Open Access Research Article
LEGAL CHALLENGES AND ALTERNATIVE DISPUTE SETTLEMENT IN FANTASY LEAGUE GAMES
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Article Details
LEGAL CHALLENGES AND ALTERNATIVE DISPUTE
SETTLEMENT IN FANTASY
LEAGUE GAMES
AUTHORED BY - VANSH
DUA
Introduction:
In recent years, the popularity of Fantasy League
Games[1]—also known
as Daily Fantasy
Sports (DFS)—in India has
skyrocketed. Players in these games may assemble digital squads with their favourite real-world athletes and
compete against one another depending on the actual results of the real teams.
The purpose of this article
is to present a synopsis
of the development and current
legal standing of Fantasy League Games in India. In
this article, we'll look at the pro and con sides of the debate over whether or not these games should be allowed, as
well as at the numerous legislative and judicial responses to the issue. At the end of the paper,
I will argue that Fantasy
League Games are completely legal in India and that the government
should do what it can to both regulate
and promote them.
Background:
Fantasy
league games are a sort of online competition in which participants construct
fantasy squads based on the actual
accomplishments of professional athletes. Most of these contests last for a single day or week, and
competitors score points based on how their teams do statistically. With these points, users can enter smaller
tournaments with larger prizes, or compete against
other users for larger prizes in larger tournaments.
The first Fantasy
Baseball League was established in the United States in the 1960s, where the concept
of Fantasy League Games was born. Since then, it has become a global
multibillion- dollar industry
that has been adopted by other sports
including football, basketball, and cricket. Millions of Indians are now playing
Fantasy League Games thanks to their meteoric rise in popularity over the past several
years. Since Dream11
debuted in India in 2008, fantasy league
games quickly became
a popular pastime.
Since then, a slew of imitators has flooded the Indian market,
allowing players to form digital
squads and compete for real money.
Legal Framework:
The Public Gambling Act, of 1867[2], which outlaws all gambling in India, serves as the primary legal underpinning for fantasy league
activities in that country.
Nevertheless, the Indian Supreme Court
has ruled that this Act does not apply to games of skill. Consequently, whether fantasy league
games are viewed
as games of skill or games of chance will determine whether
they are allowed in
India.
According to the Supreme Court, games of skill are those in which a
player's success is principally determined by his or her talent,
knowledge, training, and experience, rather
than by chance. Games of chance, on the other
hand, are those in which luck or chance plays a major role in the outcome. Fantasy league games would be excluded from
the Public Gambling Act and their legality would not be in doubt
if they were to be deemed games of skill.
In India, gambling is a topic of state law, and as a result, several
states have their own regulations
pertaining to it. Yet, a key statute that establishes gambling's definition and
its different manifestations is the Public Gambling
Act of 1867. This Act defines gambling
as "the act of making
a bet or wager on a game of skill
or chance when the result
is unpredictable and the winner is determined by chance."
In the case of State of Andhra Pradesh
v. K. Satyanarayana and Ors.
in 1967[3], the Supreme Court of India ruled that games requiring
a high level of skill are not gambling and are thus permissible. A game of skill, according to the court, is one in
which the element of skill outweighs the element of chance. The court also decided that even if a game has a little amount
of chance, it would not be regarded
as gambling if it is primarily a game of skill.
In Chandresh Sankhla v. State of Rajasthan in 2020[4],
the Rajasthan High Court ruled that Fantasy League
Games like Dream11
include a significant level of talent
and are thus not
prohibited. The judge noted that "The choice of a team by a player is
influenced by a number of variables, including prior performance, present form, injury status, and playing circumstances. This cannot be characterized as
a game of chance because it involves a significant degree
of skill and judgment."
Nonetheless, the same year, the Bombay High Court ruled in Gurdeep Singh Sachar v. Union of India and Others.[5] that although online fantasy sports games
are games of skill, the awarding of rewards
based on the outcome of a game that is dependent on chance still constitutes gambling. The court stated that "Fantasy League Games still fall under the definition of gambling" because
"the skill aspect involved is not adequate to overcome the element
of chance."
Laws regulating fantasy sports:
Despite
the fact that fantasy league games have been recognized as games of skill by
the law in the past, the Indian government has not yet passed any explicit laws governing them.
Several states have, however, taking action
to control these games.
Instead
of giving such authority to the central government, the Indian Constitution
gives it to the individual states to decide
how to regulate gaming and betting. As a direct
consequence of this, the legal standing of fantasy
league games differs significantly from one Indian state to the next. Although
some states have passed legislation to regulate internet
gambling, including Fantasy
League Games, others have not done so.
