Dream11 Forced to Rethink Operations in Karnataka as Police Intervenes

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The recently adopted Karnataka ban on online games for money has seen Dream11, India’s fantasy sports giant, get reported to local police. The company insists it has not violated any laws yet suspended operations in an attempt to seek more clarity and guarantee user safety.

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Online Gaming Ban Raises Compliance Questions

Authorities in Bengaluru have started enforcing recently adopted Amendments of the Police Act, effectively banning all games played for money and other prizes. The majority of online gaming companies halted operations until more clarity is brought in by courts and the executive branch.

However, the nation’s first gaming unicorn, running the hugely popular fantasy sports platform Dream11, chose to stay online. The Company is convinced it operates legally, based on previous court definitions and business customs. A few days later, its platform also shut down in Karnataka after a first information report (FIR) was registered against it by the State Police.

Some of the nation’s most popular platforms and apps offering casino games and online gambling
were among those affected, including the Mobile Premier League (MPL), Paytm First Games and Games 24×7. There are those that plan to reshuffle their market strategy and those that are preparing for court battle. Dream11 still insists it is not in breach of the Law.

Legal Challenges Lie Ahead

The FIR was filed directly against Dream11 co-founders Bhavit Sheth and Harsh Jain by a cab driver who believes the Mumbai firm is not compliant with the recent regulations. Quoted by local media, he points to offers of exciting wins in cash and other prizes “worth crores” as the grounds for suspension in Karnataka.

The bone of contention lies exactly in the nature of monetization that a gaming company chooses. Many online games have cash contests, entry fees and various prizes, whether directly in rupees or convertable tokens. The majority of these games are immensely popular, found on millions of mobile and have been considered games of skill, therefore legitimate.

Dream11 has a particularly strong case against the ban – fantasy sports has been declared legal by a series of High Court and Supreme Court decisions. While the company admits the police intervention may have its legal motivation, the very essence of fantasy sports and other skill games – based on knowledge, strategy and decision-making – makes them constitutionally legitimate.

Yet, concerns over the security and safety of current users have led it to suspend operations in Karnataka for the time being. Dream11 spokespeople anticipate, however, that the firm reserves full rights to contend any restrictive measures in court.

Business Logic Leads Elsewhere

India’s online and mobile gaming sector is experiencing years of constant growth, both pre- and post-Covid. Dream11 was the first desi gaming unicorn, currently valued at around $5 billion. MPL also became a unicorn just a month ago and Nazara Technologies is nearing that valuation.

Dream11 is the largest operator in fantasy gaming and Karnataka is among the states with
highest concentration of players across gaming platforms, consistently in the top 3 states in total users. It is not only companies that have been impacted by the ban, millions of users lament the disservice during a period which sees both IPL and the T20 World Cup.

While Karnataka Home Minister was quoted calling the case a “big win” for the new legislation, tech companies in Bengaluru are questioning their presence in the State. Consumers will also have to find their alternatives, some possibly at offshore-registered platforms.