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What Is Wagering Contract And Whether Any Online Fantasy Sports Of India Fall Under It?

Wagering Contract is one in which there are two necessary parties between which the contract has been made and wherein, the first party promises to pay a certain sum of money to the second party on the happening of a particular event in the future and the second party agrees to pay to the first party on not happening of that particular event. The basic fundamental of a wagering agreement is the presence of two parties who are of sound mind to get profit or loss.

A Wager in the common language means Betting or Gambling. The basic meaning of the term wager is betting. Section 30 of the Indian Contract Act specifically talks about agreements by way of wager, as void.

Agreements by way of wager are void and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide by the result of any game or other uncertain events on which any wager is made.”

Essential of a Wagering Contract:

  1. Equal opportunity:
    One of the main points in a wagering contract is that there should be an equal chance for both to either win or lose depending upon the outcome of the future event.

  2. Uncontrollable Event:
    These events are futuristic which may or may not take place and it should be beyond the control of either of the parties because if either of the parties has control over it then it would not amount to wager.

  3. No Outside Interest:
    Both the parties should have a single interest as to the profit or loss in the result of the event and there should not be any outside or personal interest attached with the uncertain event as that will not amount to wager as well.

  4. Dependency:
    The wager agreement is fully dependent upon the happening of the futuristic event whether it is contrasted with the past, present or future as to the result of that event.

  5. Promise:
    The wager contract should contain an important clause which should state that the parties promise to pay the money or money's worth to the other party on the happening of the event and this should be agreed upon by both the parties.

As per the Indian Contract Act Section 30 states that there are also certain exceptions in the wagering agreements and thus the section read as follows:
This section shall not be deemed to render unlawful a subscription or contribution, made or entered into for or towards any plate, prize or sum of money, of the value or amount of five hundred rupees or more, to be awarded to the winner of any horse race. Nothing in this section shall be deemed to legalize any transaction connected with horse- racing, to which the provisions of section 294A of the Indian Penal Code shall apply.

Thus there are exemptions to it which are as follows:
  1. Showcase of talent is not a wager
  2. Share Market
  3. Horse race competition
  4. Insurance Contracts
  5. Commercial transactions
Thus, it can be stated that all wagering agreements are contingent agreements but all contingent agreements are not wagering agreements. Thus in the simple language, we can understand that a wagering contract is a futuristic contract which is based upon the happening of a certain event in the future. A wagering contract may or may not be imposed depending upon the circumstances in the future.

Difference between Wager Agreement & Contingent Contract:

  1. All wager contracts are void but Contingent contracts are not void.
  2. Wager contracts come under the ambit of Contingent contracts and thus are a narrow concept while contingent contracts cover the concept of wager contracts and are a wider concept.
  3. The happening of the uncertain event is the sole condition of the wagering contract. And the happening of the event is not the sole condition of the contingent contracts.
  4. In a wager contract the parties have only one interest in the contract i.e. the winning or losing depending upon the outcome. In a contingent contract parties have their personal and other motives attached to the contract except for the profit or loss.
  5. In a wager contract the parties are required to keep a mutual promise under the rules of the wagering contract. While in a contingent contract the parties are not required to keep mutual promises under the contract.

The Legal status of Gambling in India:

Going back in 1867, Gambling was banned for the first time through The Public Gambling Act. It was updated every now and then. However, the funny part is that the law did not define what gambling was; forget about addressing the elephant in the room: Online Gambling. Even more ironic is the fact that there have been no reforms in this sector ever since. If this was not confusing enough, do note that the legislation is primarily based on the state laws around the subject, for example, Goa allows gambling conditionally and in Sikkim, it's even easier.

Further, the law differentiates gambling on games on the broader categories i.e. whether it's a game of 'chance' or a game of 'skill', for example, gambling on a horse race is legal because the deciding factor is the skill of the horse.

Games of Chance:
Games of chance for stakes fall within the ambit of the gambling acts of the states and are largely prohibited. Some states, such as Goa, have created exceptions within their gambling acts, allowing for authorised gaming. Thus, licences are issued in the State of Goa for games of chance in casinos, which are operated on land as well as offshore. The State of Sikkim has also promulgated the Sikkim Casino Games Act 2004, which allows for casino operations within the state.

Games of Skill:
Games of skill are outside the ambit of states' gambling acts. Whereas games of skill for stakes, like horse racing and teer, require a license from state governments, other games of skill like rummy and bridge can be offered without a license in most states. Nagaland has sought to regulate and license games of skill throughout India, through the Nagaland Act.

The Nagaland Act contemplates the regulation and promotion of games of skill through the issuance of licensees. A license can be procured by a person, firm, company or limited liability company incorporated in India that is substantially held and controlled in India. A licensee is allowed to offer games of skill across India, in states where such games are not classified as games of chance and in states where an exception for games of skill exists in the state's gambling act.

In the case of D Krishna Kumar v. State of Andhra Pradesh, the Andhra Pradesh High Court held that since games of skill fall outside the ambit of Andhra Pradesh's Gaming Act, games of skill for profits and stakes would, therefore, also fall outside the Gaming Act.

