Karnataka HC lifts ban on online fantasy sports in state

The Karnataka High Court on Monday overturned an amendment to the Karnataka Police Act, 1963, which made operating and participating in fantasy games a non-bailable offence. Citing the amendment as “unconstitutional”, Justice Krishna S. Dixit stated that the judgement will enable the Karnataka state government to adopt a new law to impose restrictions on gambling – which leaves online fantasy gaming out of the ambit.

On October 5, 2021, the Karnataka government notified the Karnataka Police (Amendment) Act, 2021, which made all forms of gaming linked to virtual or real-world stakes, including online and ‘skill’ games, a non-bailable offence. Skill games are classified by law as those that require human cognisance to be excelled at, and differ from those that are purely based on luck.

Jay Sayta, a technology and gaming lawyer, said that it is this distinction that deemed the Karnataka government’s ban as unconstitutional. “Games of skill and of chance are different, which has also been ruled previously by the Supreme Court. Once something is categorised as a game of skill, it does not fall under the ambit of gambling, and skill games enjoy constitutional protection of trade and commerce under Article 19(1)(g) of the Constitution,” he said.

The Indian fantasy sports industry is among those tipped to grow exponentially going forward. A 2020 report titled ‘The Business of Fantasy Sports’ by the Federation of Indian Fantasy Sports (FIFS) and KPMG stated that as of March 2020, the net revenue of fantasy sports operators in the country stood at $340 million, and was scheduled to grow to over $3.7 billion by 2024 – a rise of over 10x within four years.

Sameer Barde, chief executive of the E-Gaming Federation, a industry body, said that instead of a constructive impact, a blanket ban led to the rise of unofficial and unregulated activities in Karnataka, Tamil Nadu and Kerala – the three states that have so far attempted to ban online fantasy gaming.

“What happened as a result of this ban is the rise of a lot of fly-by-night operators in the field of gambling. The ability of a state to enforce a ban on such a field is next to zero, as pretty much everyone knows how to circumvent such restrictions by using VPNs. What happened is that legitimate operators stopped plying in the state, leading to the overnight operators thriving. Essentially, such bans are counterproductive,” Barde said.

Instead of such bans, industry stakeholders have called for state governments to establish regulatory actions in the field of online fantasy gaming. Dinker Vashisht, vice-president of corporate and regulatory affairs at Games24x7, said, “This is the third High Court judgement in the past seven months that has held a ban on skill gaming as Ultra Vires (or against the legal scope of) the constitution. We hope that these judgements can nudge state governments to frame progressive policy and regulatory structures for this sunrise sector.”

Roland Landers, chief executive of the All India Gaming Federation (AIGF), also added, “This is a step in the right direction to grow the gaming industry in the state, and will help unlock the economic potential this sector has. We look forward to working with the government and stakeholders to develop a clear regulatory framework – that will enable legitimate gaming companies to operate in the state with safeguards, while eradicating illegal gambling apps from the state.”

Games24x7 and AIGF were both among the petitioners against the Karnataka state government ruling at the state’s High Court. While Games24x7 offers Rummy Circle and My 11 Circle as two fantasy gaming platforms in rummy and cricket, AIGF represents multiple companies in this industry.