Fantasy Sports have become a huge thing in recent years, especially in India. With apps like Dream11, My11Circle, MPL, etc., more and more people are putting in their money, hoping to win big. But the real question is – are these fantasy games actually based on skill, or are they just another form of online gambling? This article dives into how the law sees it, what the courts have said, how these fantasy games work, and whether there's actually any real skill involved or if it's all just luck.
What is Gambling?
Gambling can be defined as a game comprising three key elements: consideration, an element of chance, and a reward. It typically involves the possibility of winning or losing substantial amounts of money based on a fortuitous event. 1
The History of Gambling
The history of Gambling in our country goes back to around 4th Century BC, when dice was used to play games such as chaupar and pachisi these games were used for gambling and it was an important element of the society at that time. Even in the epic of Mahabharata, gambling was a major plot of the story and was shown as a negative thing where the Pandavas had lost everything in the gamble which led to the war of Mahabharata. Then, around 16th Century BC, when the Mughals came to India, they introduced some more forms of such games of gambling such as cock fights, etc.
Post that, when the Britishers came to India, they introduced sports such as Horce Racing and Cricket in the year 1777 and people started to put money and play gambles on these sports as well and the concept of Gambling Houses came into existence. These Gambling Houses were places where people used to gather and put their money on sports and play bets. A large no. of cases of violence and looting arose from these gambling houses and things were getting out of the hands of the British, that was when they introduced the Public Gambling Act on 25th of January, 1867 2. This act is still in existence and is followed in India.
This Act was made with the motive of putting an end to the concept of gambling houses and stopping people from putting money and placing bets on sports. Section 13 of this Act, imposed penalties on the animals and birds fights in public places. Now, in Sections 12 and 18 of this Act, Gambling was considered as an illegal activity but skill-based games were allowed to be played. This basically meant that Game of Chance is illegal and Game of Skill is legal. Although, it was no-where defined that what exactly is a game of chance and a game of skill. This created a huge loophole in the law, which is highly relevant today. This act, stopped the concept of Animal Fights and Gambling Houses, however, Lotteries and Horce Racing were still in existence.
After India became Independent in 1947 and when the constitution of India came into existence, The Public Gambling Act of 1867 was adopted as it is and was entered into the 7th Schedule of the State List, which means that it is upon the discretion of the states whether they want to adapt and follow the act as it is, or make changes into it or even make their own laws regarding the same. Several states such as Bihar, Madhya Pradesh, Chhattisgarh, Manipur, etc., adapted the law as it is, whereas states such as Goa, Gujarat, Maharashtra, Assam, Andhra Pradesh, Kerela, etc., made some changes in this law and then implemented them.
Difference between Game of Skill and Game of Chance.
The Public Gambling Act, 1867 allows games of skills and not games of chance but does not define them, their definition and differentiation were given by the Hon'ble Supreme Court of India in the case of R.M.D. Chamarbaugwala v. Union of India 3 that every sport and game have both the factors of skill and chance involved, what matters is the dominating factor. If the dominating factor in a game is skill and it involves mental ability, physical ability strategy, etc, it will be considered as a game of skill and if the dominating factor in the game is luck, it will be considered as a game of chance. Post this, whatever cases came to the court were decided based on the factors provided by this judgement.
Current Scenario of Gambling in India
Times have changed with the advancement of technology and gambling has been transformed from streets to mobile phones and computers. Although, the laws governing gambling in our country have been the same since the late 1800s when they were first introduced by the britishers, because of which, there has been a lot of ambiguity in the area of legality of gambling in India.
Rummy has been legalized in India since 1963 when a man named K Satyanarayana who used to run a rummy club was arrested by the police for gambling. The case went to the court and the court declared that the game of Rummy requires skills; players need to memorize the cards and decide what card is to be used according to the situation 4. However, several states such as Andhra Pradesh, Assam, Tamil Nadu, Meghalaya, Nagaland, Odisha, Sikkim and Telangana do not allow this game within their territory.
