INTRODUCTION

Sports have played an integral part in the development and well-being of mankind. Traditionally, sports are considered as games which are based on application of physical strength and skill. From sports being a physical activity, we have evolved into an era where sports and gaming activities are conducted on online platforms using internet, making it one of the fastest growing industries. Earlier, e-gaming or fantasy sports were not considered as an actual sport as it was used merely for purpose of entertainment/leisure. However, together with the growth, the scrutiny in the industry has also increased with respects to offshore gambling platforms being available in India, thereby resulting in blocking of such foreign betting and gambling websites offering services remotely in India following foreign exchange irregularities and laundering .

The Indian Gaming Laws have been evolving over the period of time and like other countries, India has also recognised the need for moving from prohibition to regulation for the Gaming Industry. Betting and gambling being state subjects, provides the states with the ultimate power to frame laws in their respective territories. Each state, hence, has its own anti- gambling law. Most of the states prohibit game of chance however game of skill is exempted from such prohibitions.

Fantasy sports like e-sports have also gained popularity over the period of time and is being considered a part of online gaming. Fantasy sports, like e-sports, are also played online using electronic devices however they differ since the person playing such fantasy sports makes virtual teams with real players. Every person who is a part of the team, through their own skill and technique, compete in the games with other teams, in order to win the game. According to the report of Niti Aayog, “Fantasy sports in India have been one of the fastest developing industries which noted a compounded annual growth rate of 212% from 2 million users in June, 2016 to 90 million users in December, 2019.”[1] The report estimates that the industry has a potential to attract Foreign Direct Investment of more than 100 billion and can also generate 1.5 billion online transactions by 2023. The same can be seen quite evident with the current numbers. The law in the making will have significant impact on the growth of the industry.

Fantasy sports may either be a game of chance or a game of skill. Game of chance is merely based of probability and possibilities, while in Game of skill the players apply their own strategy and skill to win the game. It mainly involves expertise of the player and ability to predict the outcome of the game. Though the games are based wholly on skill, it does not mean that there is no element of chance.[2]

Be it a game of chance or skill, fantasy sports are a part of the fastest developing industries while being the least regulated industry in India. Though there are regulations and existing legislations in countries like UK, USA and Australia, India is still in the nascent stage where the said industry is regulated by judicial precedents and legislations and the uniform regulatory framework to regulate the online gaming industry are still being framed.

HISTORY

In India fantasy sports came in spotlight during the 2008 Indian Premier League when Dream 11(being an online betting Application) was introduced. Dream 11 is one of the oldest and most renowned fantasy games platforms in India. Fantasy sports in India are protected through the Federation of Indian Fantasy Sports, which is a self-regulatory body, established to protect the customer’s interest.

Though e-gaming was recently included within the ambit of sports, there have been various judgments, wherein the court mentioned game of skill and game of chance as the subject of discussion. Referring to the Hyderabad Gambling Act,[3] the court stated that rummy cannot be completely considered as a game of chance as it requires skills as well.[4] Further, the court in the case of Dr. K.R Lakshmanan v. State of Tamil Nadu determined factors to test and differentiate between game of skill and game of chance through the issue raised under the Madras Gaming Act, 1930 to determine whether horse racing is a game of skill or game of chance.

Game of skill are games in which the players with their skill and strategies win a game, however, game of chance is considered as the one in which there is no skill required and are completely uncertain, based on luck and probability. The Supreme Court in the landmark case of State of Bombay v. R.M.D Chamargaudwala[5], held that there might be an element of chance in the result of the game however, if a game is played with certain skill and strategy, it cannot be considered as game of chance.

There have been various cases under which sports that are related to gambling are considered as game of skill. For instance, in the case of State of Andhra Pradesh v. Satyanarayana[6], the Supreme Court referring to the Hyderabad Gambling Act stated that rummy is not completely a game of chance but also requires skills. While referring to another popular game based on skill, the Karnataka High Court, in the case of Indian Poker Association v. State of Karnataka[7], observed that poker is entirely a game of skill and no license is required to conduct a game of poker, further the court also stated that poker does not come under the ambit of gambling as per the West Bengal Gambling and Prize Competition Act, 1957. Games such as horse racing which were prevalent in earlier times, was also recognised as a skill. In the case of Dr. K.R. Lakshmanan v. State of Tamil Nadu[8], the Supreme Court observed that horse racing is neither gambling nor a game but a mere skill. Therefore, gambling and betting are not prohibited under Indian laws and are still prevalent as means of skill and entertainment.

CURRENT STATUS IN INDIA

In 2020, the Advertising Standards Council of India (ASCI) released guidelines on advertising of fantasy sports and online gaming, which are as follows:

  • A disclaimer stating that “games should be played at the own risk of the player as it involves financial risks and may be addictive” should be mentioned in the advertisement.
  • Advertisement should not present online gaming for earning real money as an income opportunity.
  • It should not suggest that a person involved in gaming activities is more successful than the others.
  • It should not depict any person who is a minor.[9]

The ASCI, under the aegis of the Ministry of Information & Broadcasting, also released advisory against ads promoting online betting websites/platforms in print, electronic and digital media to put a check on the financial and socio-income risks arising from the same to Indian consumers. The advisory was not applicable on domestic online ‘real money skill gaming’ operators such as poker, rummy, and fantasy sports websites that are incorporated in India. The skill-based gaming websites were outside the purview and this advisory was to affect only the rogue operators, largely foreign websites having no permanent establishment in India.

