Monthly Archives: May 2016

Legality Of Running And Playing Online Fantasy Sports In India

Indian population is very enthusiastic about sports and sports related activities. Indian sports has got a boost in the form of online gaming that has transformed physical sports into virtual sports, e-games, e-sports, online games, fantasy sports, etc. As on date we have no dedicated online gaming and online gambling laws in India. Similarly, we have no dedicated fantasy sports law in India till now. This is in line with the exiting game laws like online poker, online rummy, online lotteries, etc that are still not governed by any dedicated Indian law. The result is inevitable i.e. online card games in India are in limbo and legal troubles.

We at Perry4Law Law Firm are frequently approached regarding legality of online games and fantasy sports/games in India. For the larger interest of gaming community of India, we are providing a basic guideline about legality of running and playing online fantasy sports and games in India. Please note this this is not a legal consultancy and interested stakeholders must con cult a lawyers or law firm of their own choice. Of course, if you wish you can also establish a client attorney relationship with Perry4Law and seek our techno legal online gaming service.

Before discussing about legality of fantasy sports it is pertinent to know a little about it. Briefly speaking, a fantasy sport is an online game that involves selection of and competition among virtual teams for points. These points can be redeemed in multiple ways and money or cash is one of them. However, when cash for stakes is involved, a fantasy game or sport is required to comply with additional techno legal compliances.

The present trends among fantasy sports stakeholders in India is to apply the tests of traditional rummy to online poker, online rummy and fantasy sports. However, this is a wrong approach. At Perry4Law we strongly recommend that online poker, online rummy, online lotteries, fantasy sports, etc require customised and separate treatment than simply applying the skills v chance criteria. Even the central government and Supreme Court of India are cautious about these issues and they have deliberately refrained from commenting upon the legalities of online games in India. Without going into much details, it is sufficient to say that relying solely upon skills v chance criteria for running online poker, online rummy, fantasy sports, etc would be a big mistake and a sure recipe of attracting legal sanctions in India.

In United States the Unlawful Internet Gambling Enforcement Act of 2006 (pdf) (UIGEA) generally prohibits funds transfers to businesses engaged in unlawful internet wagering. While UIGEA does not impact the legality of any particular activity permitted or prohibited under other laws, it does contain some express exemptions to its funds transfer prohibitions. One of these exemptions from the UIGEA prohibitions is for fantasy sports that meet certain criteria. This means that fantasy sports that are based on teams of real multiple athletes from multiple real world teams, that have prizes established before the event starts, that use the skill of participants to determine the outcome, are exempted from the definition of a bet or wager that is the basis for requiring banks to identify and block funds transfers.

However, this exemption does not mean that fantasy sports is permitted or legal in US. All the UIGEA has done is creating an exemption in favour of some categories of fantasy sports. UIGEA has specifically mentioned that no provision of the applicable subchapter shall be construed as altering, limiting, or extending any Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United States. Since UIGEA is not a criminal gambling statute and it specifically does not alter any criminal gambling laws thus UIGEA does not make fantasy sports legal in US. Federal criminal gambling statutes are found in Title 18 of U.S. Code, such as the Federal Wire Act 18 U.S. Code § 1084 that deals with transmission of wagering information and its penalties and the Illegal Gambling Business Act 18 U.S. Code § 1955 that imposes prohibition of illegal gambling businesses.

As far as India is concerned, there is no clear regulatory framework that can be looked upon to decide legality or illegality of online poker, online rummy, online card games, fantasy sports, etc. However, there are some very complicated techno legal compliances that are required to be complied with to clear an online gaming or fantasy sports website from legal troubles. Unfortunately, online gaming and fantasy sports websites in India are not complying with these techno legal requirements and they are on the wrong side of Indian laws.

Recently the Indian government has clarified about the Foreign Direct Investment (FDI) in E-Commerce Sector of India. As per the “Consolidated FDI Policy Circular 2015” (pdf) (FDI Policy), FDI is prohibited in lottery business including Government/private lottery, online lotteries, etc and gambling and betting including casinos etc. Recently the Crime Investigation Department (CID) of the Andhra Pradesh police had sought a ban on the website of “Playwin” which had allegedly been selling online lotteries banned in the state.

As on date, online gaming, online gambling and lotteries websites are not complying with the internet intermediary compliances and cyber law due diligence (pdf) requirements prescribed under the Information Technology Act 2000. Similarly, almost all of the online poker websites in India are violating one or other laws of India. Although online gaming market in India is booming yet regulatory compliances cannot be ignored. It seems online gaming and online gambling industry of India is not considering regulations while conducting their businesses in India.

Perry4Law conducted a techno legal audit of various fantasy sports websites operating in India and we found the same problems with them as have been discussed above. Almost all of these fantasy sports websites have used a single cut-copy-paste criteria when it comes to techno legal compliances and drafting of legal documents of the websites. Clearly, these online fantasy sports websites are violating the laws of India and they may be prosecuted very soon. Those using mobile applications can also be prosecuted if they fail to comply with techno legal regulatory norms of India.

