Fantasy sports major Dream11 has stopped allowing users in Karnataka from entering paid contests on its platform, in order to comply with the state's online gambling law that came into effect on October 5.
The Mumbai-based gaming firm which counts Tiger Global, TCV and Falcon Edge among its investors shows an error message stating that users who currently reside or have a bank account within the state cannot participate in cash contests on Dream11. They can continue to participate in free-to-play contests.
The company has also updated its terms and conditions stating that individuals residing in Karnataka are prohibited from participating in the paid contests "as the laws of these states are unclear/ bar persons from participating in games of skill where participants are required to pay to enter."
"The Karnataka Police Act recently amended its gaming law to prohibit online gambling, betting and wagering. We have been advised by the Federation of Indian Fantasy Sports (FIFS), who have shared an opinion from a former Supreme Court Judge, stating that the Karnataka Police (Amendment) Act 2021 does not apply to its member Fantasy Sports Operators. This is because the FIFS format of Fantasy Sports has been upheld by the hon’ble Courts of India as not amounting to gambling, betting or wagering." a company spokesperson told Moneycontrol.
The spokesperson added "our Karnataka users have expressed deep concerns and anxiety on their safety and security. In order to allay our users’ concerns, we have decided to suspend operations in Karnataka. This decision is without prejudice to our rights and contentions under law."
In a note on its website, Dream11 said that users can withdraw their winnings by verifying their account and placing a withdrawal request by October 23, 2021. The firm also said it is trying its best to "work with the relevant authorities and resolve this situation."
"We want to assure you that your account balance is always safe on Dream11...Please note that any cash bonus given to your account will not be eligible for withdrawal" the company said in the note.
This move comes on heels of Dream11 cofounders Harsh Jain and Bhavit Sheth facing a FIR over the continued operations of its platform, the first such police case booked under the new law.
A case has been registered under Section 79(keeping common gaming house) and 80 (gaming in common gaming-house) of Karnataka Police Act, 1963, according to a report in The Times of India. The case was registered by Annapoorneshwarinagar Police in West Bengaluru based on a complaint by 42-year-old cab driver Manjunatha.
"We’ll issue notices to the parties concerned, including the names in the FIR" DCP (West) Sanjeev M Patil told the publication.
Dream11 had told Reuters it believes the complaint "is motivated" and is examining its legal remedies. "We are a responsible, law abiding company and will extend our full cooperation to any authorities," a spokesperson told the publication.
The company is examining its legal remedies and "we are a responsible, law abiding company and will extend our full cooperation to any authorities," a spokesperson said.
Moneycontrol was the first to report on October 6 that several gaming platforms including MPL, Games24x7 (RummyCircle, My11Circle), Adda52, Ace2Three, and RummyCulture among others had started immediately blocking access to residents in Karnataka, although Dream11 continued operations until today.
Skill gaming industry body All India Gaming Federation along with real-money gaming firms MPL, Games24x7, A23(Ace2Three), and Gameskraft have also approached the Karnataka High Court appealing against the state's online gambling law, Moneycontrol reported on October 10.
These firms filed writ petitions in the Karnataka High Court challenging the constitutional validity of amendments made to the Karnataka Police (Amendment) Act that was reportedly approved by governor Thawar Chand Gehlot last week. The law had outlawed all forms of online gaming where transfer of money is involved.
Karnataka’s Home Minister Araga Jnanendra told The Economic Times on October 9 that the government had only banned games of chance, and not the games of skill. However, one cannot allow betting and wagering even on games of skill, he said.
"The industry was very optimistic when there were some media reports about government officials wanting to seek two months to review the amendment. However, since it has now become a law, as the apex industry body, we had notified our member companies to block Karnataka from the day it becomes a law. Needless to say, at this juncture, the industry has no option and are forced to challenge this in court and seek legal recourse" said All India Gaming Federation CEO Roland Landers.
This development comes at a crucial time for gaming firms who were looking to cash in on the pandemic-driven usage boom and high interest from fans during key tournaments like the ongoing Indian Premier League tournament and the upcoming ICC T20 World Cup.
Over the past year, several Indian states like Andhra Pradesh, Telangana, Tamil Nadu and Kerala have banned or tried to ban real-money games. Madras High Court had struck down the suspension order in August while Kerala High Court overturned the Kerala government’s order last month. The Supreme Court also upheld fantasy sports as a game of skill in July this year.
India had around 80 million real money gamers in 2020, which is expected to grow to 150 million by 2023, according to an EY-All India Gaming Federation report. The industry will be worth $2 billion by 2023 in terms of rake fees earned, the report said.
(The story has been updated to include more details on Dream11's plan for user withdrawals)
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