Once again, a high court has ruled in favour of Dream11 and stated that the fantasy gaming company offers a game of skill, and hence is not gambling. The Rajasthan High Court on Friday dismissed a petition alleging that Dream11 offers gambling services and is also evading taxes. Being a game of mere skill, as has been ruled by multiple high courts and upheld by the Supreme Court, Dream11’s services do not constitute gambling, the Rajasthan HC declared, rubbishing the plea.
The fact that Dream11 and other fantasy gaming platforms are “self-regulating” via the Federation of India Fantasy Sports (FIFS) has helped this time. To be clear, the court did not rely on this self-regulatory mechanism to dismiss the petition against Dream11 — it didn’t need to do this, since there is sufficient legal precedent in favour of Dream11.
However, it’s worth noting that the court saw self-regulatory mechanism in a positive light. In its submissions, Dream11 said it does not function in a “total regulatory vacuum”, and that the fantasy gaming industry self-regulates itself via FIFS. Founded in 2017, the federation — of which Dream11 is the only founding member — is a Section 8 company formed for “self-regulation and promotion of best practices in fantasy sports and contests offered in India”. Some of its members are MyTeam11, My11Circle, Fancy11, and Fancode. A high court looking upon the self-regulatory body favorably adds some credibility to it that might come in handy in future disputes.
The court said its “independent view” is that the FIFS charter ensures that Dream11’s participants perform “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”. According to the High Court:
A participant is actually playing an online sport and not gambling, betting or wagering on the outcome of any game or an event inasmuch as the result achieved by a player of online fantasy sports on completion of the corresponding real life match, is wholly independent of the final result or outcome of such real life match / game / event.
FIFS rules ensure that members offer games of skill: Dream11
For context, it’s crucial for fantasy gaming platforms to (continue to) be classified as games of skill. Under Indian law and jurisprudence — starting with the Punjab & Haryana High Court judgment on Dream11 — if you allow real-money stakes for games of skill, it is not gambling, but a legitimate business protected under the Constitution. It’s crucial for fantasy gaming platforms to minimise the “chance” element in their offerings.
FIFS’s rules and regulations ensure that the games offered by its members are games of skill and not gambling or betting, Dream11 said in its affidavit. FIFS’ charter includes the following requirements (paraphrased), the court noted:
- The skill component is predominantly determined via a manual team selection by users. A company cannot offer users ay opportunity or option to auto-select or auto-fill any part of their fantasy sports teams
- A user’s team selection will have to conform to the skill-set based combinations prescribed by a member’s rules and terms
- Players cannot edit or change their teams after passing a predetermined deadline. All contests have to be locked prior to the beginning of a real world match. Users cannot change their teams during or after a match, such that it may affect the points.
- Users cannot make up teams in which more than 3/4th of the team is from a real world single team.
- A winning outcome cannot be based on the score, point-spread of any performance of any real-world team, or on the performance of a single athlete in any real-world match.
- Members cannot offering gambling services
It’s other requirements include:
- Real money fantasy gaming will not be offered to users below 18 years
- Only real world players can be part of fantasy teams. No fictional athletes can be offered.
Dream11, being a FIFS member, can only offer games that relate to a real-world match. Fantasy teams size needs to match those of real word teams in the pertaining sport, and players cannot modify their teams once a real-world game begins. Any variation in the formats, such as shorter versions than the real-life match or allowing fewer players, are not permitted by FIFS, the court observed.
FIFS self-regulatory system has “credible” members, ombudsman system: Rajasthan HC
The court also acknowledged the self-regulatory mechanism of FIFS:
- Ombudsman: FIFS’ ombudsman rules also mandate that the ombudsman be a retired SC or HC judge to ensure that any disputes or grievances of the players are depressed promptly. Retired Supreme Court Justice AK Sikri is the current ombudsman.
- Advertising guidelines are in place: FIFS has adopted IAMAI’s Self-Regulation Guidelines on Advertising Online Gaming to ensure that the advertisements are fair, transparent and not misleading. The guidelines prohibit and penalise ads (by members) that suggest any gambling or betting activities are being offered.
Apart from this, the court also noted the following:
- Credible people associated with federation: FIFS’ “representative structure” has some of the “most credible and distinguished board members” including former DGP (AN Roy, former Maharashtra DGP), former SAI secretary (Amrit Mathur), former BCCI secretary (Ratnaker Shetty). “It has eminent persons from the industry and ex-members of regulatory bodies, who are tasked with ensuring compliance with laws and charter,” the court noted.
- Fantasy gaming will contribute to exchequer: FIFS’ 35 members cater to 99% of the fantasy sports users in India. “The fantasy sports industry is regarded as the next sunshine industry of India which is growing exponentially and already contributing thousands of crores to the Government exchequer,” the order said.
- Sports lovers can engage via fantasy gaming: The court agreed with Dream11’s submission that fantasy sports is “a great tool for fan engagement”, contributes to government revenue via GST and income tax payments, and also contributes to “increased viewership and higher sports fan engagement, thereby simultaneously promoting even the real world games”.
The court that in case of Dream11, being a FIFS member, “no public interest element survives for the online gaming formats offered by them”. The court means that there is no public interest element to Dream11’s offerings, since Dream11 is compliant with the FIFS rules and regulations. This “may not be applicable if the stipulations contained in the Charter of FIFS are not followed in letter and spirit”.
Court defers alleged tax evasion to GST authorities
The petitioner, Ravindra Singh Chaudhary, had also alleged that Dream11 is evading taxes, since it only pays taxes on the commission it charges. For every ₹100 collected from players, Dream11 takes a 20% commission and transfers the rest to the winning pool amount, Chaudhury had said, alleging that, Dream11 is evading taxes by:
- First, by paying up taxes only on the platform fee, instead of on the entire amount, and
- Second, by paying 18% GST instead of 28%, by wrongly classifying its game under the wrong entry
The court said the taxation aspect is pending before the Bombay High Court, and that it will leave it to GST authorities to consider this aspect.