Fantasy or Reality? Impact of Gambling Legislation on Fantasy Sports

Despite legal and regulatory hurdles, online fantasy sports gaming is thriving in India and has quickly become a popular kind of online gaming. Fantasy sports is primarily a prediction game in which players assemble a dream team of real athletes who compete in a variety of sports such as football, cricket, basketball, kabaddi, and so on, and then compete in contests that mimic and convert the athletes' real-life performance into fantasy points.

Fantasy sports and fantasy sport operators have frequently found themselves in the crosshairs of Indian gambling regulations, with the question of whether or not online fantasy sports gaming constitutes gambling. We will look at two major legal issues that fantasy sports operators have faced in India: I the impact of Indian gambling legislation; and (ii) the role of intellectual property rights, given that fantasy sports uses intellectual property (brand names, team names, players, and statistics) to provide products and services to users.

Gambling is a state topic in India, which means that states have the ability to regulate and legislate gambling in any way they see fit. The sole act notified by the Central Government on this issue is the Public Gambling Act, 1867 ("Act"), which is almost a century old and predates online gaming. The Act has been announced in most states, with state-specific derogations. The Act prohibits all common gaming establishments from engaging in games of chance, with the exception of games of basic skill.

Games of Chance vs. Games of Skill

In India, gambling laws usually distinguish between games of chance and games of skill. A game of chance is likened to gambling and is outlawed, whereas a game of skill is normally distinguishable from gambling and is not prohibited, however state laws may apply. The laws of Assam, Orissa, Sikkim, and Nagaland (all of which require a licence), Nagaland, Andhra Pradesh, and Telangana (all of which do not carve out exceptions for games of skill from the blanket prohibition on gambling) are examples of exceptions to this general rule.

While interpreting the condition of "mere skill," the Supreme Court of India ("Supreme Court") has stated multiple times that for a game to be declared a game of skill, there must be a preponderance of skill rather than chance.

In the case of State of Andhra Pradesh vs. K. Satyanarayana & Ors., for example, the Supreme Court argued whether Rummy was a skill-based game, concluding that Rummy is not purely a game of chance and required some talent. It was decided that a game of skill would include all games in which skill prevails over chance, such as I strategizing the manner of placing wagers for bets, (ii) selecting a team or virtual stocks based on analysis, or (iii) the manner in which moves are made, whether through the deployment of physical or mental skill and acumen.

While there was an element of chance in a game of Rummy, as there is in all games in which cards are shuffled, the Supreme Court emphasised that it was primarily a game of skill. Before a previous post, we discussed a suit filed in the Bombay High Court involving the game of Ludo. There have been other Supreme Court decisions on what constitutes a skill-based game, including some decisions involving fantasy sports.

Fantasy Sports– Judicial Precedent

In India, the fate of fantasy games has been determined by whether they are classified as a 'Game of Skill' or a 'Game of Chance.' It's critical to distinguish between games of skill and games of chance when determining whether or not a particular activity is legal in India. If a game is classified as a "game of chance," it is considered gambling under the Act, and gambling is outlawed under the Act. As previously stated, the Act outlaws the operation of all common gaming houses that engage in games of chance, with the exception of games of pure skill.

Several Indian courts, including the Punjab & Haryana High Court (which was upheld by the Supreme Court in an appeal) and the Bombay High Court, have ruled that fantasy games are not games of chance and hence do not fall under Indian gambling laws.

Recent State Law Amendments in India

Tamil Nadu

The Tamil Nadu Gaming and Police Laws (Amendment) Act of 2021 ("TN Act"), which prohibits internet wagering or betting, was recently passed by the Tamil Nadu government. This restriction was also specifically extended to skill games. The TN Act was struck down by the Madras High Court in a decision (Junglee Games & Ors. vs. State of Tamil Nadu). The Supreme Court ruled that establishing a blanket prohibition violated Article 19(1) (g) of the Indian Constitution (Right to Practice any Profession, or to Carry on Any Occupation, Trade, or Business), and the TN Act was annulled. Instead of a blanket ban, the Court clearly noted that regulation of online gaming is required.

Karnataka

In a similar step, the Karnataka government promulgated a modification to the Karnataka Police Act, 1963 ("Karnataka Act") on October 4, 2021, which gained Governor's assent. With the exception of horse races and lotteries, the Karnataka Act prohibits all kinds of gambling involving a game of chance in the state, including online gambling. "Any act of risking money or otherwise on the unknown result of an event, including on a game of skill," according to the Karnataka Act.

The Karnataka Act also broadened the definition of gaming to include "online games, involving all forms of wagering or betting, including tokens valued in terms of money paid before or after issue, or electronic means and virtual currency, electronic transfer of funds in connection with any game of chance."

Dream11's operations in Karnataka were halted shortly after, and the company issued the following statement: "Following recent media attention, our Karnataka users have expressed profound fears and anxiety about their safety and security." We have chosen to halt operations in Karnataka in order to assuage our users' concerns. This decision is without prejudice to our legal rights and claims."

Bottom Line

While fantasy sports providers have, with a few exceptions, gotten around gambling prohibitions in most jurisdictions, there is still a pressing need to harmonise the numerous laws that affect such games. Furthermore, this is not the end of the road for fantasy sports operators, who must continue to deal on intellectual property and personality rights issues (covered in Part 2 of our article series).

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