Game of skill in a regulatory grey area: How Dream 11 and premium fantasy sport is booming in India

I have been a regular player of the Fantasy Premier League, which is the official fantasy gaming platform of England’s Premier League of football, for the last three years. But with little success.

Last month, the Premier League scheduled midweek matches that I completely forgot about. I therefore failed to pick my team for that game week before the deadline. As a result, my team from the previous week got automatically picked for that game week.

I lost out on at least 24 points as a result. Even though FPL is a free-to-play game, I almost gave up after that week, as my rank plummeted. I’m currently ranked 1,632,398th out of over 6 million users worldwide.

Fantasy gaming platforms in India, which number 75-80 at the moment, thrive on users like me, who may not find the time or may forget to update their teams every week in a season-long game, such as FPL.

This is the reason why the most popular fantasy sports format in India is the single-match one, called daily fantasy sports. Here, users only pick their virtual fantasy teams for a single match, rather than an entire tournament or league.

Shampoo sachet

“The masses [in India] need a shampoo sachet, not a bottle,” is how Harsh Jain, co-founder of Indian fantasy sports company Dream11 described it.

Dream11 was set up in 2008 after Jain, who was looking to play fantasy cricket when the Indian Premier League was launched that same year, could not find a platform in India. ESPN Star, a joint venture that no longer exists, had set up India’s first fantasy sports game, called Super Selector, around 1999-2000 but shut shop before the IPL came around. More on that later.

Jain, an engineer by qualification, decided to “solve a personal problem” by setting up his own fantasy cricket platform. “I just thought there might be a few hundred million others in India who might also be interested,” he said.

“That’s when I asked my friends if anyone wants to join me. One of my friends Bhavit [Sheth] said he doesn’t mind, and that’s how it started. English Premier League fantasy was the entire root cause of what we built,” he added.

Dream11’s first version in 2008 was modelled on FPL – a free-to-play, season-long fantasy cricket game in a graphical format, with an ad-driven business model. The company ran with this model for almost four years before realising that it wasn’t working in India.

“We realised that [Indian] users have a low attention span,” Jain said. “They don’t want to feel like – if I don’t change my team for one week when I was travelling for work, or on holiday, or just busy with life, then I will fall behind so much that there is no chance of me winning. They want something that has instant gratification.”

Pay to play

So, in 2012, Dream11 pivoted to a different format – daily fantasy sports. Along with the change in format, the company also tweaked their revenue model by removing ads and instead giving users the option to put money on their teams.

The money collected from all the users in a particular contest would go into a pool. After the match was over, the user(s) whose team(s) accumulated the most number of points would win the pool money, after the deduction of a service fee for the platform.

Before introducing the pay-to-play variant, Jain sought opinions from lawyers around the country as to whether premium fantasy sports would be legal in India. This was important because if fantasy sports wasn’t deemed a game of skill, the premium version would fall under the ambit of betting and gambling, which is illegal in India.

The main law that deals with premium fantasy sports in India is the Public Gambling Act, 1867. The Act, over 150 years old, criminalises gambling in a public forum in India. However, it does distinguish between putting money on a game of skill versus a game of chance. 

Roulette or three-card games such as flush are games of chance. Betting on horse racing has been defined as a game of skill by Indian courts, but the laws vary from state to state. 

The anti-gambling laws of most Indian states exempt games of mere skill. India’s Supreme Court defines “mere skill” to mean preponderance of skill, meaning the skill element should outweigh chance. According to the Supreme Court, games of skill do not amount to gambling and can be considered as commercial activities.

However, in Assam, Odisha, and Telangana, you can’t play a game of skill for money. Premium fantasy sports, therefore, are illegal in these states.

According to the legal opinion that Jain received, Dream11’s fantasy games did have a preponderance of skill. The company then introduced a freemium model in 2012, where users had the option to play for free but could also put in money on their teams if they so wished.

Landmark court judgement

The freemium model ran successfully for Dream11 without any hitches for nearly five years. Then, in 2017, one of Dream11’s users, Varun Gumber, who had lost nearly Rs 50,000 on the platform, decided to take the company to the Punjab and Haryana High Court.

Gumber challenged in his petition that fantasy sports was not a game of skill “and thus they clearly amount to gambling”. However, the Punjab and Haryana High Court observed that Dream11’s users have to acquaint themselves with the “past performance, physical state and form of athletes available for selection” and assess “the relative worth of an athlete and the anticipated statistics arising out of the athlete’s performance” in a real-life match.

“Therefore, the element of skill has a much greater and predominant influence on the outcome of the Dream11 fantasy sports game than any incidental chance,” the court observed, before dismissing Gumber’s petition.

While the court’s judgement was a big win for Dream11, Jain pointed out that it did not amount to a blanket approval of fantasy gaming in India. “The court has only approved Dream11’s game, which has three or four distinctive qualities about it.”

“For one, you have to pick as many players in your team as there are in a real-life match. In cricket, you have to choose at least 11, in kabaddi – seven, and in basketball – five. You can’t just ask users to pick one or two players and call that fantasy sports.”

Self-regulated

This was an important point Jain made because fantasy sports is not a regulated industry in India yet. It is self-regulated, by the Indian Federation of Sports Gaming, which was formed in 2017 and is chaired by Jain himself. According to the IFSG website, it has only 17 members right now.

This is a concern since the IFSG is merely a private body. Till such time that the IFSG is recognised by the Indian government as the exclusive body to regulate fantasy sports gaming in the country, it does not have any authority to regulate non-members, according to attorneys at GameChanger Law Advisors.

