by Rajshree Sharma,
The commencement of the 14th edition of the Indian Premier League (IPL) was bound to revive regulatory interest in on the internet fantasy sports in India. Within a week of IPL 2021 becoming launched, the National Payments Corporation of India (NPCI) announced a ban on UPI transactions beneath INR 50 on gaming platforms. The curb is ostensibly aimed at minimizing low volume transactions, which are alleged to have spiked in the course of IPL matches, arguably on account of persons transacting on on the internet gaming platforms such as Dream 11, Mobile Premier League, and Howzat. The (apparent lack of) legality of on the internet fantasy sports platforms, which sponsor a variety of playing franchisees in the broadly-well-liked league, has been broadly misunderstood, coupled with the moral and optical issues about genuine-funds gaming.
Rallying for numbers
Globally, India ranks as one of the major 5 on the internet gaming markets with the user base estimated to be upwards of 365 million. The country’s young demographic coupled with access to low cost smartphones tends to make it an fascinating bet for on the internet gaming firms, with annual development anticipated to be at an impressive 40%. In 2019, Dream11 became the initial on the internet gaming organization in India to be component of the coveted ‘unicorn club’, of startups valued at more than USD 1 billion. While such stellar present and future development estimates paint a profitable image for investors and entrepreneurs, operating an on the internet fantasy sports platform is riddled with challenges beyond the scope of eager solution managers or proactive marketing and advertising executives.
Courting difficulty
In the previous 5 years, on the internet fantasy sports firms have seen a steady stream of litigation, a majority of which relate to the involvement of genuine funds on such platforms. Consider the case of Varun Gumber, who filed a Civil Writ Petition titled ‘Varun Gumber vs. Union Territory of Chandigarh and Ors.’, just before the High Court of Punjab and Haryana against Dream11. As per the Petitioner’s case, he had signed up on Dream11, and transferred an quantity of INR 50,000/- to his account for participation in a variety of fantasy sports leagues operated on the platform. He made two teams for cricket and football, putting an quantity of INR 24,000/- and INR 26,000/- respectively on the teams’ winning. However, each the teams lost their matches, and he resultantly lost practically the whole quantity in a pretty quick span of 2 days. In his Petition just before the High Court, Gumber alleged that the platform was not a ability-based one, but likelihood-based, and consequently, fell foul of the provisions of the Public Gambling Act, 1867 (PG Act). Pleas on equivalent lines have subsequently been filed just before other courts in the nation, alleging that fantasy sports platforms that involve use of genuine funds constitute betting or gambling.
The legal uncertainty for on the internet fantasy sports firms is additional evidenced from a telling disclosure on Dream11’s site, which states: “The laws in Assam, Andhra Pradesh, Odisha, Telangana, Tamil Nadu, Nagaland and Sikkim are unclear on games of skills that may be played for a fee. Hence, residents of these states are not permitted to join any cash contests on Dream11.” While the archaic PG Act is the only Central statute that offers with gambling in India, ‘betting and gambling’ fall below the State List, which means that compliance needs differ from state to state.
As an instance, the Sikkim Online Gaming (Regulation) Act, 2008 is the initial regulation introduced anyplace in India which offers with on the internet gaming. The mentioned Act had brought in a mandatory licensing regime for providers of inter alia ‘online games’, but it was subsequently amended to lower its scope to physical gaming parlours and on the internet games hosted via intranet in the state. Similarly, Nagaland introduced the Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015, which amongst other people categorizes virtual sports, virtual group choice games, and virtual sport fantasy league games as ‘games of skill’, distinct from betting or gambling. On the other hand, by way of an amendment in 2017, the Telangana state made two substantial modifications it added “online gaming for money or any other stakes” inside the definition of “gaming”, and incorporated ‘game of skills’ inside the which means of ‘wagering or betting’. This amendment efficiently prohibits in the state all types of on the internet games involving funds, irrespective of whether or not they are games of abilities or of likelihood.
Game, set, legal
From the instances place forth against a variety of High Courts, there appears to be a widespread misunderstanding of on the internet fantasy sports becoming likelihood-based games, and that no substantial ability is necessary to play them considering the fact that the participants are alleged to be betting on the outcome of a genuine-time offline match. Fortunately, courts in India have been proactive in dispelling the widespread misconceptions, and have rightly categorized on the internet fantasy sports as ‘games of skills’. As early as in 1957, the Supreme Court of India in ‘R.M.D. Chamarbaugwalla vs. Union Of India’ had settled a two-fold system for distinguishing sports from betting/ wagering based on their predominant nature initial, exactly where results of the player depends drastically on their ability, and second, even exactly where there is an element of likelihood, results in the competitors dominantly relies on abilities of the player(s). As an instance, take into consideration the games of snakes and ladders and ludo, each of which are based on rolling of dice by the players, ostensibly becoming games of likelihood. However, in snakes and ladders, a player has no agency in terms of movement – the player has to move the quantity rolled and endure the consequences of the moves. While even in a game of ludo a player moves the rolled quantity, how and exactly where the player moves is based on a strategic, ability-based option made by the player. Therefore, even although each games have an element of likelihood, ultimate results in ludo is dependent largely on a player generating ability-based judgment, mastered more than a period of time.
In Indian jurisprudence, games that are purely likelihood-based have been absorbed in the which means of gambling or betting, and are largely prohibited across states. At the very same time, the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015 is the only statute in the nation to define ‘games of chance’ and ‘games of skill’, and the latter is defined to involve “all such games where there is preponderance of skill over chance, including where the skill relates to strategizing the manner of placing wagers or placing bets or where the skill lies in team selection or selection of virtual stocks based on analyses or where the skill relates to the manner in which the moves are made, whether through deployment of physical or mental skill and acumen”. Given this background, there seems to be a consensus amongst courts so far on on the internet fantasy sports becoming ‘games of skill’, with even the Supreme Court refusing to intervene against the Punjab High Court’s acquiring in Varun Gumber. Separately, even although new regulatory choices, such as the one by NPCI, location limits on on the internet fantasy sports platforms, they are a step towards higher regularisation and provide operational clarity to the platforms.
Follow-on issues
In spite of the favourable court orders, it is evident that on the internet fantasy sports firms have elected to operate on the side of caution. Given the optical and moral challenges about funds becoming spent on the internet on gaming, advertisements involving IPL matches are followed with disclaimers on the game involving prospective monetary dangers. Mobile Premier League, one of the marquee names in the space, has gone one step additional and developed its campaign with the tagline “Hai Akal, Toh Khelo MPL’. The clear tension on the ability-based nature of the platform is practically a disclaimer to publicity seekers hunting to drag the organization to court on misguided issues of betting.
Given the continued regulatory uncertainty, the favourable court orders are unlikely to present any comfort to the on the internet fantasy sports firms. While dismissing a petition against one of the major platforms, the Gujarat High Court ordered the state government to amongst other people examine whether or not the platforms lead to funds-laundering or violate laws governing foreign exchange. For firms operating in this space, the regulatory uncertainty and prospective litigations are most likely to continue.
(The author is a Delhi-based criminal lawyer, practicing in the High Court of Delhi. Views expressed are private and do not reflect the official position or policy of TheSpuzz Online.)