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Dream11: Fantasy to Reality

While fighting its way through a number of regulatory challenges, Dream11 has emerged as India's premier online fantasy sporting platform. The fantasy platform was founded back in 2008 by a couple of Indian entrepreneurs, who saw the potential of bringing this phenomenon of fantasy gaming to India.

They went on to launch Freemium Fantasy Cricket in 2012, which became their flagship product, paving their way to success. The platform has been on the rise ever since navigating through the regulatory grey area in terms of its legality to bagging the title sponsorship of one of the biggest cricket tournaments in the world; The Indian Premier League.

Legality of the Platform

The question on the legality of Dream11 was first brought up when a case was filed against the online fantasy sports platform initiating criminal proceedings in the Punjab and Haryana High Court in 2017. The petitioner contended that the nature of the activities offered on the platform were not based on any skill but were purely a game of chance and thus clearly amounting to gambling prohibited under the Public Gambling Act, 1867.

Dream11 opposed to the arguments of the petitioner by elucidating the platform and the requirement of considerable skills by the user in drafting of a virtual team and 'playing' fantasy sports game. After considering the contentions raised by both the parties and relying on the K.R Lakshmanan[1] judgment, in which the Apex Court had previously deemed horse racing to be a game of mere skill on similar grounds, the PandH High Court opined that playing a fantasy sports game required the same degree of skill, judgment and discretion as in the case of horse racing.

The Hon'ble High Court held that playing of a fantasy game by any participant user involves making a virtual team by him, which would certainly require a considerable amount of skill, judgment and discretion. Furthermore, the user has to evaluate the relative worth of each athlete/sportsperson as against all athlete/sportsperson available for selection and is also required to study the rules, regulations, strength and weaknesses of the athlete or player.

The Hon'ble High Court was further of the view that the element of skill and predominant influence on the outcome of the Dream11 fantasy are just as much as any other factors. Therefore, the Hon'ble High Court held that any sports game that constitutes the game of mere skill will not fall under the activity of gambling for the invocation of Public Gambling Act, 1867. The decision of the Hon'ble High Court was challenged before the Supreme Court. However, the petition was dismissed upholding the decision of the PandH High Court.

One of the biggest pros for Dream11 is that it has been exempted from the provisions of the Public Gambling Act, 1867 as it constitutes a 'game of mere skill'.[2] Section 12 of the Public Gambling Act, 1867 states that nothing in the act shall apply to any game of mere skill wherever played. Hence, it does not amount to gambling under the Public Gambling Act, 1867 and the same was further held in the landmark judgment[3] by the Punjab and Haryana High Court. The Hon'ble High Court also held that Dream11 is a legitimate business activity protected under Article 19(1)(g) of the Constitution of India.

After the Punjab and Haryana High Court case, the fantasy platform saw more challenges coming its way. A Public Interest Litigation (PIL) was filed in the Bombay High Court in 2019 seeking directions to initiate criminal prosecution against Dream11 for allegedly conducting illegal operations of gambling/betting/wagering in the guise of online fantasy sports gaming. It was also alleged that evasion of Goods and Service Tax (GST) payable by the platform is done by violating the provisions of Goods and Service Tax Act and that it should be determined according to the value of supply in case of lottery, betting, gambling and horse racing as determined in Rule 31A of CGST Rules, 2018.

The Hon'ble High Court quashed the PIL recapitulating the decision of the Punjab and Haryana High Court that the activities performed by Dream11 do not amount to 'gambling', even as per the Public Gambling Act, 1867. With respect to the matter of taxation, the Hon'ble High Court held that the allegation of the petitioner regarding GST evasion or erroneous classification is also directly based on the outcome of the above first issue. Only, if their Online Fantasy Sports Gaming is 'gambling' or 'betting', there is a scope to infer possibility of any tax evasion.[4]

Even after the above-mentioned judgments and SLPs in relation to these judgments, another challenge[5] was filed before the Rajasthan High Court in 2020 against the fantasy platform alleging it to be betting of cricket team and amounting to gambling. The Hon'ble High Court reaffirming the decision of the Punjab and Haryana High Court and Bombay High Court held that the question of treating the online fantasy game "Dream 11" as having any ingredient of betting/gambling is no more res integra (untouched matter; a point without a precedent). The Hon'ble High court further stated that the Special Leave Petitions have also been dismissed against the orders of these High Courts.

The Bridge between Dream11 and the Indian Premier League

Vivo being a Chinese smartphone manufacturer, deferred the contract for this year following a public backlash against Chinese companies amidst the ongoing Sino-India border dispute. Dream11 grabbed this opportunity and bagged the Indian Premier League title sponsorship in August 2020 with a three-year winning bid of Rs. 222 Cr.

However, this bid is subject to Vivo's return next year. In the light of the border dispute and the recent amendments made by the government in the Foreign Direct Investment (FDI) Policy, the BCCI highlighted that:
Dream11, essentially, is an Indian start-up with a single-digit Chinese investment that is negligible and can be resolved internally.[6]

The Government of India (GOI) vide its Press Note No.3 (2020 Series)[7] dated 17th April 2020 stated that all investments by any country that shares land border with India will require prior approval of the GOI. It further stated that even in the case of any transfer of an existing or future FDI, prior government approval will be required.

If Vivo returns as the title sponsors next year then Dream11 will have to make way. However, if Vivo does not return as the title sponsors, Dream11 will hold the title rights till the 2022 edition. The winning bid of the title sponsorship is set at an average of Rs 234 Cr per year.

Conclusion
This journey from being a global phenomenon with the potential of succeeding in the Indian market navigating through the regulatory challenges and now being the face of Indian gaming start-ups, Dream11 has come a long way. However, the legal challenges still persist, as recently a Special Leave Petition against the Bombay High Court judgment was filed before the Apex Court by The State of Maharashtra challenging the erstwhile judgement of the Bombay HC. The Supreme Court has passed an order[8] of stay against the said judgment until further notice.

Therefore, now having proved that the model is viable and welcomed in the Indian market, if Dream11 can face the legal challenges in the manner it has faced in the past, the Indian Premier League (IPL) is just one of the many leaps in this dreams journey.

End-Notes:

  1. Dr. K.R. Lakshmanan vs State Of Tamil Nadu And Anr on 12 January, 1996, 1996 AIR 1153, 1996 SCC (2) 226
  2. https://www.dream11.com/about-us/legality
  3. Shri Varun Gumber v. Union Territory of Chandigarh and Ors., CWP No. 7559 of 2017.
  4. Gurdeep Singh Sachar Vs.Union of India and Ors.
  5. Chandresh Sankhla Vs.The State of Rajasthan and Ors.
  6. https://timesofindia.indiatimes.com/sports/cricket/ipl/top-stories/ipl-title-rights-dream11-is-new-ipl-2020-title-sponsor-with-winning-bid-of-rs-222-crore/articleshow/77609893.cms
  7. https://dipp.gov.in/sites/default/files/pn3_2020.pdf
  8. https://main.sci.gov.in/supremecourt/2019/42282/42282_2019_1_27_21273_Order_06-Mar-2020.pdf

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