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Fantasy leagues – Legal by ‘Chance’?

Despite the growing popularity, several states have banned fantasy league games, citing them to be a platform for gambling. Many people have also called them illegal. But are these claims justified?

By: Yash Vardhan, Gujarat National Law University (GNLU).

Introduction

COVID-19, Lockdown, and IPL have turned out to be a fortune for Fantasy league games. Research conducted by KPMG, in collaboration with The Federation of Indian Fantasy Sports (FIFS), shows that the number of fantasy sports operators has increased by seven times between 2016-18. Simultaneously, the number of users has grown by over twenty-five times, from 2016 to 2019(1). These numbers are expected to have grown exponentially this year.

Why in the news?

Despite the growing popularity, several states, including Andhra Pradesh, have banned such games citing it to be a gambling platform.

Many people have also recently filed cases against these types of games and calling them illegal. But are these claims justified? Prima facie, these games look like the perfect site for gambling and betting, but there is a greater legal aspect. 

What is gambling?

In KR Lakshmanan vs. State of Tamil Nadu and Ors.,(2) the Supreme court categorically pointed out that any game’s character can be classified as ‘Chance’ or ‘skill’ or a combination of both. In this case, the court had the view that if the outcome of the game is majorly a matter of chance, with the consciousness of risk and hope to gain, then the activity is gambling. 

For instance, games like rolling the dice, three-card flush, etc. are based entirely on chances (luck). The outcome of these games is not in the hands of the player but is dependent on luck. On the other hand, success in a game like Chess is entirely based on skills. It requires superior knowledge, training, discipline, and other similar traits. But there is another set of games that requires both of these elements. Fantasy Leagues fit in this category. Indeed, choosing your virtual players requires skills but the same players’ performance in the real world is not in your hands and thus a matter of chance. Generally, people are skeptical about this element. But in legal terms, merely involving the aspect of chance doesn’t make that game or activity illegal. 

 The reasoning behind such contention is that any activity is not gambling if success depends on substantial skills and that if the skill is dominant over the aspect of chance.(3) This is also popularly known as the predominance test.

One can find its legality in article 12 of the Public Gaming Act 1867, which says that the penalising features applying to all gambling activities shall not apply to any game of “mere skill”. The phrase “mere skill” has been interpreted by the SC to mean “mainly and preponderantly a game of skill” notwithstanding the element of chance.(4) Therefore, for any conclusion, we have to examine that to what extend is the role of skill in fantasy leagues?

Fantasy Leagues and skills

Fantasy league is the type of online game that requires the participants to create a virtual team of their own, constituting real-world players playing in a particular upcoming match.  The number of players in the virtual team cannot exceed the number of players playing in the real-world game. A team is drafted in exchange for some credits, which is decided by the player’s past performance in the real-world. A participant cannot exceed the credit allotted to him. The drafted team is locked and cannot be changed when the real-world game starts. After the match, each virtual player is assigned some points based on the corresponding real-world player’s performance. The participant whose team has the highest cumulative points wins the game, independent of the real-world game-winner.

Drafting a team requires considerable skill as the participant must examine and make a comparative analysis of all the players available for selection. He then has to select that player, which he considers, according to his experience, is best suited for the game; and keeping in mind the past performances, gaming conditions, fitness, strengths, and weaknesses. Players’ age, statistics in a particular stadium, the opportunity cost of not selecting a player for others, etc. are among factors that the player has to assess objectively, making it a game involving substantial skill.(5)

The Hon’ble Punjab and Haryana High Court also support the claim when it categorically held that success in Dream 11’s Fantasy Sports essentially arises from user exercise of superior knowledge, judgment, and attention thus as per their skill.(6) Perhaps, Dream11 isn’t wrong after all when it says “khelo dimaag se”  in its promotion.

It can be safely assumed that the above court’s reasoning was based on a supreme court’s judgment, which upheld the legality of betting on horse racing. According to SC, betting on horse racing is not gambling/illegal as it requires high analytical and comparative skills to predict the winner of the game, which is also in line with the working of these gaming platforms.

Taking a cue from this and Punjab and Haryana high court’s decision, recently, the Rajasthan HC and Bombay HC have also dismissed pleas seeking to ban the said games.  Both the courts have also declared them to be the game of skill and not gambling.(7)(8) The Rajasthan High Court held, “A participant is playing an online sport and not gambling, betting or wagering on the outcome of any game or an event since the result achieved by a player of online fantasy sports on completion of the corresponding real-life match, is wholly independent of the final result or outcome of such real-life match/game/event.” Many ‘special leave petition’ (SLP) filed against these cases have also been dismissed by the supreme court. 

So, can we still ban these games? Although individual states like Andhra Pradesh and Telangana have made a blanket ban on online games involving real money under their respective state gaming acts, the current central law doesn’t allow it. The central statutes and the above court judgments consider these games nothing but commercial business activities.

They are protected under article 19(1)(g) of the Indian Constitution (3). These High Courts’ decisions favoring fantasy games and SC’s dismissal of SLPs against said decisions leave no straightforward way to ban these games. 

Conclusion and way ahead

Although these fantasy games involve elements of uncertain and changing factors, these games cannot be reduced to a mere game of chance and thus gambling. The fantasy sports industry is growing exponentially and contributing hundreds of crores to the government in taxes and revenues. These games give sports enthusiasts a more exciting opportunity to play at home with friends and family, thus promoting sports culture.  Agreeably these games do need regulations, but at the same time, when the law commission of India advocated legalising gambling(9), banning fantasy games straightway will in no way be justified. Before such steps, the predominance of either character in these games needs to be adequately assessed. In the absence of any government regulations, significant players from this market have already come together for this purpose. This authority, named The Federation of Indian Fantasy Sports (FIFS), has eminent personalities from the legal and sports fraternity. Only after analysis and appropriate revisions, the government of India should try to upthrust this initiative and give it legal backing.

Endnotes

  1. https://assets.kpmg/content/dam/kpmg/in/pdf/2019/03/online-gaming-india-fantasy-sports.pdf
  2. Dr. K.R. Lakshmanan vs State Of Tamil Nadu And Anr: 1996 AIR11531996SCC (2) 226
  3. State of Bombay v. RMD. Chamarbaugwala AIR1996SC1153
  4. State Of Andhra Pradesh vs K. Satyanarayana & Ors: 1968 AIR 825, 1968 SCR (2) 387
  5. Jeffrey C. Meehan, The Predominate Goliath: Why Pay-to-Play Daily Fantasy Sports are Games of Skill Under the Dominant Factor Test.
  6. Varun Gumber Vs. Respondent: Union Territory of Chandigarh and Or 2017CriLJ3827)
  7. D.B. Civil Writ Petition No. 20779/2019 Ravindra Singh Chaudhary Vs. Union of India and Ors. 
  8. Gurdeep Singh Sachar Vs. Union of India and Ors. (BOMHC) (2019) 75 GST 258 (Bombay)
  9. 276th law commission report.
  10. Manoranjithan Manamyil Mandram v. State of Tamil Nadu, AIR 2005 Mad 261

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