light-touch regulatory
framework. The draft has also put forth draft guiding principles,
which include compliance with advertising guidelines, age limits,
and communications to states for requests of immunity.

Regulations by ASCI

The Advertisement Standards Council of India (“ASCI”)
had released certain guidelines in December 2020, on advertisements
of fantasy sports and online gaming. Under the ASCI Guidelines, all
such advertisements should contain certain mandatory disclosures
and statements (whether such advertisements are in print or audio/
video format) such as; (i) the game involves financial risk and may
be addictive and that the players should play at their own risk;
(ii) the advertisement should not present online gaming for real
money winnings as an income opportunity or an alternative
employment option; (iii) the advertisement should not suggest that
a person engaged in gaming activity is more successful as compared
to others; and (iv) the advertisements should not depict any person
below the age of 18 years or who appears to be below 18 years of
age, engaged in the game of online gaming for real money winnings
or suggest that such persons can play these games.

Moreover, online fantasy sports platforms are also required to
follow the draft guidelines for Advertising on Digital Media
(“Influencer Guidelines”) issued by the ASCI in February
2021. Considering the impact of influencers on consumers, the
Influencer Guidelines suggest certain standards be followed by
influencers. These standards include specific disclosures of the
nature of posts by making prominent labeling of each digital media
post, and also provides for the specifications of labeling or
disclosures to be followed in picture posts, video posts, and audio
posts. These guidelines have been prescribed so that accurate or
correct information regarding the financial and other risks
associated with online games are portrayed to the consumers.

Such active roles by government and regulatory bodies are no
doubt a positive step in promoting and expansion of the fantasy
sports industry in the country.

Madras High Court’s strikes down ban on Online Gaming

In a very recent order (Junglee Games & Ors. Vs. State
of Tamil Nadu) of August 2021, the Hon’ble Madras High
Court completely struck down a Tamil Nadu Government law that put a
blanket ban on all forms of online gaming, including games of
skill. The Court was of the view that imposing a blanket ban fell
afoul of Article 19(1) (g) of the Constitution of India and hence,
completely quashed the amendment that brought about the ban on all
forms of the online game. The Court also specifically pointed out
that Games of skill are no more res Integra and that the ban was
ultra vires the constitution as it imposed a restriction on right
to practice any profession, trade, or business. The Court also
mentioned and focused on the requirement that it is necessary to
regulate online gaming rather than prohibiting it altogether.

New Norms for Fantasy Sports in Telangana

The Telangana Government has recently made its intention in
coming up with new rules for online fantasy sports, which will
encourage self-regulation and fantasy sports development in the
state. It is important to note that Telangana is one of the states
which has a prohibition on games of skill as well. However, the
state government has shown its willingness in bringing about a
progressive piece of legislation and being a role model for other
states. This clearly shows that with each passing day the states
are ready to accept the impact of fantasy sports in the economy and
regulate the same since it also has a huge potential to generate
revenue for the states.

India closing in on becoming Fantasy Sports Hub

The Federation of Indian Fantasy Sports (FIFS) in the absence of
a governmental regulatory body, is the first and only
self-regulatory body and focuses on the standard of operation and
protection of the interest of the consumers dealing in fantasy
sports. FIFS regularly conducts panel discussions through its
flagship event “GamePlan” wherein work in the fantasy
sports domain is recognized. The recent event that happened in
August 2021 emphasized the need to build a system of continuous and
constructive engagement with all the state governments, which is an
ongoing dynamic exercise to make India the hub of Fantasy Sports.
Such a proactive approach in educating and recognizing the fantasy
sports industry in India will provide substantial confidence
amongst the developers and investors and at the same time provide
an adequate framework for dissemination of adequate information and
risks to the users/players. As there is a huge potential for a
positive impact on the economy, it is expected that the Government
shall also undertake active steps to promote the growth of this
industry in India and make India the hub of Fantasy Sports.

Way Ahead for Fantasy Sports in India

As it stands, the subject is under intense litigation,
legislation, and discussion from a host of different areas with
courts from all parts of the country frequently involved in various
issues around the fantasy sports industry. Evidently, there has
been a considerable shift in the judicial approach vis-à-vis
regulating the online gaming space, where courts have been nudging
state governments to regulate the virtual gaming landscape. Various
High Courts have urged the state governments to possibly regulate
online gaming. Further, certain states have also brought
legislation seeking to ban/regulate online gaming.

The Indian gaming industry severely requires a robust regulatory
revamp as it has been governed by various archaic legislations. A
comprehensive regulatory make-over will serve a dual purpose; it
will curb illegal activities and regulate the online gaming
industry. Additionally, this move could come to benefit various
stakeholders including the potential users, owners of such
platforms, and the respective governments. Firstly, the
regulation of online gaming will protect the children from getting
corrupted, as stressed upon by various high courts.
Secondly, the owners of such platforms will benefit from
such a decision as it will augment investment and revenue in the
online gaming industry. Further, the potential professional players
would also profit from increased investment and revenue.
Lastly, the state governments would also be able to curb
illegal activities on such platforms.

On the flip side, a regulated online gaming industry would lead
to greater taxes being levied by the state governments, which could
prove to be worrisome for such platforms. However, such a formal
structure would allow such platforms to consult and assist the
state governments in making laws that govern the gaming industry.
Thus, while the intention behind the move is correct, the state
government’s actions should be based on consultation,
discussions, and dialogue with the stakeholders.

29 states – prohibited in 4, restricted in 2, confusing in all.
It wouldn’t be a surprise to know that a Bill is tabled in the
next Parliament session – it is the need of the hour anyway.

Conclusion

The issue with legalizing online fantasy gaming platforms
ultimately falls on the concept of what one may consider a chance
and to what degree it can be allowed within the purview of the
Public Gambling Act. The SC had already given the green light,
barring the appeal from the Bombay High Court, where the issue is
more to do with taxability aspects rather than legality per se. It
is the need of the hour to deem the age-old Public Gambling Act
nugatory – which is what even the 276th Law Commission had
recommended doing. The Law Commission report mentions a clear need
for legislative interference in the issue rather than prohibiting
the same altogether. Without clear guidelines as to what
constitutes a game of skill or a game of chance, innovation in the
field is seriously stifled. Unicorns Dream11, though growing
strong, are still left to the mercy of judicial interpretation,
without strong precedents. Moreover, platforms Paytm and MPL
(Mobile Premier League) have recently involved prize monies and
contests in fantasy sports, as well as iconic board games Ludo -
which are yet to test the boundaries of chance and skill.

The author believes that since self-regulation has proved to be
very effective in the past for various industries, and the same
could be applied to Fantasy Sports until governmental legislation
comes into play. It ensures the constant growth of the industry and
creates a fair and safe environment for both the producers and the
customers. The online fantasy sports industry is growing and
evolving by the second. Self-regulation can also help overcome
market failure and prevent harms such as those to the consumer, the
environment, the organizations, and any other stakeholders in the
industry. Therefore, self-regulation could be the way ahead for the
online fantasy sports industry. In this context, a body such as the
FIFS taking up the task of industry self-regulation has the
potential to benefit the fantasy sports industry and its various
stakeholders in numerous ways, as further described above. The
author also strongly agrees with the stance of the NITI Aayog that
an independent body needs to be set up to monitor every such game
and prepare strong guidelines as to the classification of
skill-based and chance-based games. The sooner, the better!

Fantasy Sports In India: A Report

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