Dream11 recently has gained widespread attention across various streaming platforms thanks to endorsements from celebrities, elevating its status and being recognised as the most prominent fantasy sports platform which reported a profit of Rs 188 crore on revenue of Rs 6,384 crore for the year ended March 31, 2023[1]. This growth of fantasy sports raises questions about the legitimacy and legality of fantasy sports in India.

The fantasy sports industry has seen phenomenal growth, with India emerging as the most prominent fantasy sports market in the world with a market size of Rs 34,000 crore expected to reach Rs 1,65,000 crore at 38%[2], along with a solid player base of about 180 million users registered by the year 2023 which is projected to grow around 500 million by 2027[3].

Fantasy sports are online games where participants create virtual teams of real-world players of a professional sport, including various sports such as cricket, football, hockey, and many more. The performance of these players in the real world is converted into points, which are calculated according to specific criteria described by a particular platform. The participant with the most points wins the contest and is rewarded a certain sum of predefined money, which varies accordingly in different contests. This prize money became an alluring factor for the rapid growth in the fantasy sports industry because of its uncomplicated model and easy money withdrawals.

While fantasy sports are considered mainly legal in India due to their classification as 'games of skill', ethical concerns continue to persist around addiction and financial risks, which continue to spark debate among users, regulators, and industry stakeholders.

Legal validity of fantasy sports in India

The question of the legal validity of fantasy sports platforms, namely Dream 11, first arose in the case of Varun Gumber v. U.T. of Chandigarh[4] in 2017. The petitioner transferred Rs 50,000 to his account on the platform and invested his whole amount by entering into a cricket and a football contest. After losing his invested amount, he realised that activities offered on the said platform were not based on any skill but purely a game of chance, thus punishable under the provisions of the Public Gambling Act of 1867. The Punjab and Haryana High Court relied on the Apex court's decision in K.R. Lakshamanan v State of Tamil Nadu[5], which held horse racing as a game of skill and placed fantasy sports on equal footing with it.

The participant in fantasy sports games requires the same degree of skill, judgement and discretion as the user is required to evaluate the relative worth of each athlete/sportsperson as against all athletes/sportspersons available for selection and is also required to study the rules, regulations, strength and weaknesses of the athlete or player and held that element of skill has a more significant influence on the outcome of the fantasy sports and therefore fantasy sport will not fall under the activity of gambling under the Public Gambling Act, 1876.

Many other petitions were filed in the Bombay High Court and Rajasthan High Court concerning the illegality of fantasy sports in India. Both these High Courts relied on the Punjab and Haryana High Court's decision on fantasy sports and upheld its legality as a game of skill that did not come under gambling. Finally, the Supreme Court, in 2021, upheld fantasy sports as a game of skill, which is protected under Article 19(1)(g) of the constitution as regular business activities and dismissed the appeal that challenged the legality of fantasy sports by saying that the issue was no longer 'res integra' as this subject matter has been previously decided[6].

Emerging Challenges Facing Fantasy Sports in India

States like Andhra Pradesh, Assam, Nagaland, Sikkim, and Telangana have resorted to banning fantasy sports by classifying them as illegal gambling in their respective states irrespective of the courts declaring fantasy sports legally valid and as a game of skill instead of gambling, which is banned. In a recent event, the Madras High Court notified Sourav Ganguly and Virat Kohli about endorsing a fantasy sports platform. This act of issuing notice was done in light of recent increased suicides resulting from the loss of money from these fantasy sports platforms[7].

Advertisements by these personalities lure people into believing that greater prize rewards can be received from these fantasy sports platforms, and ultimately, they end up investing in fantasy sports platforms and lose their money. These events raise serious questions about the legal ambiguity of fantasy sports platforms, although courts hold them legally valid.

The most critical challenge fantasy sports face is addiction problems, which eventually result in financial issues. People from the poor class of society, usually between the ages of 20-30, become victims of these fantasy gaming platforms to earn quick money, mainly to improve their financial status or pay some debt.

