This piece has been authored by Karthik Subramaniam, a second year student at NALSAR University of Law. It discusses the debate surrounding Fantasy Gaming Leagues and gambling.
Spectator sports have been popular since time immemorial. fantasy sports leagues across the world have gained huge fan bases and manage to rake in massive revenues. The National Football League (NFL), the premier American Football tournament in the United States managed to generate revenue of around 13,680 million USD in 2017, which surpasses the GDP of almost 64 countries. Many individuals see these leagues as geese that lay golden eggs, thereby, motivating them to get involved.
Sports Fantasy leagues are games in which participants accumulate points based on the statistical accomplishments of the athletes they have selected to their teams based on a draft. One of the earliest published accounts of a fantasy sports involved Oakland businessman Wilfred “Bill” Winkenbach who devised fantasy golf in the latter part of the 1950s in the United States.With sports leagues such as the National Football League (NFL), the National Basketball Association (NBA), Major League Soccer (MLS), Major League Baseball (MLB) and the National Hockey League (NHL) present in North America, Fantasy Sports Leagues boasted almost 56.8 Million players in 2015. With people spending an estimated 11 Billion USD on online fantasy leagues in 2013, the need for regulations in the area becomes all the more important. The spending of so much money on a game where the pay-outs are highly uncertain draws a very fine line between such spending and the illegal act of gambling.
The Unlawful Internet Gambling Enforcement Act of 2006(UIGEA) is a legislation in the United States that regulates online gambling and ensures the protection of individuals operating in this rapidly booming field. The UIGEA prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law. The presence of this legislation has made gambling over the internet illegal. In fact, betting on sports is illegal in all American states apart from Nevada. The reason fantasy football and other such fantasy sports fall outside the ambit of being a gamble or wager is due to the UIGEA. The legislation says that games of “skill” played for a certain reward (money in most cases) can be permitted to continue online, while games that involve an element of “chance” cannot. UIGEA includes a specific exemption for fantasy sports from being considered as gambling, provided that they meet three essential requirements: 1) The value of the prize involved is entirely independent of the number of players involved, 2) the outcome is based on the relative knowledge and skill of the participants and determined by statistical results, and 3) the outcome cannot be determined by the score of the game or based solely on one individual player’s performance in a single real sporting event. These specific exceptions were carved out to accommodate the slowly growing (in 2005) industry of online fantasy gaming. In a letter dated Feb. 1, 2006, the top lawyers from the NFL, NBA, NHL and MLB asked members of Congress to co-sponsor UIGEA, which included the fantasy carve-out. The legality of the same has allowed many states to impose taxes on fantasy gaming, allowing them to join in on the money bandwagon as well.
The Indian standpoint on this is based on the differentiation between games involving chance, and games involving skill as well, as laid out in the American context.
The Fantasy Sports League sector in India has been gaining steam for a while. Recently, in April 2019, Dream11, a Mumbai-based fantasy gaming start-up became India’s first gaming unicorn. The online gaming revenue is expected to increase from around 2,000 crores in 2014 to around 11,900 crores in 2023. The sector has undergone a massive change over the last few years with people rapidly gaining interest.
The current Indian legislations that deal with gaming in India are the Public Gambling Act, 1867(PGA) and the Prize Competitions Act, 1955(PCA). The 1867 Act, being a pre-Independence legislation offers a colonial approach to gambling, which put forward a largely anti-gambling rhetoric. While this legislation looks at predominantly criminalising gambling in most cases, it also tries to distinguish between betting on a “game of chance” and staking on a “game of skill” to provide a safe harbour to activities such as wagering on horse races which were extremely popular amongst the British. While the application of this legislation was limited to the erstwhile British presidencies, the adoption of the principle espoused by the statute in most state legislations illustrates a similar mind-set showcased by Indian states.
Very much like the UIGEA, the Indian position with respect to declaring online-fantasy games as legal lies on the emphasis given on “games of skill”. While the PGA does not clearly mention specific games that constitute as games of “mere skill”, Indian courts have by and large adopted the “dominant factor test” or “predominance test” which requires the court to analyses the case and verify if chance or skill “is the dominating factor in determining the result of the game”. Courts have recognised that no game is a game of pure skill alone and almost all games involve an element, albeit infinitesimal, of chance.
Based on the above, Sports Fantasy games have been exempt from the provisions of the PGA and have been declared as a legitimate business activity protected under Article 19(1)(g) of the Constitution of India. With a high potential for growth in the Indian market, foreign entities have been looking at exploring possibilities in the country. The classification of games into those involving “skill” and those involving “chance”, in India has been very vague, and often left up to the interpretation of courts. In an era of growing acceptance and evolution there is a requirement of an effective legislation specifically classifying activities as illegal gambling, separating it from those involving preponderance of skill.
Vivek Benegal, Gambling Experiences, Problems and Policy in India: A Historical Analysis, in 108, Addiction, December 2013, 2062-2067.
Dr. K.R. Lakshmanan v. State of Tamil Nadu, AIR 1996 SC 1153; State of Andhra Pradesh v. K. Satyanarayana, AIR 1968 SC 825.