Even the banks, payment gateways and online payment merchants, mobile payment vendors, etc supporting these online poker, online rummy, online card games and fantasy sports websites can be held liable for not following cyber law due diligence norms as they have blindly approved online payment option to these illegal and law breaking websites. These banks and payment gateways can also be held liable for money laundering, FEMA violations and assisting in tax evasion. If such banks, payment gateways and online payment merchants have already approved such illegal and law breaking online poker, online rummy, online games and fantasy sports websites in India, it is in their own interest to cancel such approval immediately. The banks etc must ask them to first comply with applicable techno legal compliances and then support their claims with a proper techno legal consultancy from a reputed law firm.

If you need a techno legal compliance and legal consultancy from Perry4Law for your online games or fantasy sports, please establish a client attorney relationship so that we can start working upon your project. Perry4Law wishes all the best to all gaming stakeholders and entrepreneurs.

PIL Filed For Banning Online Lotteries From Other States In State Of Maharashtra

India has been struggling hard to deal with issues of online gambling, online gaming and online lotteries for long. Till now we have no dedicated online gambling and gaming laws in India. This position has become more complicated since the Supreme Court of India has refused to decide about legality of online poker, online rummy and online card games in India.

Recently the Indian government has clarified about the Foreign Direct Investment (FDI) in E-Commerce Sector of India. As per the “Consolidated FDI Policy Circular 2015” (pdf) (FDI Policy), FDI is prohibited in lottery business including Government/private lottery, online lotteries, etc and gambling and betting including casinos etc. Recently the Crime Investigation Department (CID) of the Andhra Pradesh police had sought a ban on the  website of “Playwin” which had allegedly been selling online lotteries banned in the state.

This episode has also proved that online gaming, online gambling and lotteries websites are not complying with the internet intermediary compliances and cyber law due diligence (pdf) requirements prescribed under the Information Technology Act 2000. Similarly, almost all of the online poker websites in India are violating one or other laws of India. Although online gaming market in India is booming yet regulatory compliances cannot be ignored. It seems online gaming and online gambling industry of India is not considering regulations while conducting their businesses in India.

A disturbing trend of “legal violations” is fast dominating the online gaming industry of India. For instance, the fine line and distinction between online gambling and online gaming in India is not appreciated and understood by online gambling and gaming enthusiastics of India. As a result they are frequently prosecuted in India for violating online gaming and online gambling laws of India. Even technical mechanisms are also used to curb such activities in restricted territories or zones so that activities of one state may not violate the laws of other state of India.

In the past, Kerala refused permission to Future Gaming Solutions India Private Ltd to sell Nagaland lotteries in the state. Now a social worker had knocked judiciary’s doors praying for immediate ban on unauthorized and alluring online lotteries. Promoted by other states within Maharashtra, he contended that over 1,300 bogus online lotteries under various strange names are operating here and ruining lives of millions. A division bench comprising justice Bhushan Gavai and justice Swapna Joshi issued notices to central and state governments seeking their reply before court resumes after summer vacations.

Petitioner Chandan Trivedi through his counsel Shrirang Bhandarkar has urged the court to direct authorities to take stern action against lottery operators. The PIL stated that state government has permitted only 13 online lotteries. But operators with permissions from states like Mizoram, Arunachal Pradesh, Sikkim, and Meghalaya, are conducting online lotteries where results are announced in every 15 minutes on single-digit. The petitioner termed the entire activity as totally illegal.

The petitioner contended that under guise of online lotteries, open gambling is on in brazen violation of Lottery Regulations. So far, these operators have caused a loss of Rs933 crore to state exchequer. Many lottery operators on the lines of ‘matka’ have developed software which gives hand written receipts to circumvent tax payable to state exchequer and transactions remain unaccounted. The PIL also quoted state finance minister Sudhir Mungantiwar’s statement in legislature in which he had promised to seek legal opinion to ban online lottery companies of other states, which have duped the exchequer crores of rupees. The government was also trying to trace owners of these companies and probe was handed over to Economic Offence Wing (EOW), the minister had informed. Trivedi claimed that he brought patent illegality to the notice of all authorities, including top political executives, but nobody paid any heed and millions of people are addicted to it.

According to lottery rules framed by Maharashtra government, it’s mandatory for operators to pay advance tax on all types of online lotteries in the state. But, the lottery companies challenged legality of rules and the high court had given an interim stay on it. Taking advantage of it, the online lottery companies from outside states avoided payment of tax to the tune of Rs933.14 crore during 2007-09. In 2009, the high court lifted the interim stay and allowed the state government to collect the tax, but no recovery has been made, the PIL mentioned.