26 October 2015

Skill versus chance - A saga of online gaming

by Sreya Bhar


The current trend of selecting national or international players/athletes based on their performance/skill/fitness and creating one’s own virtual team to compete on a virtual platform is not a novel concept. In fact, this indulgence dates back to the post World War II era.

In common parlance, trading of players/athletes by individuals on a virtual platform is popularly termed as ‘fantasy sports’. Such games began as mere hobby and the frenzy regarding such ‘fantasy sports’ grew by leaps and bounds. With the spread of internet across the globe, this enthusiasm for virtual ‘fantasy sports’ grew. The post millennium decade witnessed a boom in internet sites offering the user an opportunity to create his virtual team on a simulated platform with professional athletes/ sportspersons and also indulge in trading and substituting the selected athletes.

The present article attempts to find the legality of such ‘fantasy sports’ on online platforms wherein money can be made by betting on players/teams, and to draw a bridge between such online games and ‘games of mere skill’.

What is ‘Online fantasy sports’?

A virtual platform for trading of sportspersons is more commonly known as ‘online fantasy sports’, wherein participants step into the shoes of owners/managers on a simulated environment. Such games can be played by the participating individual by way of paid leagues, free entry leagues, knock out tournaments, etc. The participant selects sportspersons based on the statistics of such individual players playing the sports professionally in reality. He has the liberty to trade/substitute players in his team before each round of a real professional match, akin to real sports team management.

Based on the performance of the players in actual tournaments or matches, points are credited virtually to the participant’s online user-account and such points continue to accrue over a period of time after which the same may be converted to cash and/or this cash be received via account transfer in the name of the participating individual on verification of the identity of the participant by means of proper documentation. This raises questions pertaining to the legality of the same.

Legality of online/virtual sports leagues

It can be well argued that such virtual sports league is a type of betting, which is spelt out as illegal under the Indian Public Gambling Act, 1987. Wagering or gambling, as defined in Black's Law Dictionary (Sixth Edition) ‘involves, not only chance, but a hope of gaining something beyond the amount played. Gambling consists of consideration, an element of chance and a reward’.  However, the provisions of the said Act would not apply when such a game involves mere skill, wherever played (according to Section 12, Indian Public Gambling Act, 1987). This was reiterated and reinforced by the Supreme Court in K.R. Lakshmanan v. State of Tamil Nadu, 1996 SCC (2) 226, that if the game involves a substantial degree or ‘preponderance of skill’, even though such a game shall have money as its sole consideration, it shall not amount to gambling as the outcome of the same is not left completely to chance. ‘Preponderance of skill’ in a game can be construed to mean that the outcome of a particular game would depend more on skill of the player/participant rather than just plain luck. Additionally, it shall be pertinent to note that the Supreme Court, in Pratapchand Nopaji v. KotrikeVenkataSetty, (1975) 2 SCC 208, held that gain of one party arrived at the expense of loss of the other party constitutes the essence of wagering contracts.

It shall be worthwhile to note that unlike placing bets with bookies, such type of simulated online sports requires the participant to have substantial knowledge of the sports as well as speculation and certain degree of logical analysis. Therefore, it can be asserted that these types of games are based on certain skillful permutation, combination and arrangement of the teams of players, which requires certain degree of information of the players’ statistics as well as knowledge and ample familiarity with the sports itself. It is not a game which can be left to blind chance or luck to score a win. A display of skill is thus, a prerequisite in case of playing such online sports.

The K.R. Lakshmanan case (supra) also elaborated upon ‘objective facts capable of assessment by race goers’ specifically in relation to horse races. This can be extrapolated in case of online sports, as elucidated further below.

In case of such online games (‘fantasy sports’), where the participant bases his decision of inclusion or exclusion of a player from his team on the player’s inherent talent, dexterity, ability, form and fitness, pre-tournament preparation, overall performance in the last few matches, and even on the turf/pitch conditions, and other such conditions; the participant is actually proving his own expertise and knowledge of the game and thus, the dependence on chance and luck is greatly reduced.

These above-discussed factors form the objective criteria for consideration and assessment of sportsperson by the individual, who is participating in an online sports league. He needs to be conversant with these various factors and have ample awareness and understanding of the same about the players and the game itself to form a team of such players to be able to win such points. Hence, it may be safe to opine that such games are games where skill holds a key role. Even if the sole consideration for the participant is the points which can be converted to money, it can be argued that such virtual sports leagues have a keen eye on skill over chance.

The Supreme Court, on 13 August, 2015, in Mahalakshmi Cultural Association v. The Director, Inspector General of Police, SLP (Civil) 15371/2012, held that the Madras High Court ruling in the Director General of Police, Chennai v. Mahalakshmi Cultural Association, 2011 SCConline Mad 1997, which observed that playing rummy with stakes amounts to gambling, shall not impact online rummy websites. The Supreme Court, on 18 August, 2015, further observed in the SLP (Civil) 15371/2012(supra) that the observations made by the Madras High Court did not survive as Mahalakshmi Association, which had preferred the Writ petition before the High Court withdrew the said petition as it received acquittal from all charges against its officials in the trial court below.

Also, it may be mentioned that for a few of these fantasy sports games, the participant does not need to pay any amount as processing fee or entry fee. The question of such websites profiteering out of the fees paid by the participants, therefore, does not arise as well. In such case where a registration fee is required to be paid, such amount, on theory, does not in any manner form a basis of calculations for the amount to be paid to the participant on accrual of a specific number of points. As per Section 3 of the Public Gambling Act, owning or keeping, or having charge of a gaming-house is liable to be penalized. By the above decision in Mahalakshmi Cultural Association case (supra), the Apex Court has negated the application of such provision to an online gaming website.

All the prizes or awards which are offered to the winners in such cases are published on the websites, with clarification regarding the conversion of such points and often the calculation method. This is in furtherance of the point that such ‘fantasy sports’ is not in the nature of gambling. The result of these games do not depend on a solitary event of a player’s performance on the field or on the winning or losing of the team in a single match, but depends over a number of matches and on proficiency and awareness of the participant, unlike in the case of betting with bookies.

Concluding remarks

Taking into account the aforementioned judicial precedents, a list of conditions can be prepared to examine the validity of online fantasy sports so as to steer clear from the purview of gambling/wagering, viz.:

  • i) whether the balance tilts in favour skill over chance;
  • ii) whether there is ‘mutuality’, i.e. one party enjoys a gain at the loss of the other party with whom the agreement has been made on the basis of occurrence of the uncertain event which is the subject matter of the agreement;
  • iii) whether the winning is based on a single solitary match or performance of an athlete in a single match or tournament;
  • iv) whether speculation of the participant depends on his knowledge and objective assessment of the facts and scenario of the athlete, team, tournament, pitch/turf, etc.

These may provide the nudge to push online games in the nature of fantasy sports into the criteria of being considered as a game of skill and thus not be prohibited under the laws of the land. The above mentioned criteria are not the exhaustive conditions that are required to be kept in mind. There is no such pigeon-holed formula to determine whether the balance tilts more in favour of skill in the case of such online games.

With the current trend of online gaming, it is fairly certain that the above criteria and conditions would be explored and distinguished at various levels by the Courts. The laws relating to such online gaming and online reward are evolving at a fast pace. Hence, the time is ripe for such a judicial decision or amendment of the concerned legislation clarifying the stance once and for all.

[The author is an Associate, Corporate Practice, Lakshmikumaran & Sridharan, Kolkata]

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