The Rise of Fantasy Sports in India and Its Legal Quagmire

The journey of Fantasy Gaming in India has been quite an intriguing one. The industry has surged in popularity in India, transforming from a niche pastime to a mainstream phenomenon. The allure of fantasy gaming lies in its unique blend of strategic thinking and real-time sports excitement, allowing users to create and manage their own teams based on real-life athletes.

The industry’s explosive growth is evident in its increasing presence in major sporting events and advertising campaigns. Platforms like Dream11 now sponsor prominent events such as the Indian Premier League (IPL), showcasing their financial clout and market influence. Moreover, the industry’s ability to attract big celebrities for their advertising campaigns underscores its mainstream appeal.

This expansion however has also brought to light significant legal challenges and regulatory ambiguities. The fantasy sports industry in India operates in a complex legal environment, navigating through a maze of regulations and judicial rulings that often vary from state to state. The debate over whether these activities are a game of chance or skills remains a contentious issue.

This article aims to examine the legal loopholes that companies navigate, and explore the scrutiny and regulatory measures that are shaping its future.

What Are Fantasy Sports and Their Legal Status in India

Sports like fantasy games let players assemble fictional teams of actual players from a particular sport. The player’s team then engages in fantasy sports, and the success of the players there is based on their performance in real life.

Participants earn points and rankings based on the statistical performance of their selected players, with the ultimate goal of outsourcing their competitors.

The trend of fantasy sports has been steadily growing in India for over a decade, spurred by the popularity of gaming applications like FanFight, My Team 11, and Mobile Premier League (MPL). However, the phenomenon gained significant traction with the rise of Dream11, particularly due to its association with the highly commercialized Indian Premier League (IPL).

The legality of fantasy sports and its demarcation from online gambling in India hinges on the classification of these games as either games of skill or games of chance. The skill v Chance differentiation as devised by the Indian courts is crucial for validating the legality of fantasy games. The Public Gambling Act was enacted in the 1867 under the British rule, to prohibit gambling and public gambling houses. The Act however, made an exception for games of skill.

After the enactment of the constitution in 1950, betting and gambling were listed under entry 34 of the State list, vesting the power in the state legislature to enact laws pertaining to gambling and betting.

The crux of the issue then remains how fantasy games are games requiring skills and hence legal in India. The Punjab and Haryana High Court, in the case of Varun Gumber v. U.T., Chandigarh, determined that playing fantasy sports requires substantial skill, judgment, and discretion. Participants must evaluate the relative value of each athlete based on their strengths and weaknesses when drafting players. This assessment significantly influences the success or failure of the fantasy sports games, making skill the predominant factor in determining the outcome. A subsequent challenge to this ruling was dismissed by the Supreme Court on September 15, 2017.

Indian jurisprudence has notably distinguished fantasy games from online gambling and betting. Courts have recognized that fantasy sports involve skill, strategic thinking, and informed decision-making, setting them apart from games of pure chance. However, questions persist about whether the industry should remain largely unregulated. There are concerns that the allure of quick earnings could lead to addiction among players who may not always rely on skill or informed choices but rather follow popular trends. This raises ethical considerations regarding consumer protection and fair play within the fantasy sports ecosystem. As the industry continues to grow, balancing innovation with responsible regulation becomes increasingly crucial to safeguarding participants and maintaining the integrity of fantasy sports in India.

Let us first take a look at the already existing regulations for fantasy gaming platforms to adhere to.

As it stands, the legal landscape in India regarding gambling, betting, and wagering is complex and varies widely across states. With the exception of Goa, Sikkim, and the Union Territory of Daman, most states explicitly prohibit any form of gambling, betting, or wagering on games of chance. Additionally, states like Assam, Andhra Pradesh, Nagaland, Sikkim, and Telangana have also placed restrictions on games of skill, which bars participation in activities involving real money transactions, such as fantasy sports platforms like Dream11.

In India, with the absence of a dedicated governmental regulatory body, the Federation of Indian Fantasy Sports (FIFS) has taken on the role of a self-regulatory organization. FIFS is focused on establishing operational standards and safeguarding the interests of consumers engaged in fantasy sports. The transformation of the Indian Federation of Sports (IFS) into FIFS reflects a strategic shift towards emphasizing esports and fantasy sports, moving away from a broader focus on all skill-based games.