Casinos and Slot machines are allowed in Daman & Diu, Goa and Sikkim under the Goa, Daman & Diu Gambling Act, 1976 5 in some limited amounts through proper licensing system.
Horse Racing was also declared as a game of skill in the case of Dr. K.R. Lakshman vs State of Tamil Nadu in 1996 6, stating that the person putting money in the game doesn't put bets based on chances but does that after carefully studying the performance history of the horse, conditions of the track, skills of the jockey, etc. Hence, since then, it is completely legal to place bets on horse racing.
Lotteries have been prevalent for a long time and in order to regulate them, The Lotteries Regulation Act 7 was passed in the year 1998 which introduced fair guidelines and transparency system of lotteries and the private and illegal ways of lotteries were banned all over the country and only the states were allowed to conduct lotteries through their certified distributers. 13 States in India namely – Arunachal Pradesh, Assam, Goa, Kerela, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Punjab, Sikkim and West Bengal conduct lotteries.
Fantasy Games have been prevalent since late 2000s and were declared to be legal and valid by the Punjab and Haryana High Court in 2017 8 for the reason being that concept of such games is skill based. These are also recognized under the IT Rules of 2021 and their amendments of 2023. 9
What is a fantasy game?
A fantasy game is a type of prediction game which connects with real life games taking place in real time.
The actual real-life players from the sports are linked to the characters of these fantasy games. The performance of the actual players reflects the performance of the in-game characters.
An individual is supposed to create a team within certain rules and budget consisting of players of both the teams that are playing against each other in a match and each player's performance adds up points that decide the winners.
What is the revenue model of Fantasy Gaming Apps?
Let us understand this with an example –
For instance, there are 5 players. Every game has an entry-fees, let us assume it to be 100 rupees. Now a total of 500 rupees has been accumulated. From these 500 rupees, 28% GST will be deducted which is 140 rupees, now remain 360 rupees, from which the share of the fantasy gaming app is deducted that is generally 20-30%, assuming it to be 20% (72 rupees), it leaves us with 288 rupees. Whoever wins this round of the game would get these 288 rupees but that person would have to bare a TDS of 30% which adds up to 86.4 rupees, remaining 201.6 rupees is what the winner of the round gets. The principal amount was 100 rupees, which means the profit that the winner gets is rupees 101.6
In this particular round, the winner gets 101.6 rupees, the gaming company gets 72 rupees and the government gets 226.4 rupees.
This was just an example of a single round of game. There are multiple rooms and games of competition and events in a single match but let's consider the Mega Event, in which, around 1.5 crore people participate and the entry fees for this event is 49 rupees, which adds up to a total of 73.5 crore rupees from which, 33.28 crores go to the government and 10.58 crores go to the app owners and there are multiple numbers of such events. Approximately 1500 crore rupees are put on a single international match and if domestic and international tournaments are summed up, the number adds up to approximately 10 lakh crore rupees.
The revenue of these fantasy gaming apps in 2022 was about 6800 crores and is estimated to grow to about 25240 crores by 2027, as per a joint report from Deloitte and Federation of Indian Fantasy Sports (FIFS) 10
Is it really a game of skill or a game of chance?
Now, we are aware of the difference between a game of skill and a game of chance.
Let us take the example of the most relevant and followed sport in our country, which is, cricket. These fantasy sports claim to be a game of skill as the player has to study about the ground, pitch conditions, weather conditions, etc. and the form, statistics, etc. of the players that he is selecting in his team and has to select a total of 11 players out of the 22 players from both the teams and also has to select any two of those 11 players to be the captain and vice-captain. It is to be noted that each player's performance adds up points which lead to deciding of the winner of a particular round.
If we calculate all the combinations that are possible from these circumstances of creating a team, it adds up to a total of 7,05,432 combinations, among which, the captain and vice-captain have to be chosen and there shall be 110 combinations of captain and vice-captain, now, multiplying these two amounts of no. of combinations (110×705432) adds up to 77597520 combinations, and only one among these is the winner who gets the highest amount of money from the prize pool. The probability of winning is 0.0000067%.