They start by investing a small amount of money and quickly get tangled in the world of fantasy sports, and they find themselves at a point of no return. After a series of losses, they find themselves demotivated and in a tough spot where they take a loan to recover the lost amount. Finally, after everything falls to the ground, they end up committing suicide as a last resort, which gives birth to 'debt-death traps' created by these fantasy sports platforms.

Lastly, there needs to be a government-controlled regulatory body or framework to keep an eye on the operation of these fantasy sports platforms. These fantasy sports platforms collect significant user data, making them vulnerable to cyber-attacks and possible data breaches. For instance, a mobile number is required to create an account on fantasy sports platforms. These platforms also request credentials like Aadhar card, PAN card, and bank details to verify that the account is eligible for withdrawal of money won in contests.

Collecting this type of sensitive data without a governmental body raises a serious question regarding data privacy. Presently, the Federation of Indian Fantasy Sports (FIFS), formed in 2017, acts as India's only self-governing body for fantasy sports, which works towards creating a robust governance structure to support the growth of the fantasy sports industry. However, with increased daily disputes, the Federation of Indian Fantasy Sports will not be enough to deal with the conflicts arising from fantasy sports platforms.

A Way Forward
The growing popularity and significant investments in the fantasy sports industry could allow India to capitalise on the untapped potential of this booming industry, which can boost the country's economy. NITI Aayog released a draft in 2020 for guiding principles on regulating fantasy sports, and subjecting the winning amount to taxation shows the government's interest towards the fantasy sports industry. This taxation is a significant step that can benefit the lower class as it forces them to consider the risk and pay tax from which they will try to avoid the debt-death trap.

A robust government framework is required to handle a diligent verification process and handling of sensitive data, barring minors from entering the contests and limiting the amount that can be invested along with creating a regulatory body with government control that can solve the disputes and keep a check on fantasy sports companies that will support the growth of fantasy sports in the country.
Positive measures like these will address the ethical issues surrounding the current development of the fantasy sports industry. The industry will become firmly established in the Indian market, generating substantial revenues and contributing to the Indian economy.

References:

1. ETech, 'Dream11 posts higher profit, revenue; auditor flags risk from GST demand' (The Economic Times, 19 Jan 2024)
   https://economictimes.indiatimes.com/tech/startups/dream11-revenue-grows-66-in-fy23-firms-auditor-flags-impact-of-gst-dues/articleshow/106991326.cms
   accessed 29 August 2024
    
2. https://www2.deloitte.com/content/dam/Deloitte/in/Documents/technology-media-telecommunications/in-tmt-fantasy-sports-industry-report-noexp.pdf
3. Tanushree Basuroy, 'Number of fantasy sports users in India from 2016 to 2023, with an estimate for 2027' (Statista, 15 Aug 2024)
   https://www.statista.com/statistics/1322714/india-fantasy-sports-user-base/ accessed 29 August 2024
4. Varun Gumber v. UT, Chandigarh, 2017 SCC OnLine P&H 5372
5. Dr. K. R. Lakshmanan v. State of Tamil Nadu, (1997) 223 ITR 601
6. Timesofindia, 'Fantasy sports by Dream11 is game of skill, says SC' (The Times of India, 14 Sep 2022)
   https://timesofindia.indiatimes.com/business/india-business/fantasy-sports-by-dream11-is-game-of-skill-says-sc/articleshow/94206983.cms
   accessed 30 August 2024
7. Soumitra Bose, 'Online Gaming: Sourav Ganguly, Virat Kohli's Role Irks Madras High Court After Spate Of Suicides' (Outlook, 28 Jan 2021)
   https://www.outlookindia.com/sports/sports-news-online-gambling-virat-kohli-sourav-ganguly-get-high-court-notices-for-endorsing-fantasy-cricket-apps-news-363551
   accessed 30 August 2024