“As such, till such time that individual states come up with adequate legislations to regulate the online gaming industry within their jurisdiction, the only legal stipulation on the players in the fantasy sports industry is to ensure that such fantasy sports remain games of skill and do not become games of chance,” attorneys Amrut Joshi, Namrata Bhagwatula and Abhay Upadhyay said in an email response.

Jay Sayta, a corporate lawyer from Mumbai who runs a website on gambling laws in India, believes that Indian fantasy sports companies are just waiting for sports betting to be legalised in the country. “Fantasy sports is what is available right now, but the larger game will definitely be sports betting,” he said.

Earlier this year, the United States’ Supreme Court ruled that states can legalise sports betting. Since then, Fan Duel and Draft Kings, two of the biggest fantasy sports companies in the US, have introduced sports betting.

“Fantasy sports companies have already built a huge user base, they have engaged with them, they have users who are willing to pay and play, so it’s easy for them to switch to sports betting, which is a lot more lucrative model than daily fantasy,” said Sayta. In the US state of Nevada, where sports betting is legal in some jurisdictions, the industry touched $4.9 billion in 2017, according to CNBC.

In the aftermath of the IPL betting and spot-fixing scandal in 2013, the Supreme Court of India had asked the Law Commission to study the possibility of legalising betting. In July this year, the Law Commission submitted a report in which recommended regulating gambling and betting in sports such as cricket.

However, a day later, the Law Commission seemed to go back on its recommendation, saying it has “strongly and categorically” told the central government that legalising betting and gambling is not desirable in the present scenario.

Sports betting may not be legalised and regulated in India anytime soon, but fantasy sports companies are more than happy as long as users are allowed to put money into this game of skill.

Out of Dream11’s 45 million lifetime users, only around 15% of them have played for money, according to Jain. But those 6 million-odd premium users account for Dream11’s entire revenue stream. “We charge a 15% service fee and will never introduce advertisements on our platform, not as long as we can run the freemium model,” he said.

Today, Dream11 is the official fantasy gaming partner of the International Cricket Council, the Big Bash League, the Caribbean Premier League, the Pro Kabaddi League, the Indian Super League, the international hockey federation (FIH), and the NBA in India.

In September, Dream11 reportedly raised $100 million in a Series D funding round led by Chinese multinational investment holding conglomerate Tencent. Dream11 also reportedly holds 90% of the market share in the Indian fantasy sports industry.

Sometime last year, Dream11 signed up former India cricket captain MS Dhoni as their brand ambassador and released an ad campaign with the slogan “Khelo Dimaag Se”, or “Play with your brain”. No prizes for figuring out the logic behind the slogan.

“Dhoni is the epitome of the characteristics we want our users to have,” said Jain. “To think calmly, to research, to think of those hatke ideas that separate you from the rest – no one backs their players as much as Dhoni has. We want our users to think, research, choose their players carefully, and back them.”

Looking at Dream11’s success, Joy Bhattacharjya, one of the principal figures behind ESPN Star’s Super Selector, rues the fact that they did not realise the product’s potential, especially considering how big a hit it had become when it was first launched. “We had 7,000 users within the first half an hour,” said Bhattacharjya. “By 2 am, our system had gone down.”

However, Super Selector was always a free-to-play game as ESPN Star was not sure whether fantasy sport would be regarded as gambling or not, so they did not want to introduce a feature where users could put money into the games, according to Bhattacharjya. “People were also not so open to using [credit and debit] cards on the net, there were no digital wallets and stuff like that,” he said.

ESPN Star could not sustain Super Selector long enough and the game petered out by the time the IPL was launched. ESPN Star’s loss turned out to be Dream11’s gain. Super Selector was just, as Jain describes it, “the right product at the wrong time”.

Challenges ahead

Despite Dream11’s success, Jain believes the company has a long way to go. “We have penetrated only 15% of the online sports audience of 300 million in India,” he said. “We’ve got a good 5x to 6x growth in front of us that we can get in the next two years just in distribution.”

For newer companies such as StarPick, which was launched in April last year, the challenge is to retain users. “I don’t want to be a seasonal platform,” said Trigam Mukherjee, one of the co-founders of StarPick. “I do not want to depend on an IPL or a World Cup. When India and Zimbabwe play, do I have to settle for lesser number of people who engage with me? No.”

In an industry that is growing so fast, Anand Ramachandran, co-founder and CEO of Fantain, believes the challenge is going to be around marketing. Not all companies, after all, can afford to sign Dhoni.

“We need to figure out what subset of a sports fan is a fantasy sports fan?” he said. “Can we understand him or her well enough to target them and engage with them? At what cost will be able to acquire these people?

“How do we build loyalty in a space where it’s so easy for people to jump platforms? How can we protect our turf and make sure a new company is not able to quickly replicate what we have done?” he added.

Mukherjee believes fantasy sports has the potential to grow as big as e-commerce in India. For that to happen, the digital maturity of Indian consumers needs to grow, he said. “People like you and me, living in big cities, are just 1% of the population, but the real users of the web are in the rural areas, the category B and C cities,” he said.

“For them to mature from being Facebook and WhatsApp users to being a consistent users of fantasy sport, it will take time. But this is a sweet time to be in fantasy sport. With digital maturity, we will see the same kind of growth that e-commerce has seen in India.”

Whether it’s digital maturity or legal, one thing is for sure – with millions of Indian sports fans wanting to be “dimaag se Dhoni”, this is just the beginning for fantasy sports in India.