There are lakhs of cricketers in our country from district level and state level players to national level and retired players who are well aware of the understanding of the statistics in their sport and also the other factors that affect their sport such as the pitch conditions, weather conditions, etc. If it actually was a game of skill, it would be easy money for the thousands of cricketers in our country but every time a random person comes up as the winner. Recently, a daily wage worker in Sitamarhi, Bihar, who had literally no idea about cricket, and had participated in a round of such fantasy game because his friends told him to do so, won 1 crore rupees. 11
It is very evident whether such games are actually a game of skill or a game of chance.
Problems caused by Fantasy Sports
The American Psychiatric Association publishes a Diagnostic and Statistical Manual of Mental Disorders and the World Health Organization publishes the International Classification of Diseases, in which, a comprehensive list of criteria and solutions for mental health diseases. These are used by doctors, worldwide, to be updated and aware about such diseases and the methods of their treatments.
In the 5th edition of DSM 12 and the 11th edition of ICD 13 the offline and online gaming addictions are compared to substance related diseases that are alcohol and drugs and a separate category has been introduced, namely – Pathological and Disordered Gambling has been introduced along with its treatments and medicines.
Moreover, as per a report of Translational Psychiatry, the part of brain that controls impulses of the people who gamble too much gets weak and they start losing control over themselves. 14
There are numerous cases where people have lost lakhs of rupees, their savings, and even took loans to put their money in these fantasy gaming platforms. 15
During IPL 2023 Fantasy Sports Industry made a gross revenue of 2800 crore rupees. 16 In the years 2018 and 2019, Foreign Direct Investment of about INR 1500 crores companies such as America's Tiger Global and UK's Steadview Management was brought by the Fantasy Sports Industry as per the FIFS report. 17 If the government takes any step against these apps then all these foreign investments coming to India will stop. Furthermore, State Government, Central Government, BCCI and Huge Business Companies that have invested in these apps, all of these will be deeply impacted, which would also result in financial losses to the government. So, even if there's a debate about whether these games are legal or ethical, the fact is – they aren't going anywhere anytime soon. The money, influence, and reach are too big now. The only thing that needs to be figured out is how to protect the people playing – especially when some are losing way more than they can afford.
Footnotes
1. C. Black, Black's Law Dictionary (6th ed. 1994).
2. The Public Gambling Act, 1867
3. R.M.D. Chamarbaugwala v. Union of India - AIR 1957 SC 628
4. State of Andhra Pradesh v. K Satyanarayan and Others, (1968) 2 SCR 387
5. The Goa, Daman and Diu Public Gambling Act, 1976.
6. Dr. K.R. Lakshmanan v. State of Tamil Nadu & Anr., (1996) 2 SCC 226
7. The Lotteries (Regulation) Act, 1998.
8. Varun Gumber v. Union Territory of Chandigarh & Ors., CWP No. 7559 of 2017
9. The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021
10. Fantasy Sports – Creating a Virtuous Cycle of Sports Development https://www.deloitte.com/in/en/Industries/tmt/research/fantasy-sports.html
12. Diagnostic and Statistical Manual of Mental Disorders (DSM-5-TR) - https://www.psychiatry.org/psychiatrists/practice/dsm#:~:text=Diagnostic%20and%20Statistical%20Manual%20of%20Mental%20Disorders%20(DSM%2D5%2DTR)
13. International Statistical Classification of Diseases and Related Health Problems (ICD) - https://www.who.int/standards/classifications/classification-of-diseases#:~:text=International%20Statistical%20Classification%20of%20Diseases%20and%20Related%20Health%20Problems%20(ICD)
14. Translational Psychiatry https://www.nature.com/articles/tp2016256
15. https://www.thequint.com/fit/online-fantasy-sports-apps-addiction-debt-depression-loan
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
