Legality of Online Fantasy Sports League Games in India – Recent Developments

Online fantasy sports league games (“Fantasy Games”) have become increasingly popular and are a particular area of interest for various investors. The recent lockdown in India and across the world has given sporting events a pause and consequently affected the Fantasy Games businesses. While the sector deals with the impact of COVID-19, we discuss in this article certain developments in relation to the legality of such Fantasy Games in India, which could also have a far reaching impact on the sector.

The legality of Fantasy Games primarily rests on the question of whether such games are games of skill or games of chance. While states like Telangana, Assam and Odisha do not differentiate between the two and do not have an exception for games of skill, this classification is key to determine the legality in other states of India.

In the recent past, the Punjab & Haryana High Court examined this issue in Varun Gumber v. Union Territory of Chandigarh (2017 Cri LJ 3827), and observed that playing Fantasy Games online was a game of skill. An appeal against this decision was not entertained by the Supreme Court. A similar finding was also reached by the Bombay High Court in Gurdeep Singh Sachar v. Union of India ((2019) 75 GST 258 (Bombay)) and recently by the Rajasthan High Court in Chandresh Sankhla v. State of Rajasthan (2020 SCC Online Raj 264).

A special leave petitioned filed by Union of India against the Bombay High Court judgement in Gurdeep Singh Sachar was dismissed by the Supreme Court. In their order dated December 13, 2019, Justice R. F. Nariman and Justice S. R. Bhat however, allowed the Union of India to file a limited review petition before the Bombay High Court with respect to the issue of Goods and Service Tax (“GST”) evasion. Another petitioner approached the same bench to seek a review of the Bombay High Court’s views on the game being a game of skill, but was dismissed by the Supreme Court with a stern observation that: “It is reiterated that in accordance with our order dated 13.12.2019, the only scope of the review filed in the Bombay High Court is with respect to GST and not to revisit the issue as to whether gambling is or is not involved.” The foregoing orders seemed to have provided more clarity on the legality of Fantasy Games, but raised a concern as to how the Bombay High Court would review the issue of GST only, which was intrinsically linked with the issue of Fantasy Games being games of skill.

A special leave petition was also filed by the State of Maharashtra against the Bombay High Court judgement. This petition came up before a three judge bench of the Supreme Court. At an admission hearing held on March 6, 2020, the bench stayed the order of the Bombay High Court and issued notice. Therefore, the entire judgement of the Bombay High Court in Gurdeep Singh Sachar is likely to be reconsidered by the Supreme Court as the appeal proceeds. However, it is worth noting that public news reports suggest that the Supreme Court expressed concerns with the process followed by the Bombay High Court and based its decision on the fact that sufficient time was not granted to the Government. No such observations or reasons have been set out in the order.

While the decisions of the Punjab & Haryana High Court and the Rajasthan High Court remain in effect, and there is comfort from the Supreme Court’s approach in the appeal from the Punjab & Haryana High Court in Varun Gumber as well as Justice R. F. Nariman’s orders in the appeals from the Bombay High Court in Gurdeep Singh Sachar, the Supreme Court’s latest decision to consider the appeal may create some uncertainty. It is uncertain whether the Supreme Court will re-open the issue of the legality of Fantasy Games or only delve into the issue of taxability of such formats. The decision of the Supreme Court would ultimately decide if Fantasy Games are put on par with games like rummy and horse racing (both of which have been explicitly held to be games of skill by the Supreme Court) or are held to be games of chance.

The matter was listed to be heard on April 24, 2020. However, as of now, with courts only taking up matters of great urgency, this period of uncertainty is bound to last for some time and a decision is not likely soon.

Authors:

Kashish Bhatia, Partner
Sruti Baid, Associate

Date: May 20, 2020