Bypassing the Nagaland Prohibition of Gambling and Promotion and
Regulation of Internet Games of Skill
Act in 2015[6], the
state of Nagaland became the first state in India to regulate online gaming, including Fantasy League
Games. This made Nagaland the first state in India to regulate online
gaming. The term "games of skill" is defined under
this Act to refer to those games
in which a player's success
is predominately dependent not on chance
but on the player's own talent, knowledge,
experience, or training
rather than on the luck of the draw. In addition
to this, the Act creates a license and regulatory framework for online gaming
enterprises, and it mandates that these businesses adhere
to a wide range of laws and regulations.
By implementing the Sikkim Online
Gaming (Regulation) Amendment
Act in 2009[7], the state of Sikkim also updated its legal code in
order to regulate online gambling, including Fantasy League Games. This was done in order to comply with the
requirements of the Federal Trade Commission. The term "games of skill" is defined by this Act as referring to games in which a player's
success is not determined by chance but rather by their own level of expertise
and knowledge. In addition, the Act
creates a licensing and regulatory framework for online gambling enterprises, in addition to imposing a number of other laws and
regulations.
Legislation
to control internet gambling, including Fantasy League Games, has also been suggested
in a number of other states, including
Karnataka and Rajasthan[8]. The purpose of this proposed legislation is to define and regulate online
gambling, create a licensing and regulatory structure, and apply a variety
of different rules and regulations.
Legal Obstacles
related to Playing of Fantasy
League
Games
in India:
Even
though Fantasy League Games have been officially acknowledged by the law as
being games of skill, these games
continue to encounter legal obstacles in India. Opponents of these games assert, among other things, that they
constitute a form of gambling and are hence prohibited
under Indian law. Some people believe that playing these games may lead to addiction, which in turn can lead to
problems with gambling and other forms of social dysfunction.
In 2019, the Bombay High Court considered a lawsuit that questioned the validity of Dream11, which
is one of the top firms in India that specializes in Fantasy League Games. Petitioners in the case asserted that Dream11 should
be regulated as a gambling
platform since it was
functioning like that of a gambling platform. Nonetheless, the Court
decided that Dream11
was a game of skill, and as
such, it is not subject to the legislation that governs gambling. In the year 2020, a similar lawsuit was taken
before the Punjab and Haryana High Court, contesting the legitimacy of Paytm First
Games, which is another firm that specializes in Fantasy League
Games. Once more, the Court determined that the game in question was a
game of skill and was therefore exempt from the restrictions that govern
gambling.
Another legal obstacle can be the use of real-world player statistics and
other data in FLGs. This gives rise
to questions of ownership and appropriation of such data. Claims by the data owners
that FLG operators are utilizing their data without their
consent or payment
might lead to litigation. Public gambling is
prohibited under the Indian Criminal Code, of 1860, as is the ownership or operation of gaming
establishments. Notwithstanding the IPC's lack of direct mention of FLGs, it has been used to support the position that
such games constitute illegal gambling. The income produced
from all sources,
including FLGs, is subject to taxation under
the Income Tax Act, of 1961, a comprehensive statute that does so.
Although FLGs aren't mentioned by
name in the Act, they are nonetheless a source of revenue for both players and operators
and must be taxed as such. The Indian Supreme
Court ruled in Dream11 Fantasy
Pvt. Ltd. v. Commissioner of
Income Tax[9]
that Fantasy League Games (FLGs) are a game of skill rather than chance and are
thus exempt from GST under the IGST Act,
2017.
Current Events:
In
recent years, the Indian government has taken several actions to control
internet gambling, including FLGs.
The government introduced the Internet Gaming
and Prevention of Addiction Bill in November
2021[10] to regulate online
gaming and outlaw
some game genres
that are seen to
be addictive or harmful. The proposed law exempts FLGs from the restriction by
defining them as "games of skill."
The
Tamil Nadu government passed an ordinance outlawing internet gambling in the
region, including FLGs[11],
in December 2021. The ordinance sanctions penalties and jail time for infractions and forbids the establishment, marketing, or sale of online games that entail
betting, wagering, or
gambling. Several people have criticized the rule, saying that it is
excessively broad and may result in the persecution of genuine FLG businesses.
Regulating Fantasy
Sports Games
In this part, I will talk about some potential FLG regulations
in India.
1. FLG operator
licensing and registration
The
need that FLG operators to get licenses or register with a regulatory body is a
common and successful method of regulating
FLGs. By requiring licensing or registration, authorities may make sure that businesses adhere to norms concerning things like player safety, responsible gaming, and the prevention of
fraud. This has the potential to shield customers from deceptive business dealings and discourage dishonest competitors from joining the market.
2. Legal mandates
for openness and disclosure
Disclosure
and transparency rules for FLG operators are another method for regulating
FLGs. The operators should be obligated
to inform players about the game's scoring system, reward structure, and probability of winning. As
a result, players will be better able to grasp the rules of the game and make educated choices. If operators are to be
trusted with player cash, they must be transparent about
their financial situation, particularly the origins of their capital.
