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Fantasy League Games and the Spectre of Gambling

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State Legislatures, as per the Constitution of India, have enough power to make laws on gambling and betting. According to Public Gambling Act 1867, the central enactment on a subject is adopted by some Indian states. Some states have formed different legislation for regulating gambling in the territory of various states. 

The fantasy sports gamble is defined by many State Acts as “the act of betting or wagering” for money’s worth. But the State Acts (other than in Telangana, Assam and Orissa) excludes such laws for playing games of “just skill,” which don’t fall under the scope of gambling. The courts have explained gambling terms for games in which there are controlling factor chances. 

What are Games of Skill?

According to Indian Supreme Court, the games of the skill are completely based on skill. These have also laid down that competitions, where winning is based on a substantial skill degree, won’t fall in the “gambling” category. Despite there are some elements of chance, if a particular game is dependent on the game of skill, it will never be considered as the “game of skill.” No matter a game is of skill or chance, it needs to be evaluated based on different scenarios or case by case. 

The principles in terms of the games of skill, as stated by the Supreme Court, have been repeated by different high courts. Depending on such principles, some high courts have conducted games like chess, rummy and carrom as the games of skill. 

Individually, some State Legislation like Nagaland Prohibition of Gaming and Promotion, West Bengal Gambling, Prize Competitions Act, 1957 and Promotion and Regulation of Online Games of Skill Act, 2016 particularly consider some games like poker, rummy, nap, bridge, etc. as the games of skill. 

Fantasy Leagues as Game of Skill

The High Court of Haryana & Punjab in the case of Union Territory of Chandigarh vs. Varun Gumber care examined the fantasy sports gambling online for cricket league formats. These are held as games of skill. The court also ruled that participating in online fantasy sports on the Dream 11 website is not considered gambling. It involves a substantial skill level. 

The court also examined that: 

(a) Playing in fantasy league involves user forming a virtual team, which need certain skill, discretion and judgment; 

(b) The user also needs to assess the worth of every sportsperson/athlete against all other sportspersons or athletes available for selection; as well as

(c) The participant needs to study all the rules and regulations on a given site. They even need to analyze the weaknesses and strengths of each player or athlete before playing. 

These factors stated affected the game results. Therefore, it is considered a mere skill game and eliminating it from the gambling factor. The Supreme Court also dismissed a special petition for leave filed by a petitioner in opposition to Haryana & Punjab high court’s order with no bad remarks.  

This decision has been confirmed by the Bombay High Court as regards Gurdeep Singh Sachar vs. Union of India on April 30, 2019. In this case, the court examined that:  

(a) If the result of the contest/game has been determined only by accident or chance. Money put at stake with the risk consciousness and will to gain would be referred to as “gambling” or “betting.” It won’t hold for the fantasy games or contests;

(b) The fantasy game contest’s results on the Dream 11 app are not dependent on losing or winning any specific team in the real-world game. Therefore, no gambling or betting is based on their fantasy games; and

(c) There is also no plausible cause for taking a view contrary to the judgment of the High Court of Haryana and Punjab. It has also been confirmed by the Hon’ble Supreme Court.

Another problem that became a huge debate recently is the taxability of betting formats. The issue was discussed by the Bombay High Court in the Union of India vs. Gurdeep Singh Sachar. In this case, the court examined that: 

(a) Under Section 7(2) of the Schedule III mentioned in the Central Goods and Services Tax Act, 2017, the actionable claims besides betting, lottery and gambling won’t be considered the supply of goods or services. Therefore, it’s not taxable. As the online fantasy games don’t amount to “betting” or “gambling,” there is not any scope for inferring possibility of the GST avoidance;

(b) The money pooled in the escrow account managed by an operator will amount to some actionable claim. It is just the same as the amount to be distributed among the winners of a particular game. Nonetheless, fantasy leagues won’t amount to “betting” or “gambling.” The mentioned actionable claim will not fall under the given Section 7(2) mentioned in the Schedule III of CGST Act; and  

(c) Actionable claim is considered to Rule 31A of the CGST Rules, 2018 is just limited to “betting” “gambling” or “lottery” or “horse racing in the racing club.” Therefore, it has no application for the given case. 

The high court, thus, clarified that money pooled by users was not liable to GST, depending on the result that fantasy leagues are not subjected to “betting” or “gambling.” 

The given decisions of different Indian courts have declared that online fantasy games may fall in the game of skill. It would not be taken as gambling or betting. Therefore, the analysis given by the courts is fact-specific. And, each format will be evaluated independently to determine if it will meet the test conducted by the High Courts and Supreme Court.

Apart from that, other starts may also pass legislation that eliminates the estimates of such games of skill. These are similar to the acts done in the State of Orissa, Assam, and Telangana. In such a case, users would consider restricting their bets in these states. 

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