This article has been written by Debdattaa Das and edited by Lawyasa.
I’m sure you have heard of the platforms like Dream 11 or Pari Match. Be it our favorite celebrities endorsing them, or the impressionable success stories, to escape the thrill of online fantasy sports, is next to impossible! With the drastic shift of the gaming industry from offline to online, the laws need reforms too. Ever wondered where they stand on the line of legality? Read further to know more!
HOW DO THESE PLATFORMS WORK?
Fantasy sports are a part of websites like Dream 11 and Pari Match. Real players’ virtual equivalents are present on the platform. When you sign up for this site, you can create and manage a team of players who are players of the sport in real life. Based on how those same players actually performed in real life, your team’s online score is determined. You can further customize your team by adding, removing, or exchanging players, which may cost you some points or fictitious coins. This, in turn, necessitates the use of actual money. You must pay an entry fee of as little as INR 75, and depending on the number of players and the simultaneous winner, you might earn as much as 50%.
WHAT MAKES THEM SO POPULAR WITH GAMERS?
According to the Federation of Indian Fantasy Sports’ most recent report, India is the world’s largest fantasy sports consumer/user. With an estimated population of 13 crore people, Esports has seen an increase in money produced and taxable income.
If you ever thought why these platforms are in the vogue, consider this:
- Autonomy to manage- The gamers get to actively manage the teams and therefore, put their previously passive knowledge and understanding into the application. Additionally, it also gives them a sense of control which can often be empowering.
- Heightened engagement- There are some matches that the gamers would have previously might have overlooked or watched superficially. However, with the added dependence on their winning and monetary gains, they are compelled to pay more focused attention to these.
- Socialising- Most of these platforms also give you the option of interacting and socializing with fellow gamers who may be your friend, family, or colleagues. Don’t have enough friends to play it with? You may make new ones here!
GAME OF SKILL OR CHANCE?
This legendary classification could have ramifications beyond what we ordinarily think of it. A game of skill is one where the player needs to apply some of his own logical, analytical, strategic, or physical skills in order to win. On the other hand, a game of chance is one whose outcome depends upon luck/chance. Now, it is possible for a game to have both as factors for the determination of the winner.
For example, in Ludo, there is a factor chance as a player can move on the rolling of a dice. There is also a factor of skill, as in, the player must analyse the board before deciding which move would result in a win for him and a failure for this opponent. However, the component of chance overpowers the component of skill in Ludo, rendering it a ‘Game of chance’.
Similarly, a game in which the component of skill overpowers that of chance would be called a ‘Game of skill’.
This determination becomes particularly important when we talk about the legality of these platforms and the taxability of the winnings therefrom. (Discussed later in this Article)
THE LEGAL JOURNEY OF BETTING THROUGH THE YEARS
Betting refers to the wagering of money on the future outcome of an event. When you bet on a game of chance, it is referred to as gambling which is illegal by virtue of many statutes at the State level. This also varies depending upon the nature of the game such as horse racing, lotteries, rummy, and poker have different implications on the laws of different States. Except for Assam and Odisha, which prohibit all forms of businesses dealing with betting, the States in India allow betting on ‘Games of skill’. Whereas, betting and operating gaming houses on ‘Games of chance’, are considered as ‘Gambling’ under the law. The only exceptions are Goa and Sikkim, both of which have legalized gambling and betting within their borders under the control of their respective state governments.
The legal recognition of online games and betting thereon has come a long way. However, the laws are still uncertain. The general purpose seems to be cracking down on businesses instead of the gamers.
A District Court in Delhi found that online gaming portals, even those dealing with ‘games of skill’, which partake a certain slice of the winnings by the user, are no better than public gaming houses and thus, illegal.
In a more recent case, the High Court of Punjab and Haryana held that Fantasy Sports involve a considerable amount of skill, judgment, and discretion. A gamer is required to study the rules intensively and keep a track of statistics, analyzing the performance of players. This decision and findings of the court were upheld by the Bombay High in 2019. It also took into account that the Supreme Court has dismissed the petition stating that there was no illegal betting in games like Dream 11.
THE R. M. D. CHAMARBAUGWALA CASE 
This case becomes particularly important while deciding the fate of fantasy sports in India. And, fortunately, for fantasy sports gamers, it speaks in their favour. What it says is that a game need not be completely based on skill. It is likely to have a component of chance and so long as the component of skill predominates over the component of chance, the game would be called a game of skill and would not be interpreted within the meaning of gambling. Further, since fantasy sports like Dream 11 and Pari Match involve a considerable amount of skill, be it logical, analytical, or judgemental, they fall within the purview of ‘games of skill’. This in turn implies that betting on these kinds of games and gaming portals that earn money through the operation of these games, are not illegal.
Based on the decisions of the Supreme Court of India and the various High Courts, it is evident that fantasy sports platforms have not been declared to be illegal in India. In fact, the government is looking for ways to promote the same, based on the immense popularity and huge revenue generation from these games. In 2020, Niti Aayog issued Guidelines for fantasy sports. The principles agreed upon, (open for discussion) include:
The following represents the tax implications on the gamer applicable to his/her winnings from online games:
For amounts greater than INR 10,000, the entity responsible for payment of winnings must withhold the tax amount in form of TDS. (Section 194 of the ITA). For greater clarification, you can get in touch with the subject matter experts.
While it is rejoicing to see the support of the government on the fantasy sports industry, the issues of lack of, definitive parameters for evaluating a game as ‘skill-dominant’; consumer awareness about grievance redressal; awareness to curtail the prevalent taboo against monetary gains from gaming; and immunity from State Legislations, still remain unresolved. Therefore, it is pertinent that these issues are looked into and appropriate measures are taken to further promote the industry that could do wonders for the economy.
- “The entry fees are usually around Rs75 with the total prize pool of Rs3 Lakh with respect to 5333 entries. The number of winners ranges to 2600. The prize money is then distributed among 2400 users from the 5333 entries.”, Himangi Khare, Dream 11: Binding Indians Together, StartupTalky, https://startuptalky.com/dream-11-business-revenue-model/. ↑
- India has the world’s biggest fantasy sports market with over 13 crore users, https://thebridge.in/fantasy-sports/india-fantasy-sports-market-world-largest-revenue-users-financial-year-30089 ↑
- “There are few games, if any, which consist purely of chance or skill, and as such, a game of chance is one in which the element of chance predominates over the element of skill, and, a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element- ‘skill’ or ‘chance’ that determines the character of the game.”, K.R. Lakshman v. State of Tamil Nadu, K.R. Lakshmanan (Dr) v. State of T.N., (1996) 2 SCC 226; State of Bombay v. R.M.D. Chamarbaugwala, 1957 SCR 874. ↑
- Gaussian Network (P) Ltd. v. Monica Lakhanpal, 2012 SCC OnLine Dis Crt (Del) 1. ↑
- Shri Varun Gumber v. Union Territory of Chandigarh and Ors., CWP No. 7559 of 2017; 2017 SCC OnLine P&H 5372. ↑
- Gurdeep Singh Sachar v. Union of India, 2019 SCC OnLine Bom 13059. ↑
- Supra at 3. ↑
- Guiding Principles for The Uniform National-Level Regulation of Online Fantasy Sports Platforms in India (Draft for Discussion), December 2020, Niti Aayog, https://www.niti.gov.in/sites/default/files/2020-12/FantasySports_DraftForComments.pdf. ↑