Earlier in the year 2022, ASCI found close to 300 advertisements aired by fantasy gaming companies during the first week of the Indian Premier League (IPL) tournament to be potentially violating its guidelines.

In 2022, the Supreme Court upheld the judgment of the Punjab and Haryana High Court[10] in which the court stated that Fantasy Sports comes under the ambit of skill and not chance. Although chance plays an important role in fantasy games, at the same time skills are also required to determine the strategies which will help the players win in the game.

Recently vide government notification, dated 23rd December 2022 (the Notification), the Ministry of Electronics and Information Technology (MeitY) has been designated as the nodal ministry to oversee the country’s upcoming online gaming industry by amending the second schedule of Government of India (Allocation of Business) Rules, 1961. Further in accordance with the Notification, the E-sports, as part of multi-sports events, have been included under the purview of Ministry of Youth Affairs and Sports.

The Ministry has prepared draft amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 made by the Government in exercise of its powers under the Information Technology Act, 2000. The draft amendments proposes that:

  • an online gaming intermediary shall observe the due diligence required under the rules while discharging its duties, including reasonable efforts to cause its users not to host, display, upload, publish, transmit or share an online game not in conformity with Indian law, including any law on gambling or betting.
  • it shall observe additional due diligence by displaying a registration mark on all online games registered by a self-regulatory body and informing its users regarding its policy related to withdrawal or refund of deposit, manner of determination and distribution of winnings, fees and other charges payable and KYC procedure for user account registration.
  • Self-regulatory bodies will be registered with the Ministry and may register online games of such online gaming intermediaries who are its members and which meet certain criteria. Such bodies will also resolve complaints through a grievance redressal mechanism.

The Online Gaming (Regulation) Bill, 2022, was also introduced in the Lok Sabha on 1st April, 2022, to regulate online gaming in India. The Bill is currently under review. The Bill proposes to bring about the following developments:

  • Mandatory registration of gaming platforms under the self-regulatory body through application and granting of license.
  • An Online gaming commission is to be formed which will include (The self-regulatory body will comprise five members from diverse fields such as chairman, vice-chairman, one member from field of law, one member from the cyber technology department, experience in law enforcement).

ANALYSIS

Fantasy sports which can also be considered as a form of gambling or betting has not been explicitly mentioned, however, the main elements of fantasy sport i.e., gambling has been mentioned under Entry 34 of List II of the VII Schedule, of the Constitution, thereby, being the subject of the state list. The state has the power to make laws relating to gambling. Currently, after the recognition of e-gaming under the ambit of sports, the Draft Notification 2022 stated that e-sports will be regulated under the Information Technology Rule of 2021. Fantasy games are not allowed to be operated without license in all states. Issues have been raised as to whether e-gaming comes under the ambit of the states or the centre, as an appeal was filed in the Supreme Court, by the Telangana and the Karnataka Government.[11] While the debate regarding the distribution of power between the State and Centre with respect to fantasy sports continues, the issue relating to its legality has also come into picture. Fantasy sports, which create a platform for players to agree to the terms and conditions of the online game, can be considered as an agreement between the player and the gaming company. If fantasy sport is in the form of a wager or a game of chance, such an agreement would be considered as a void agreement as per the Contracts Act[12], which prohibits any agreement in the form of a wager. Therefore, a fantasy sport which is merely based on a game of chance cannot be recognised under the current legal regime.

Fantasy games which are technology-based sports, have an element of skill, yet, the final outcome of the game is uncertain and based on probability. Considering fantasy sports are majorly based on application of skill, they fall within the ambit of game of skill.[13] Although, online games have been recognised by the law under the recent amendments and notifications, the regulations do not explicitly mention about either game of skill or game of chance.

The recent notification and bill which is introduced, requires more clarification as to the subject matter regulated by the state or the union, as the subject falls under the state list.[14] The draft rules regulate online gaming under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code), Rule, 2021, which proposes regulating gaming under the purview of Union Legislature. Considering the wide ambit of online jurisdiction, a uniform law is required which shall help in regulating all the possible issues relating to online games.

Although the regulation serves as a means of implementing effective legislations for regulating online games the aspect of game of skill and game of chance needs clarification which shall considerably reduce instances where games may be used as a medium for gambling and betting.

[1] https://www.niti.gov.in/sites/default/files/2020-12/FantasySports_DraftForComments.pdf

[2] Dr. K.R. Lakshmanan v. State of Tamil Nadu, 1996 (2) SCC 226.

[3] (II of 1305 Fasli)

[4] State of Andhra Pradesh v. Satyanarayana, 1968 AIR 825.

[5] State of Bombay v. R.M.D Chamargaudwala, AIR 1857 SC 699.

[6] Supra Notes

[7] Indian Poker Association v. State of Karnataka, 2013 SCC Online KAR 8536.

[8]Supra Note 2. .

[9] https://mib.gov.in/sites/default/files/Advisory.pdf

[10] Varun Gumber v. Union Territory of Chandigarh.

[11] https://theprint.in/india/all-about-modi-govts-new-draft-rules-for-online-gaming-kyc-to-skirting-skill-vs-chance-debate/1297809/

[12] The Contracts Act, 1872, Sec. 30.

[13] Shri Varun Gumber v. Union Territory of Chandigarh.

[14] INDIAN CONST. List II, Entry 34.

Author – Jyotsna Chaturvedi

Head – Corporate Practice

Co-Author – Avantika Singh

Intern