Self Regulation - A Gamechanger for Online Fantasy Sport

Innovation and growth, particularly in new age industries and sunrise sectors, is never a uniform or predictable process. Every industry, in its nascent stages of growth, attracts certain players who enter with a long-term vision of sustainability and others who operate with a myopic vision of short-term gains, taking advantage of regulatory arbitrage.

While this creates the need to regulate these sectors, their complex and dynamic nature often require deep industry knowledge and flexibility, which makes conventional, top down, government regulations difficult. Historically, a robust, responsible, transparent, and representative self-regulatory regime has directed the navigation of various sectors in a responsible and consumer friendly manner. This self-regulatory model, for instance, has been implemented successfully across various sectors internationally, as an efficient means of developing best practices and codes and checking bad actors. Some of the examples are the Entertainment Software Rating Board in the United States, which assigns ratings to video games and apps to assist parents in making purchase decisions, the Japan Toy Association for safety marks on toys, the Electricity and Gas Complaints Commission for consumer dispute resolution in New Zealand, the framework for mobile content and payment services between telecommunication companies in Denmark for mobile content and payment services and Confianza Online regulating ecommerce players in Spain.[1]

Closer home, the Advertising Standards Council of India is the premier body overseeing advertising. Both the BSE and NSE have exemplified standards of market controls, the Digital Content Complaint Council is a self-regulating body overseeing content across over-the-top content platforms. The Reserve Bank of India has also recognised the importance of self-regulation and is planning to set up a framework for self-regulating organisations in the digital payments space, similar to the Monetary Authority of Singapore.

A recent judgement by a division bench of the Hon’ble Rajasthan High Court (“Court”) in the matter of Ravindra Singh Chaudhary v. Union of India[2] (“Judgement”) examines the impact of such a regime on ensuring that the rapidly growing space of online fantasy sports (“Fantasy Sports”), long recognised as an important growth area[3], with significant follow on effects on fan engagement[4], are games of skill, and enjoy protection under Article 19(1)(g) of the Constitution of India (“Constitution”).

In part, the Judgment largely reaffirms the long held position that online Fantasy Sports, where the elements of skill clearly predominate, are games of skill, as has been held repeatedly, including by the Punjab & Haryana High Court in Varun Gumber v. UT, Chandigarh[5], the Supreme Court’s dismissal of the Special Leave Petition filed against the said judgment of the Punjab & Haryana High Court[6], Bombay High Court in Gurdeep Singh Sachar v. Union of India & Ors[7] and the Rajasthan High Court in Chandresh Sankhla v. State of Rajasthan and Ors.[8]  While arriving at the conclusion, the Court also took note of the submission made by the Additional Solicitor General, Union of India, who while submitting that the PIL was not maintainable stated:

the PIL deserves to be dismissed as it was not maintainable contending that the issue of gambling/betting had already been closed by the Hon’ble Supreme Court in its order dated December 13, 2019, and only issue kept open was regarding GST.”

More interestingly, the Judgment also carries out a deep and insightful analysis of the impact of the existence of a pre-eminent representative and self-regulating body, namely the Federation of Indian Fantasy Sports (“FIFS”), on the operation of Fantasy Sports in India.

Fantasy Sports and Fan Engagement

Apart from examining the existing jurisprudence around the dominant factor test[9], the Court   also noted the observations of the 276th Law Commission Report[10] where ‘fantasy football’ was recognised as a form of ‘gaming’, as distinguished from wagering or gambling, and observations of Hon’ble Madras High Court in D. Siluvai Venance v. State[11] where the value of robust regulation was emphasised. Thereafter, the Court recognised Fantasy Sports as a distinct category of sports with their own set of rules and regulations, unlike other online variations of games.

The Court also observed that players on Fantasy Sports platforms are engaged in a virtual competition, with results being independent of the outcomes of real-world events and agreed with submissions that online Fantasy Sports are a globally recognised tool for fan engagement and promote real world games. This is in line with the global trend, where some of the largest sports leagues have virtual Fantasy Sports platforms with millions of active users.

Self-Regulation promotes transparency and protects public interest

After having reached the above conclusions, the Court engaged in an independent analysis of the self-regulatory mechanism that distinguishes the operation of Fantasy Sports from other types of online gaming.

The Court considered at length whether a responsible, self-regulating environment for online fantasy sport operators existed. In this regard, the Court analysed the Charter for Online Fantasy Sports Platforms adopted by the members of the FIFS, the salient features of which are set out below:

  1. Prohibition on offering Fantasy Sports to users who are less than 18 years of age;
  2. Prohibition on automatic selection of any part of Fantasy Sports teams in order to keep the predominant skill component in team selection intact;
  3. Restrictions on drafting or editing fantasy teams during the course of a match or afterwards;
  4. Requiring users to draft a fantasy team composed of at least the number of athletes that would comprise a starting line-up of one team in a real world sports match;
  5. Restriction on selecting more than 75% of fantasy players from a single real-world team/squad;
  6. Ensuring only real world players and athletes are permitted to be drafted for fantasy sports teams;
  7. Ensuring that a winning outcome will not be based on the score, point-spread, performance results or partial results of any single real-world team or any combination of real-world teams;
  8. Ensuring that a winning outcome will not be based on the score, point spread or performance of a single athlete in any single real-world sports match; and
  9. Ensuring that a winning outcome will not be based on E-sports contests or virtual, randomised, simulated or historical sports matches.

