Skill v. Chance: A Tale of Fantasy Sports in India

By Rupin Chopra and Apalka Bareja

Introduction

India in the recent years has witnessed a drastic change in the development of online gaming industry viz a viz the skill-based games and chance based games. With the scope and advancement of technology and increased internet penetration in the Indian market, one has seen a surge in the number of online gaming sites offering a plethora of games such as fantasy sports.

The question as to what is considered as a ‘skill-based game’ and what is considered as ‘chance-based game’ is a question to be determined on the basis of the scheme of a game and such a distinction between games of skill and games of chance is a crucial factor in determining the legality of fantasy sports in India.

Fantasy sports primarily involves participants creating ‘virtual teams’ of real-life players from various sports and earning points based on their performance in actual matches. Platforms like Dream11, MyTeam11 and MPL are a few emerging ‘major’ players in the Indian fantasy sports industry.

Dream11, India’s premier online fantasy sports platform, founded in the year 2008, that allows users to draft virtual teams and compete in various sports tournaments such as fantasy cricket, fantasy kabbadi and fantasy football has often been making the headlines and fighting its way through the regulatory challenges with respect to its operations and legality.

LEGALITY OF DREAM 11- A SAGA

Shri Varun Gumber v. UT of Chandigarh & Ors, CWP No. 7559

The question of legality on Dream11 was first raised in the year 2017 when a case[1] was filed in the Punjab and Haryana High Court (hereinafter referred to as P&H High Court) against the online fantasy sports platform wherein the P&H High Court held the fantasy sport game to be a game predominantly based on skill.

Brief Facts:

Varun Humber (hereinafter referred to as ‘Petitioner’) claimed to be a victim of Dream11 (hereinafter referred to as ‘Respondent Company’) who alleged illegal gambling activities were carried out through the Respondent Company’s website.
The Petitioner had transferred an amount of INR 50,000 by his credit card in his own account opened on the website for participating in the various leagues created on the said website.
The Petitioner created a virtual team of 11 players for the cricket match between Ireland and Afghanistan on the website out of the total players, who were to play for Ireland and Afghanistan collectively.
The Petitioner after forming a virtual team of 11 players as per his own selection, joined various leagues and from the available deposit of INR 50,000 he used approximately INR 24,000 for playing in the league which the Plaintiff lost entirely while playing in the various leagues.
The Petitioner thereafter created a virtual team for the fantasy sport of football match being played between Manchester City and Middleborough wherein he used the remaining amount of INR 26,000 to play in the league and again ended up losing the said amount while playing the leagues.
The Petitioner thereafter losing the money in aforementioned manner filed the petition claiming to be a victim of illegal gambling since the nature of the activities offered on the website are not based on any skill but purely a game of chance thus punishable under the provisions of Public Gambling Act, 1867.

Contentions of the Respondent Company

The Respondent Company while explaining what fantasy sports game[2] contended the following:

Playing fantasy sports require the users to draft a virtual team which involves exercise of considerable skill as the user is required to assess the relative worth of each athlete/sports person against all athletes/sports person available for selection.
The user is required to study the rules and make evaluations of the athletes/sports person strengths and weaknesses based on these rules.
The users virtual team cannot entirely consist of athletes of single real world which ensures that the user has to exercise greater skill in having knowledge about both athletes of participating real world so as to prevent creating a circumstance resembling the act of betting.
The user while drafting the team and selecting players in case of cricket for example need to evaluate a number of factors for a batsman, such as:
batting average
total runs
number of half-centuries

a number of factors for wicket keeper, such as:

strike rate
number of catches
stumpings based on past matches, age, statistical trends, current form, injuries etc.

There is an element of skill which is predominant as ‘drafting’ and ‘playing’ requires exercise of superior knowledge, judgement, attention and adroitness.
The user is required to constantly monitor the scores of players drafted by the user.

Observation and Ruling of Punjab and Haryana High Court

The P&H High Court while considering the contentions put forth by the Respondent Company and relying on landmark judgement of Apex Court in the case of Dr. K.R. Lakshamanan v State of Tamil Nadu and Anr.[3] held horse racing to be a game of mere skill, opined that playing a fantasy sports game required the same degree of skill, judgement and discretion as the user is required to evaluate the relative worth of each athlete/sportsperson as against all athlete/sportsperson available for selection and is also required to study the rules, regulations, strength and weaknesses of the athlete or player.
The P&H High Court further held that the element of skill has a much greater and predominant influence on the outcome of the fantasy sports game than any incidental chance.
The P&H High Court held that any sports game that constitutes the game of mere skill will not fall under the activity of gambling under the Public Gambling Act, 1876
The P&H High Court also held that the business activity carried out by the Respondent Company is a legitimate business activity protected under Article 19(1)(g) of the Constitution of India

Appeal against High Court decision

An appeal against the P&H High Court’s decision was filed which was subsequently dismissed by the Hon’ble Supreme Court on September 15,2017.[4]

Gurdeep Singh Sachar v. Union of India[5]

However, the challenges faced by Dream11, the fantasy sports platform were not over as a Public Interest Litigation (hereinafter referred to as PIL) was filed in the year 2019 in the Bombay High Court for allegedly conducting illegal operations of gambling/betting/wagering in the guise of online fantasy sports gaming.

The PIL further alleged that Dream11 was in violation of the Central Goods and Service Tax Act, 2017 (hereinafter referred to as CGST Act) read with Rule 31 A of the Central Goods and Service Tax Rules, 2018 (hereinafter referred to as CGST Rules).