3. Safety precautions for consumers
Implementing
consumer protection measures is also necessary for FLG regulation. Betting limitations, self-exclusion regulations, and training for FLG operators on responsible gambling would all fall under this category
of initiatives. These safeguards may reduce the likelihood of people developing gambling problems and protect them from financial
loss.
4. Playing by the rules and preventing fraud
Fair play and the elimination of fraud are further goals of FLG regulation. Measures
to prevent cheating, such as software that
identifies suspicious behaviour and monitors user activity, should be mandatory for FLG operators.
Operators must have procedures in place for looking into and settling issues.
5. Taxation
Last but not least, tax compliance is essential for FLG regulation. Revenue or profit-based taxes might be levied by the Indian government on FLG operators. The government's coffers
may be padded and business
owners' financial contributions guaranteed in this way.
Protecting consumers, ensuring
fair play, and encouraging innovation and entrepreneurship are all
important considerations that must be carefully balanced while regulating FLGs
in India. Several approaches may be
taken to govern FLGs, but it's crucial to make sure the rules aren't too restrictive. India has the opportunity to provide millions
of people with a safe and entertaining form of entertainment by enacting the appropriate regulatory measures for FLGs.
Impact On the Sports Industry:
Fantasy League
Games (FLGs) have had
a significant impact on the sports
industry.
1. Fan Participation Rises:
The rise in spectator involvement is one of FLGs' most noticeable effects
on the sports business. Users of FLGs may assemble
their own "teams" and compete against
others based on the stats of
actual athletes. More people than ever are paying attention to sports because
of this new format.
As a result,
FLGs have become a meeting place where sports
enthusiasts can talk to one another about their shared passions. This
heightened interest has resulted in greater viewership and ticket sales, as well
as new financial opportunities for sports
leagues and organizations.
2. Revenue
Growth for Sports Groups and Leagues:
The income of sports teams and organizations has also been significantly
impacted by FLGs. FLG firms are
looking to collaborate with teams and leagues to give unique content and incentives to users, which has improved
sponsorship and advertising income for teams and leagues.
Also, FLGs have opened up new financial opportunities for sports clubs and leagues. Daily
and weekly competitions hosted by certain
FLG corporations provide
users with the chance to win prizes,
opening up a new market
for sports teams and organizations to sell VIP experiences and items
to FLG customers.
3. Lesser-known sports
get more exposure:
Even in nations where soccer and basketball are not as popular, FLGs have
served to raise awareness of these sports.
In India, for instance, where cricket is by far the most popular sport, FLGs
have provided a forum for supporters to interact with other sports like
football and basketball, so contributing
to their development and popularity.
4. Problems and Debates:
FLGs have had a profound
effect on the sports business,
but they have also been the subject
of criticism and debate. One
of the biggest problems has been the questionable legality of FLGs in various countries
like India.
The possible
influence of FLGs on
the integrity of sports has also been criticized. Others
have stated that FLGs cause
consumers to have a bias since they focus on the results of certain players rather than the game as a whole.
Dispute Resolution Mechanism in Fantasy
League Games:
As Fantasy
League Games (FLGs)
gain popularity in India, so does the necessity for a reliable
dispute resolution system. Players, FLG corporations, and even sports
teams/organizations may all get
into arguments. This section will examine the various dispute resolution options available
to FLGs in India at present.
1. Methods of Resolving Disputes
Within the Organization
The terms and conditions of most FLG firms operating in India will
include their internal dispute
resolution methods. To use these channels, customers often lodge complaints
with the company's customer service
department, which then conducts an investigation and offers a remedy. Users may also be asked to back up
their accusations with proof like screenshots or videos.
2. Mechanisms for the
External Settlement of Disputes:
External disagreement procedures, such as arbitration or mediation, may be used in addition
to FLG enterprises' internal
dispute resolution systems. These procedures may be mandated by legislation or described in the terms and conditions
of the FLG firm.
A neutral third party is appointed to hear all sides of a dispute and render a final, legally
binding ruling. The goal of
mediation is for the disputing parties to negotiate an agreement that is satisfactory to both sides. The resolution
process in arbitration or mediation is typically more expedient and less costly than going via the courts.
3. Methods for Settling Legal Disputes:
If both informal and formal channels for resolving disagreements fail,
going to court may be the only option
left. Disputes involving FLGs are governed by many bodies of law, including those
about contracts, consumer
protection, and intellectual property. Sometimes, sports groups or teams are also a part of the conflict.
Disputes
may be settled in civil court or via alternative dispute resolution processes
like arbitration or mediation, all of which are available under
India's legal system.
