Sarthak Bhardwaj
On 18th September, 2020, Paytm was temporarily removed from Google Playstore. Google alleged that Paytm flouted its gambling policies. In an official blog post, Suzanne Frey, Vice President, Android Security and Privacy, wrote, how they “don’t allow online casinos or support any unregulated gambling apps that facilitate sports betting.” This incident brings into sharp focus the growing popularity and questionable legality of online gaming platforms like Paytm Fantasy Games and Dream11. Research conducted in the recent past has revealed that fantasy sports platforms will surpass 100 million users by 2021. Such games, comprising a multi-million dollar industry, are often purported to be proxies for illegal gambling activities. Due to their involvement in huge financial transactions, some have argued that fantasy sport games, being games of chance, are illegal. The debate presently is more relevant than ever, for the Supreme Court is set to conclusively decide on the legality of online fantasy sports games, once and for all.
In this article, I shall firstly discuss what fantasy gaming is. I will then briefly lay down the existing Indian regulatory framework around gaming in general. I will also highlight the present framework’s inadequacy to regulate online fantasy games. Thirdly, I shall trace the judicial history of an online fantasy sports game, Dream11. Dream11 is the first and only instance of Indian courts having to deal directly with the issue of online fantasy games. Fourthly, I will rely on a foreign jurisdiction to offer global perspectives on online fantasy games. Finally, I shall conclude by highlighting the need to legalise online fantasy gaming and keeping it outside the fold of gambling.
What is Fantasy Sport Gaming?
It is essential to begin this discussion with an understanding of what is meant by fantasy sport games and how they function. Fantasy games permit users to build and manage virtual teams consisting of real-world players. The players are chosen based on a variety of factors ranging from skill, performance, fitness, probability to do well and so on. These teams then compete against fellow user-based teams on specific dates in a particular league or series. The users are awarded points based on an individual player’s performance on their team. The scoring metric is decided by the on-field action of players.
The Punjab and Haryana High Court (PH High Court) in the case of Varun Gumber v. Union Territory of Chandigarh (Varun Gumber) interpreted online fantasy sport to mean, “a game which occurs over a predetermined number of rounds in which participating users select, build and act as managers of their virtual 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 sports persons or teams in certain designated professional sporting events.”
Regulatory Framework
The two primary statutes which regulate gambling in India are the Public Gambling Act, 1867 (PGA) and The Prize Competition Act, 1955 (PCA). A prize competition, under the PCA, is any competition where rewards are offered for solving a puzzle based on arrangements or combinations. It further lays down limitations on conducting prize competitions. The PGA, on the other hand, distinguishes between games of “mere skill” and “games of chance”, wherein the former is legalised and the latter is prohibited. Although the PGA does not specify what constitutes games of mere skill, the Supreme Court, as early as in 1957, interpreted it as “games predominantly of skill”, in the case of R.M.D. Chamarbaugwala. The court also granted constitutional protection under Article 19(1)(g) to platforms conducting games merely of skill, as such games do not fall under the ambit of gambling but are a legitimate business activity. Further, in Dr. K.R. Lakshmanan v. State of Tamil Nadu, it was held that games of chance are those which are determined purely by luck and without any application of the human mind.
Indian jurisprudence, however, is restricted primarily to offline gaming and there is a lot of ambiguity about the regulatory measures of online gaming. As per the Seventh Schedule to the Constitution of India (Entries 34 and 62 of List II), the state governments are empowered to legislate on betting and gambling. Therefore, a state legislation on gambling overrides the PGA. Presently, there are two states, Nagaland and Sikkim, which have legislated on online gambling. The Sikkim Gaming (Regulation) Act, 2008 aims to achieve the twin-goal of controlling and regulating online gaming through electronic formats. The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act 2015 regulates skill based games like chess, sudoku, quizzes, virtual racing games and so on. Barring these two states, other legislations have failed to contemplate online gambling. Online gaming operators therefore, rely broadly on principles of the PGA and judicial pronouncements. Antiquated colonial laws like PGA, when applied to online games and their business structures, prove to be inadequate and cause confusion. This is because the PGA primarily criminalises gambling in public forums and keeping a ‘common gaming house’, i.e., an enclosed space where gaming instruments are used for profits. Its provisions fail to include the shifting arenas of gambling to online platforms.
The undecided question of law that emerges here is whether online fantasy sports games fall under the ambit of gambling, or are they exempt from the PGA being games merely of skill?
Judicial Developments in India
This question first arose in 2017 before the PH High Court. In the ‘Varun Gumber’ case, the petitioner sought to make the respondent, Dream11, criminally liable under the PGA. The petitioner after adding a sum of 50,000 rupees in his online account, wagered on a cricket and football match in quick succession. His virtual team performed dismally and he lost money. The petitioner then alleged that since the game involved no skill and was based purely on chance, it amounts to gambling under the PGA. Justice Amit Rawal rejected this contention on several grounds. Firstly, the court held that Dream 11 required “material and considerable skills by the user in ‘drafting’ of a virtual team and ‘playing’ fantasy sports game.” Secondly, it was found that Dream 11 has an elaborate training programme, where users are guided on the do’s and don’ts of the game. Other reasons included acceptance of terms and conditions by the user, interaction with the game regularly to keep a check on the players and so on. Thus, the court, while rejecting the petitioners claim, held that “success in Dream11 arises out of users’ exercise, superior knowledge, judgement and attention.” Dream11, therefore, was held to be a game of skill by the PH High Court.
