This Article is written by Our Editor, Ayush Verma, a second year student at Dr. Ram Manohar Lohiya National Law University, Lucknow.
According to KPMG, the Indian Fantasy Sports industry is growing at a CAGR rate of 32% and its worth is expected to reach USD 3.7bn till the end of 2024[1] which shows that online fantasy sports have undergone a rapid transformation in recent years and are is growing at a really fast pace. However, it often comes to mind whether such sports are legal or not, as prima facie they seem like a game based on chance or luck which usually amounts to gambling. The game allows users to create a team from a pool of real players and manage the same. Then that person is awarded points based on performance of individual players of the team. Such games are often criticised and have been widely debated on being a game of ‘chance’ or ‘skill’.
As far as its legality is concerned, the Law Commission of India in its 276th report while discussing sports betting stated that such games, where the participant uses his skills to place his bet, should be legalised.[2] The Indian and Foreign courts have also pointed towards the same which will be discussed in detail later.
Game of ‘Chance’ or ‘Skill’
Gambling is an act which basically involves three things:[3]
A ‘consideration’ that is paid as an entry free for placing bet;
The ‘chance’ of winning; and
Getting ‘rewarded’ in case of winning.
The thing that is often debated is the chance of winning which seems to be based on luck. In the conventional understanding, a game of chance is one the outcome of which is determined by a game of dice, picking cards etc. However, in the contemporary world, the games that involve some degree of skill or knowledge but are mostly based on chance also fall in the same category. Therefore, the deciding factor is the degree of chance that a game involves to classify it as a game of chance.[4] Contrastingly, a game of skill would be one in which the skill factor would be predominant.
Now, based on above statements, some tests have been laid down which are followed globally. The ‘predominance test’ which is widely followed in the United States lays down the basis for determining whether a game involves winning by ‘chance’ or ‘skill’.[5] It says that the court shall analyse the dominating factor in deciding the case. It entails that if a game is based on 51% skill, it shall be considered a game based on skill, and hence should be legal.[6]
Skill as a dominant factor in Online Fantasy Sports
In the case of Humphrey v. Viacom[7], the court held that fantasy sports are a game of ‘skill’ as the winning is dependent upon the participant's ability to choose a team based on his understanding that he develops after analysing the past performances of the players. In a report prepared by a Prof. Zvi Gilula, it was seen that the win rates of ‘top performing players’ were significantly higher than ‘average performing players’. This means that former had more chances of winning due to their skill. Thus, it was observed that the win cannot be based on chance factor alone.[8]
In a study conducted by IIM Bangalore titled ‘Fantasy Sports: A Game of Skill or Chance’, on the basis of several hypotheses and analysis of the detailed data sets, it was established that Dream11’s fantasy sports is skill dominant.[9] Similar conclusion was drawn in a study conducted by MIT and Columbia.[10]
Judicial approach to the element of ‘skill’
The element of ‘skill’ was dealt for the first time in the case of State of Bombay v. R.M.D. Chamarbaugwala[11], where the court held that if a game is predominantly dependent upon the skill, then it would be considered a game of ‘mere skill’. However in the cases of State of Andhra Pradesh v. K Satyanarayana & Ors[12] and Dr. KR Lakshmanan v. State of Tamil Nadu & Anr[13], the court held that Rummy and Horse racing are a game of skill, respectively. It was reasoned that such games require a substantial amount of skill to succeed, and therefore they qualify as a game of ‘skill’.
Finally, the debate on skill or chance was put to rest in the case of Shri. Varun Gumber v. Union Territory of Chandigarh & Ors[14] by the Punjab and Haryana HC. Here, a court for the first time ruled that a fantasy sport is predominantly based on skill. The court took into account the rules of the game such as difference in points awarded to the participant for choosing Captain and Vice Captain, among others and also analysed the business model of the Operator. Consequently, it held that fantasy sports involve considerable skill as the participant has to analyse the past performance of players. It further held that success in such games requires superior knowledge, judgement and attention, and such business activities fall under the ambit of Article 19(1)(g) of the Constitution. The judgement was challenged by filing a SLP before the SC, however, it was summarily rejected.