Depending on the nature of the games, obtaining licenses and approvals from regulatory bodies such as the All India Gaming Federation (AIGF) or state-level gaming authorities is necessary. In 2023, the Ministry of Electronics and IT (MeitY) introduced initial guidelines for online gaming in India. This move followed the Central government’s designation of MeitY to oversee and regulate the online gaming and esports sectors nationwide.

Under these guidelines, online gaming platforms must register with a self-regulatory organization recognized by MeitY. Only games approved by this organization will be permitted to operate legally in India. Additionally, the rules prohibit companies from facilitating betting on game outcomes. They also mandate stringent requirements, including mandatory know-your-customer (KYC) verification procedures and the establishment of a robust system for handling consumer complaints. These measures aim to ensure transparency, fairness, and consumer protection within the rapidly evolving online gaming industry in India.

The Nagaland Act has established a licensing framework for offering skill-based games, which includes fantasy sports. This legislation explicitly identifies “virtual team selection games” as games of skill. In Nagaland, the Finance Commissioner serves as the licensing authority for regulating such activities.

In Rajasthan, a proposed bill aims to regulate online fantasy sports within the state. If enacted, this bill would subject fantasy sports and their operators to a licensing regime. Under the proposed legislation, licensing authority would be vested in officers appointed by the state government of Rajasthan. This regulatory approach aims to ensure oversight, compliance, and consumer protection within the burgeoning fantasy sports sector in Rajasthan.

In the absence of uniform national legislation and with laws varying by state, the legal landscape for fantasy sports in India is diverse. To ensure consistent standards, the Federation of Indian Fantasy Sports (FIFS) has established guidelines that its members must follow in its charter–

Fairness and Equality

• Members must ensure that the budget, rules, playing conditions, chances of winning, and risks associated with any contest are equal for all participants.

Transparency and Disclosure

• Members are required to draft and publish the terms and conditions, contest rules, points calculation mechanisms, winner determination methods, and prize distribution details on their platforms.
• These documents must be readily available on the member’s website, and any significant changes must be communicated to users in advance.
• Members must prevent and prohibit the use of scripts that provide unfair advantages to certain users.

Integrity

• Personnel from member organizations are prohibited from participating in paid contests against users on their Fantasy Sports Platforms (FSP).
• Members must adhere to the FIFS Responsible Gaming Policy and any updates or re-enactments thereof.
• Members must comply with directives from the FSRA, a committee of independent judicial experts established by FIFS to resolve disputes at an appellate level.

Financial Management

• Members must maintain separate accounts for operational expenses and prize pool funds.
• User funds should only be used for transfers to the user’s verified bank account and must be deposited in reputable banks to ensure timely withdrawal.

The NITI Aayog, has acknowledged the positive legal judgments regarding fantasy sports and the existing legislative gap, highlighting that these platforms are operating under an ambiguous exception to state gambling and public order laws. In response, a draft has been prepared outlining guiding principles for Online Fantasy Sports Platforms (OFSPs).

Undefined Skill vs. Chance Test:

• There is no clear, objective method to determine whether a game is based on skill or chance, placing the burden of assessment on the game developers. This lack of clarity can hinder innovation and development.

State Regulatory Variance:

• Different regulations across states create a heavy compliance burden for platforms, complicating their operations.

Consumer Compliance Burden:

• Variations in state laws also impose legal risks for consumers. For instance, a user residing in Delhi might face prosecution if they use the app while in Nagaland.

In light of these challenges, NITI Aayog has proposed the creation of a self-regulatory organization for the industry, overseen by an independent oversight board. This organization would include an independent evaluation committee to determine the skill level of games. Additionally, a national light-touch regulatory framework is suggested.

In December 2020, the Advertising Standards Council of India (ASCI) introduced guidelines for advertisements related to fantasy sports and online gaming. These guidelines mandate that all ads, in print or audio/video format, must include disclosures stating that the game involves financial risk and may be addictive, advising players to participate at their own risk. Ads should not present online gaming as an income opportunity or alternative employment, nor suggest that gamers are more successful than others. Additionally, they must not depict individuals under 18, or those who appear to be under 18, participating in real money gaming. Further, fantasy sports platforms must adhere to the ASCI’s February 2021 Influencer Guidelines, which require influencers to clearly label their digital posts and provide specific disclosures for picture, video, and audio posts to ensure accurate information about the risks associated with online games is communicated.