Following this, a Special Leave Petition (SLP) was filed contesting the order of the PH high court before the Supreme Court. However, in September, 2017, the Supreme Court dismissed it and upheld the reasoning of the PH high court.
On 30th April, 2019, Dream11 faced yet another challenge in the Bombay High Court. In Gurdeep Singh Sachar v. Union of India a PIL sought criminal proceedings under the PGA against Dream11. The moot question for determination was whether Dream11 was involved in illicit betting under the guise of online fantasy sport. The Bombay High Court, relying on the ‘Varun Gumber’ case, dismissed the PIL as success of a user’s virtual team did not depend on the actual winning or losing of a team in the real world setup. Points were garnered on the basis of an individual player’s performance, which, as the Varun Gumber case shows, requires skill to recruit and maintain.
On 14th February, 2020, the Rajasthan High Court passed a similar order. In Chandresh Sankhla v State of Rajasthan, a PIL argued that Dream11 was involved in betting on cricket games and thereby lured people with insufficient knowledge of law into illegal activities. The respondent rebutted this claim by presenting Section 12 of the Rajasthan Public Gambling Ordinance, 1949. Under this Section, games which rely merely on skill are outside the ambit of gambling. A division bench of justices Indrajit Mahanty and Ashok Kumar Gaur, therefore, dismissed the PIL.
In an interesting turn of events, however, on the 6th of March, 2020, Supreme Court stayed operations of the Bombay High Court judgement in the Gurdeep Singh Sachar case. Pursuant to a SLP filed by the Maharashtra government, the Supreme Court issued a notice to all the parties and the stage is once again set for arguments to commence afresh. Despite a catena of judgements favouring online fantasy sports platforms as games of skill and not gambling, e.g., Varun Gumber, Chandresh Sankhla and Gurdeep Singh Sachar, this new development brings all previous judicial endorsements on this point back into focus.
While a judgement from the Supreme Court to settle this issue is awaited, there have been a few international cases where courts have held online fantasy games to be games predominantly of skill and not chance. I shall discuss two such cases in the next section.
A Global Perspective
The question of determining an element of skill in online fantasy sports is not peculiar to India. A study of global perspectives on this matter will reveal that such games are generally considered games of preponderant skill.
A leading case from the United States of America serves as a clear example. In Humphrey v. Viacom, the plaintiff argued registration fees taken by online sports leagues constitute wager and the winners, due to players’ injuries or other unforeseeable circumstances, are dependent largely on chance. District Judge Dennis Cavanaugh rejected the petitioner’s argument and ruled in favour of the defendant. The reasons offered were two fold. Firstly, entry fees were not wagers 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. The second argument, as shown above, has found favour with numerous Indian courts.
In another case, FanDuel v. Schneiderman, certain statistics such as a fantasy sport player’s actions having direct consequences on the game and well-informed players performing better than non skilled players, led the court to believe that online fantasy sports are games predominantly of skill.
This discussion shows how international developments on the point of online fantasy gaming, are in tune with the position taken by various High Courts. (See here, and here)
Conclusion
Prior to the Supreme Court staying operations in the Gurdeep Singh Sachar case, the law laid down in Varun Gumber, strengthened by dismissal of a PIL against it by the Apex Court, was applicable pan India. For a potential $150 billion industry, the Supreme Court’s ruling on this matter will have wide ramifications. If the Apex Court holds online fantasy games to be reliant on chance, the entire industry might face closure. While a judgement is awaited, based on the arguments presented above, I submit that fantasy sport games are those where success depends on a substantial degree of skill. Rulings from various High Courts have demonstrated willingness to agree with this perspective. However, it must be remembered that analytical metrics of each game are different. Various rules and regulations greatly alter the degree of skill required in a fantasy sport game. Hence, gameplay and interface of each game ought to be understood differently by applying the numerous principles enumerated in judgements like Varun Gumber and Gurdeep Singh Sachar.
Further, apathy of states to legislate on matters of online gaming leads to deeply problematic operations. Therefore, I submit that sports based online games, where the outcome depends predominantly on skill and not chance, should be legalised. Such a law would not only be in accordance with the recommendations of the Law Commission Report (No.276) in July, 2018, but have several other advantages. Firstly, since online gaming already occurs surreptitiously in large numbers, banning it would push it further underground. Secondly, by mainstreaming online gaming, it would remove bookies from the fold and eliminate black money from the economy. Thirdly, if legalised and taxed, online gaming can be a huge source of revenue for the government. Reports have shown that doing so will make India richer by Rupees 19,000 crore. Fourthly, creation of avenues of employment is an obvious ancillary benefit. A robust framework for regulating online gaming would ensure people don’t indulge in excesses and everything remains legal. Finally, a blanket ban on it would be futile, for as Edmund Burke said, “Gambling is a principle inherent in human nature”.
The author is a 3rd year student, pursing their degree in law from VIPS, IP University.
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