It was reiterated by the Bombay HC in the case of Gurdeep Singh Sachar v. Union of India[15], and by the Rajasthan HC in Chandresh Sankhla v. State of Rajasthan[16] and Ravindra Singh Chaudhary v. Union of India[17]. However, the decision of the State of Bombay has been stayed by the SC in response to a SLP filed by the State of Bombay which has again stirred the debate.
But recently, the Rajasthan HC in Ravindra Singh Chaudhary v. Union of India[18] while hearing a PIL acknowledged that although SC has stayed the operations of Bombay HC’s decision in Gurdeep Singh’ case, considered the Law Commission Report and held that such games are predominantly based on skill as the outcome of the real game does not get affected by the participants’ selection of players virtually. However, the clock is still ticking on the issue as the Supreme Court is yet to consider upon the legality of such sports.
Conclusion
It can be asserted that the law in India regards Online Fantasy sports as a game of skill, through various judgements of Indian courts and the report of Law Commission. Therefore, such games cannot be said to be a ‘wager’ under Section 30 of the Indian Contract Act. However, the need to regulate such sports cannot be disregarded as some games might have altered rules and regulations which may compromise with the ‘skill’ element. Hence, the same rule cannot be universally applied to all online fantasy sports.
To regulate the same, some states have advanced some conditions that need to be fulfilled before offering such services. For instance, the State of Nagaland passed an Act in 2015,[19] recognising Online Fantasy Sports as a game of skill, requires a license and the procedure for procuring the same is provided therein. Similarly, the Sikkim Act passed in 2008,[20] also provides for granting of license to applicants along with other rules and regulations.
But, the State of Telangana in 2017 by passing an Amendment Act,[21] categorised online gaming as a prohibited activity and also imposes a penalty in case someone’s involvement is found in such activities. Therefore, a blanket ban can also be put on Online Fantasy Sports instead of commending regulations.
[1] IndiaTech, https://www.indiatech.org/wp-content/uploads/2020/09/IndiaTech.org-Whitepaper-OnlineFantasySports-compressed.pdf (last visited May 14, 2021). [2] Law Commission of India, Two Hundred Seventy-Sixth Report on Legal Framework: Gambling and Sports Betting including in Cricket in India, 2018, 129. [3] Marc Edelman, Regulating Fantasy Sports: A Practical Guide to State Gambling Laws, and a Proposed Framework for Future State Legislation, 92 IND. L.J. 653, 662 (2017). [4] Id. [5] Joshua Taggart, Is Daily Fantasy a Form of Gambling Hidden by Skill?, 6 MIss. SPORTs L. REV. 81, 86 (2016). [6] Dourmashkin, Examining the Legalization of Daily Fantasy Sports, 25 CATH. U. J.L. & TECH. 414, 429 (2017). [7] Humphrey v. Viacom, 2007 BL 38423 (DNJ 2007). [8] Id. [9] Fantasy sports are skill dominant, finds IIMB-Cartesian study, https://indianexpress.com/article/technology/tech-news-technology/fantasy-sport-dream-11-iimb-cartesian-study-6165065/ (last visited May 14, 2021). [10] https://devavrat.mit.edu/publications/is-it-luck-or-skill-establishing-role-of-skill-in-mutual-fund-management-and-fantasy-sports/#:~:text=Accessibility-,Is%20It%20Luck%20or%20Skill%3A%20Establishing%20Role%20of%20Skill%20in,Fund%20Management%20and%20Fantasy%20Sports&text=In%20particular%2C%20the%20failure%20of,and%20not%20based%20on%20luck (last visited May 14, 2021). [11] State of Bombay v. RMD Chamarbaugwala, AIR 1957 SC 699. [12] State of Andhra Pradesh v. K Satyanarayana, AIR 1968 SC 825. [13] Dr KR Lakshmanan v. State of Tamil Nadu, AIR 1996 SC 1153. [14] Varun Gumber v. Union Territory of Chandigarh, 2017 Cri.L.J. 3827. [15] Gurdeep Singh Sachar v. Union of India, SCC OnLine Bom 13059. [16] Chandresh Sankhla v. State of Rajasthan, 2020 SCC OnLine Raj 264. [17] Ravindra Singh Chaudhary v. Union of India, D. B. Civil Writ Petition No. 20779/2019. [18] Id. [19] Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015. [20] Sikkim Online Gaming (Regulation) Act, 2008. [21] Telangana Gaming (Amendment) Act, 2017.
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