In light of the aforesaid provisions, the Court observed that the Charter ensures that the games run by the members of the FIFS are games of skill and are not any forms of gambling/betting.   The Court recognised the status of FIFS, whose members service a vast majority of fantasy sport users in India as a self-regulating body for online fantasy sports platform operators, and evaluated its self-regulation mechanism across its Charter, its governance structure, representative body, and its eminent ombudsman Retd. Justice A.K. Sikri.

The Court also reached an independent view, which could be sustained even in the absence of all previous findings on the point based on the FIFS charter. The Court held:

Certain submissions made in response to the present PIL and the FIF Charter have not been considered in the earlier judgments on the issue. We, therefore, have dealt with the same in some detail and in view of the same, even if all earlier judgments of different High Courts are ignored, we are of the independent view, particularly based on the charter of FIFS, of which Dream-11 is a member,  that a participant who enrols in a fantasy sport game and puts monetary stakes therein, performs a role similar to that of a real life team/manager or selector, which requires use of substantial knowledge, strategy skill and adroitness against other participants. A participant is actually playing an online sport and not gambling, betting or wagering on the outcome of any game or an event in as much as the result achieved by a player of online fantasy sports on completion of corresponding real life match, is wholly independent of such real life match or event.

The Court accordingly concluded that the safeguards put in place by FIFS adequately protected the element of public interest, and that independent of the view taken in previous decisions, a participant of Fantasy Sports conducted in accordance with the FIFS Charter performs a role similar to that of a real life team manager/selector, which requires use of substantial knowledge, strategy, skill, and adroitness against other participants. It was held that a participant is actually playing an online sport and not gambling, betting or wagering on the outcome of any game or an event.

The Court observed that variations from approved formats, such as shorter versions of complete real-life matches, or allowing lesser players than real-life matches to be selected in Fantasy Sports would not emulate a real life selector, and are not permitted by FIFS. 

Conclusion

The Judgment is a welcome step in the right direction and will help mitigate many apprehensions in the industry. Recognition of self-regulation as one of the standards to determine transparency, corporate responsibility and public interest is a significant step in the right direction and in consonance with global best practices across multiple industries such as advertising, online content streaming, financial markets and consumer goods.


[1] OECD (2015-03-01), “Industry Self Regulation: Role and Use in Supporting Consumer Interests”, OECD Digital Economy, available at:

 http://dx.doi.org/10.1787/5js4k1fjqkwh-en

[2] D.B Civil Writ Petition No. 20779/2019

[3] KPMG-IFSG ‘The evolving landscape of sports gaming in India’, March 2019, available at: https://home.kpmg/in/en/home/insights/2019/03/online-gaming-india-fantasy-sports.html

[4] ‘Online Fantasy Sports Adding value to the Indian Sporting Ecosystem’, whitepaper by IndiaTech.org, September 2020 available at:

 https://www.indiatech.org/wp-content/uploads/2020/09/IndiaTech.org-Whitepaper-OnlineFantasySports-compressed.pdf

[5] 2017 SCC Online P&H 5372

[6] Order dated September 15, 2017 passed in SLP Diary No. 27511 of 2017

[7] Judgment dated 30th April 2019 in Criminal P.I.L. No. 16 of 2019

[8] D.B. Civil Writ Petition No. 6653/2019

[9]  State of Bombay v. RMD Chamarbaugwala, AIR 1957 SC 699; Dr. K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226 (Supreme Court) and Bimalendu De v. Union of India and Ors., AIR 2001 Cal 30 (Calcutta High Court.

[10] Law Commission of India, report dated July 2018, Report Number 276,  ‘Legal Framework: Gambling and Sports Betting Including in Cricket in India’, available at:  http://lawcommissionofindia.nic.in/reports/Report276.pdf

[11] MANU/TN/3677/2020

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Co-Head and Partner in the Private Client Practice at the Mumbai office of Cyril Amarchand Mangaldas. Rishabh specialises in family constitutions and settlements, trusts, wills and succession planning. He can be reached at rishabh.shroff@cyrilshroff.com

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Partner in the General Corporate Practice at the Bengaluru office of Cyril Amarchand Mangaldas. Arun is part of the Technology, Media and Telecommunications (TMT) group and has special expertise in advising clients in the electronics, information technology enabled services, outsourcing and information technology sectors. He was also a member of the Government of India’s working group on the legal enablement of information and communication technology systems.Arun was described as a “very effective and highly knowledgeable” lawyer by Chambers and Partners in 2011. He can be reached at arun.prabhu@cyrilshroff.com

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Principal Associate with the Bengaluru offices of Cyril Amarchand Mangaldas, and is part of the Technology, Media and Telecommunications practice of the Firm.

Anirban regularly advises clients across diverse sectors including healthcare, manufacturing, banking, information technology, automobile, financial services media and broadcasting on transactional as well as advisory matters. Anirban supports transactions by handling the entire documentation process for large scale technology transactions and advice on emerging trends in the data protection and privacy space. Anirban works with the business teams of clients closely to ideate and evolve legal documentation, policies and best practices based on commercial requirements of clients and interactions with regulators such as the Telecom Regulatory Authority of India (“TRAI”).

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