Contentions of Dream 11

The games offered on the website of Dream11 are not in the nature of betting/gambling as held by P&H High Court wherein the Hon’ble P&H High Court stated that playing fantasy sports games requires the same level of skill, judgement, and discretion as in case of horse racing.
A SLP against the P&H High Court was admittedly dismissed by the Hon’ble Supreme Court vide order dated September 15,2017
An explanation of how the game works on the platforms was given wherein it was explained that the players compete against such virtual teams created by other users. The winners are decided based on points scored, using statistical data generated by the real-life performance of the players on the ground.
Further, the deadline to create a team is latest by the official match start time and no changes can be made after the deadline. The users do not bet on the outcome of the match and merely play a role akin to that of selectors in selecting the team. Therefore, the game(s) played on their platform is a ‘game of skill’ and not of ‘chance’, and therefore outside the purview of Rule 31A(3) of the CGST Rules.

Observation and Ruling of Bombay High Court

The Bombay High Court while placing its reliance of the decision of P&H High Court quashed the PIL and held that games played on the website of Dream11 are games of skill and not games of chance thus not amounting to ‘gambling’ as per the Public Gambling Act, 1876.
The Bombay High Court further held that the allegation of petitioner with respect to GST evasion or erroneous classification is directly based on the outcome of the first issue i.e., whether the activities of Dream 11 amount to ‘gambling/betting?’ which is not the case, there exists no violation of CGST Act and CGST Rules.

Chandresh Shukla v. State of Rajasthan & Ors.[6]

Despite the aforementioned rulings, Dream11 was faced by yet another challenge in the year 2020 wherein a case was filed before the Rajasthan High Court alleging it to be betting of cricket team thereby amount to gambling. The Rajasthan High Court reaffirming the decisions of P&H High Court and Bombay High Court held that the question of treating the online fantasy game “Dream 11” as having any ingredient of betting/gambling is no more res integra (untouched matter; a point without a precedent). The Rajasthan High Court further stated that the Special Leave Petitions have also been dismissed against the orders of these High Courts.[7]

Avinash Mehrotra v. The State of Rajasthan & Ors.[8]

At last, in the year 2021 the Hon’ble Supreme Court upheld the decisions of the Rajasthan High Court to the effect that the online fantasy game Dream11 involves skill and does not amount to gambling. The Hon’ble Court while dismissing the Special Leave Petition stated that ‘this matter is no longer res integra as Special Leave Petition have come up from Punjab & Haryana High Court and have been dismissed by this Court as early as on 15.06.2017. Also, from the Bombay High Court, Special Leave Petitions have been dismissed on 04.10.2019 and 13.12.2019.

Analysis:

Bringing the Saga to an end, the decision of Supreme Court came as a sigh of relief to Dream11 and bringing in light different facets that fantasy sports gaming platforms must consider while offering such games:

Legality and Compliance: The platforms shall comply with applicable laws and regulations and ensure adherence to relevant gaming statutes and take measure to prevent money laundering, tax evasion and unauthorized activities on its platform.
Consumer Protection and Responsible Gaming: The platforms shall implement safeguarding measures such as age verification, limit-setting for deposits, and providing information on odds, risks, and addiction prevention. Transparent communication to prevent any misleading representation of winnings and the need for users to be well-informed about the risks involved shall be duly communicated.
Users Knowledge, skill, judgement and Discretion: The platforms shall ensure that a user applies a degree of his/her skill, judgement, knowledge and discretion to play any game offered on the platform. For example, in the game of fantasy cricket offered by Dream 11, a user is required to take into consideration a number of factors while drafting its team and choosing the captain and vice-captain such as:
Venue
Type of pitch
Type of ground
Past matches of the batsman and wicketkeeper
Batting average
Total runs
Number of half-centuries
Strike rate
Number of catches
Stumpings
Self-regulation would promote transparency and further protect the public interest.

Conclusion

While the judgement of Supreme Court on Dream11 in India provided a significant boost to the fantasy sports industry clarifying the legal status of the game, it also recognized the importance of consumer protection, responsible gaming measure and regulatory oversight to ensure the integrity of the industry. The judgement is undoubtedly a welcome step in the right direction and will help mitigate the possible apprehensions that may arise in the industry. However, one also must take note of the fact that not all fantasy sports are ‘a game of skill’ as the question of ‘whether a game is a chance or skill’ is determined on the basis of facts and circumstances of each case. As the fantasy sports landscape continues to evolve, it is crucial for stakeholders to adhere to the judgment’s principles and work towards fostering a transparent and responsible gaming ecosystem.

[1] Shri Varun Gumber v. UT of Chandigarh & Ors, CWP No. 7559 of 2017 decided on April 18,2017.

[2] Any fantasy sports game offered by them is game which occurs over predetermined 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, achievement and results generated by the real individual sportsperson pr team in certain designated professional sporting events.

[3] 1996 AIR 1153, 1996 SCC (2) (226)

[4] Diary No.(s) 27511/2017 (arising out of impugned final judgement and order dated 18-04-107 in CWP No. 7559/2017 passed by the High Court of Punjab and Haryana at Chandigarh.

[5] CPIL No. 22/2019

[6] Civil WP No. 6653/2019

[7] https://www.legalserviceindia.com/legal/article-3747-dream11-fantasy-to-reality.html

[8] SLP (C) No. 18478/2020

India: Fantasy sports games as ‘games of skill’

Skill v. Chance: A Tale of Fantasy Sports in India

Introduction

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