The High Court of Rajasthan (Jaipur Bench), vide its decision dated 14 February 2020 in the case of Chandresh Sankhla v. The State of Rajasthan and Ors. observed and held, in view of the decisions of the Punjab and Haryana High Court and Bombay High Court (Division Bench), that the online fantasy game of the game operator does not involve elements of 'betting' and 'gambling' respectively and that the playing of a fantasy game by any participant user involves a virtual team selected by him or her that would require a considerable amount of skill, judgment and discretion.

In the case of Indian Poker Association & Anr v. State of West Bengal & Ors., the Calcutta High Court (Circuit Bench at Jalpaiguri) vide its order dated 29 August 2019 observed and held that since the game of poker is not included within the gambling activities under the West Bengal Gambling and Prize Competitions Act 1957, the police cannot interfere with such games.

The rise of Fantasy Sports in India:

  1. What are Fantasy Sports?

    Fantasy Sports are online prediction games where the fantasy gamers (persons playing the game) put together a virtual team of real sports players such as players from the Indian Premier League (IPL), English Premier League (EPL) the National Basketball Association (NBA), etc.

  2. Prominent Fantasy Sports Platforms in India

    There have been many fantasy sports platforms in the offing in India, but it was Dream11 that made it big and popularized fantasy sports in India. Some of the other apps such as MPL, My11 Circle, My team 11, Fancode, Fancy11, Faboom, Fanfight, Guru 11, and Balle Baazi are fighting out in the market which already is in surge with the number of new players joining in. Dream 11 has been the first Fantasy Sports platform that has entered the league of unicorns in India. They have also been at the forefront when it comes to legal suits as many cases have been filed against it and some are still pending.

  3. Legal Issue Around Online Gaming in India

    The main legal hurdle faced by online gaming companies in India is whether it is a game of skill or a game of chance.

The Court for the first time had settled this question in the case of Varun Gumber v. UT of Chandigarh & Ors. (2017), clarified that: Playing a fantasy game by any participant user involved forming of a virtual team by him which certainly required considerable skill, judgment and discretion. The participant had to assess the relative worth of each athlete/sportsperson as against all athlete/sports persons available for selection. He was further required to study the rules and regulations of the strength of athlete or player and weakness also.”

The High Court made its stance clear that Dream 11 is completely a game of skill and held that fantasy sports did not amount to gambling. The Court also added that Dream 11 was conducting a business activity protected under Article 19(1) (g) of the Constitution.

Two years after the Varun Gumber case, the legality of Dream 11 was questioned again in the Bombay High Court in the case of Gurdeep Singh Sachar v. Union of India case (2019).

The Court again sided with the previous judgment and observed:
The participants do not bet on the outcome of the match and merely play a role akin to that of selectors in selecting the team. The points are scored by the participants for the entire duration of the whole match and not any part of the match.” This was an interesting analysis done by the Bombay High Court which further strengthened Dream 11's case.

Dream 11 again got the benefit of the doubt in 2020 where the Rajasthan High Court dismissed the PIL in Chandresh Sankhla v. The State of Rajasthan and Ors. (2020) which argued that the said app was involved in betting on cricket games.

Current Scenario
Recently in D Siluvai Venance v. State, the Madras High Court has called for stricter regulations for online games. The Court showed concern by pointing out how youngsters are being attracted to play such online games where some prize money is involved. The Madras High Court also sent a notice to MPL ambassador Virat Kohli and My11Circle ambassador Sourav Ganguly for promoting online gaming apps. It is worth noting that the apps mentioned above not only include fantasy sports but they also have online rummy- which was the major point of contention in the Siluvai case.

Andhra Pradesh was the latest state to ban fantasy sports in its entirety when the savings and exceptions for 'game of skill' from the provisions of the Andhra Pradesh Gaming Act were done away with.

Conclusion:
Lastly, to determine whether MPL or Dream 11 or any online fantasy sports that have been offered in India fall under Wagering Contracts or not, can be decided by seeing into the essentials of Games of Skill.

Horse Racing falls under the exceptions of Wagering Contracts because in the case of Dr KR Lakshmanan v. State of Tamil Nadu, the Supreme Court of India recognised that horse racing, football, chess, rummy, golf and baseball are games of skill. It further held that betting on horse racing was a game of skill as it involved judging the form of the horse and jockey, and the nature of the race, among other variables.

As mentioned above, till now the cases in which the Court held that fantasy sports did not amount to Gambling because it's a game of skill. So here Game of Skills” plays a very significant role because where any game in which we need some skills to play it then it gets the protection and cannot be held illegal on the ground of wagering contracts or gambling.

Since, the decision of the Bombay High Court in Gurdeep Singh Sachar v. Union of India case (2019) has been challenged before the Supreme Court already. The Supreme Court has issued notices to all the parties for hearing the fresh contentions. So, it can be said that the future of online fantasy sports hangs in the balance until the Supreme Court decides on the pending matter.

Written By: Shashwata Sahu, Advocate, LLM, KIIT School of Law

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