THE NEXT STEP-

Despite the several regulations, the challenges that the industry faces is two faced- for the platforms as well as the users. Platforms must navigate a complex web of state-specific laws and compliance burdens, making nationwide operation difficult. Additionally, platforms struggle to accurately determine if a user is playing from a state where such activities are allowed and to verify the actual age of the users.

On the other hand, members of the federation are required to adhere to the charter’s regulations. However, the absence of comprehensive legislation creates a significant loophole. This regulatory gap provides a safe haven for platforms that choose not to join the federation, enabling them to operate with minimal oversight and potentially engage in practices that would otherwise be restricted or scrutinized. As a result, these non-member platforms can exploit the lack of stringent legal requirements, working on their own terms and often prioritizing profit over fair play and consumer protection. Users in India might not always be aware of this regulatory gap, which can lead to them engaging with platforms that are not subject to the same standards of fairness and transparency. This lack of awareness can expose users to potential risks and unethical practices by non-member platforms.

It is also important to note that in navigating the legal landscape, fantasy gaming platforms often capitalize on the ambiguous term ‘skill-dominant’ as outlined by judicial interpretations. This term, lacking precise definition, provides a strategic opening for platforms to adapt their game formats. By subtly adjusting the ratio of skill to chance elements, integrating randomized events, or tweaking algorithmic outcomes, these platforms can maintain a facade of skill-dominance while introducing enough chance to diversify gameplay. It can obscure the true nature of the game, potentially misleading players about the actual factors influencing outcomes. This opacity not only undermines transparency but also raises concerns about fairness and consumer protection.

Beyond legal uncertainties, fantasy gaming presents additional challenges that warrant consideration. The allure of these platforms, often promoted as skill-based entertainment, can inadvertently lead to addiction among players. The financial stakes involved, where users may invest significant sums with uncertain returns, raise concerns about potential financial loss and exploitation. Moreover, while some may pursue fantasy gaming as a career, the lack of stability in earnings and the highly competitive nature of the industry underscore the risks of depending on it for sustained income. These challenges highlight the need for robust consumer protections, responsible gaming practices, and clearer regulatory oversight to safeguard players’ well-being and ensure the sustainability of the fantasy gaming sector.

CONCLUSION

In conclusion, the landscape of fantasy gaming in India stands at a critical juncture, navigating legal ambiguities and societal concerns amidst its rapid growth. While the pending Online Gaming Bill represents a step towards regulatory clarity, it currently lacks differentiation between various forms of gaming, including fantasy sports. This omission underscores the urgent need for targeted legislation that specifically addresses the unique dynamics of fantasy sports, clarifying what constitutes skill-dominant gameplay and establishing robust consumer protections.

Concurrently, the establishment of a dedicated regulatory body empowered to oversee compliance and promote responsible gaming practices remains imperative. These measures are essential not only to protect players but also to foster a sustainable and transparent ecosystem that supports the continued evolution of fantasy gaming as a legitimate and socially responsible form of entertainment. Unlike self-regulatory measures limited to member platforms, a statutory regulatory body would enforce consistent standards across all operators, regardless of membership status. This inclusivity ensures broader protection for all users, establishes uniform guidelines that enhance industry credibility, and mitigates the risk of non-compliance loopholes exploited by non-member platforms.

The government’s decision to levy more taxes on fantasy gaming platforms reflects a nuanced approach akin to how it manages regulated goods like alcohol. This strategy signifies a recognition that while fantasy gaming cannot be outright banned due to its popularity and economic potential, its usage must be carefully regulated and possibly discouraged.

Hence, as long as measures are in place to address addiction risks and ensure that users are well-informed about the potential pitfalls rather than merely enticed by celebrity endorsements, the fantasy gaming industry can continue to thrive. By adopting this approach, the industry not only sustains its economic contributions but also promotes responsible participation. This balanced approach supports the broader economic growth of the country while safeguarding individuals from the adverse effects of excessive gaming behaviors.

BY PAANKHURIE SHRIVASTAVA

INTERN STUDENT, RGNLU