Yet, legal conflict resolution may be time-consuming
and costly, so it's best to save it for when everything else fails.
Finally, while many Indian FLG enterprises have their own internal issue
resolution systems, it may be necessary
to resort to external dispute
resolution methods like arbitration or mediation. Legal conflict resolution processes may be required in specific instances. Companies in the FLG industry must have a transparent and
thorough dispute resolution procedure
in place to deal with consumer complaints and keep the playing field level for everyone. Users should also be aware of
accessible dispute resolution tools and follow those procedures when raising issues.
Conclusion:
In
conclusion, the popularity of FLGs in India has led to a discussion over how to
regulate them. Many believe FLGs are
games of skill and therefore should be legalized, while others believe they are nothing more than another
form of gambling and thus should be outlawed. I have shown via my research that the results of FLGs are not
entirely influenced by random chance. As a result, FLGs need to be recognized
as valid leisure activities.
Nonetheless, the legal and regulatory environment in India for FLGs is
still developing. I've gone through
India's current legal structure and the necessity for new legislation to handle FLGs' particular challenges. I have also recommended several
regulatory measures to guarantee
parity, safeguard consumers, and encourage creative problem-solving and
business initiative.
Complexity arises from the need to strike a balance between the interests
of many parties involved in the
regulation of FLGs. Protecting consumers from damage is crucial, but so is ensuring that new ideas and businesses are
allowed to flourish. India has the opportunity to provide millions of people with a safe and entertaining form of
entertainment by enacting the appropriate regulatory measures for FLGs.
Finally, I propose that the Indian government and regulatory authorities
adopt a holistic and detailed legal framework for regulating FLGs, including mandatory licensing and registration, mandatory disclosure and transparency, mandatory consumer protection measures, mandatory
fair play and anti-fraud measures, and mandatory taxes. By doing so,
India can guarantee that FLGs are governed in a manner that encourages creativity and business initiative.
References:
1.
Saini S,
“Laws Governing Online Betting in India” (Advocate, Divorce Lawyers and
Corporate Consultants in Dwarka) https://ssglawfirm.in/laws-governing-onlinebetting-in-india/ accessed April 15,
2023
2.
Bhatia K,
“Legality of Online Fantasy Sports League Games in India – Recent Developments” (azbSeptember 21, 2021) https://www.azbpartners.com/bank/online-fantasy-sports-league-games-in- india-recent-legal-developments/
accessed April 15, 2023
4.
“Law
Commission of India” (India) https://www.lawcommissionofindia.nic.in/ accessed April 10,2023
5.
Manupatra,
“An Online Database for Legal Research” (Manupatra)
https://www.manupatrafast.com/ accessed April 11,
2023
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Chandra S,
“The Legality of Online Fantasy Sports in India” (Black n' White
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2023
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Sports in India: A Report”
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2023
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Indranil Deshmukh GP, “Supreme Court to Have
Its Say on Legality of Fantasy
Sports” (India Corporate LawJanuary 25, 2022) https://corporate.cyrilamarchandblogs.com/2020/05/supreme-court- to-have-its-say-on-legality-of-fantasy-sports/ accessed April 14, 2023
10. Ahlawat T, “Online Fantasy Sports in India: Gaming
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2023
[1] Hereinafter referred to as ‘FLGs’
[3] State Of Andhra
Pradesh vs K Satyanarayana
& Ors (Supreme Court of India)
[4] Chandresh Sankhla S/O Jagdish
vs The State Of Rajasthan
(Rajasthan High Court)\
[5] Gurdeep Singh Sachar
vs Union Of India (Supreme Court of India)
[6] Nagaland Prohibition of Gambling and Promotion and Regulation of Internet Games of Skill Act, 22 April 2016
[8]“Research and Articles” (Nishith Desai AssociatesMay
31, 2022) https://www.nishithdesai.com/SectionCategory/33/Research-and-Articles/12/45/NDAHotline/6144/1.html accessed April 14, 2023
[9] Union Of India vs Dream 11 Fantasy Pvt Ltd (Supreme Court of India)
[10] Mishra P, “India Introduces New Rules and Regulations
for Online Gaming Industry” (TaxGuruApril 11,
2023) https://taxguru.in/corporate-law/india-introduces-rules-regulations-online-gaming-industry.html
accessed April 15, 2023
[11] “Explained: Tamil Nadu's New Law on Ban of 'Games of
Chance' and Gambling” (IndiaTimesDecember 18,
2022) https://www.indiatimes.com/explainers/news/tamil-nadus-new-law-on-ban-of-games-of-chance-and-
Article Information
LEGAL CHALLENGES AND ALTERNATIVE DISPUTE SETTLEMENT IN FANTASY LEAGUE GAMES
Authors: VANSH DUA
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/07/01
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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