Dream11 suspends Karnataka operations following FIR against its founders

The Karnataka government recently made amendments to the Karnataka Police Act, 1963, prohibiting the online games of chance and skill where money is risked

e4m by exchange4media Staff
Updated: Oct 11, 2021 8:28 AM

Sports tech company Dream Sports has suspended Karnataka operations of its fantasy gaming app Dream11 following the filing of an FIR against its founders in Bengaluru under the state's newly legislated Karnataka Police (Amendment) Act, 2021.

Bengaluru police had registered an FIR against the Founder and Directors of the well-known Dream 11, which is owned by $5 billion Dream Sports. Dream11 founders Bhavit Sheth and Harsh Jain have been booked as accused number one and two.

“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,” Dream11 said in a statement.

“However, following the recent media coverage, our Karnataka users have expressed deep concerns and anxiety for their safety and security. In order to allay our users' concerns, we have decided to suspend operations in Karnataka. This game involves an element of financial risk and may be addictive. Please play responsibly and at your own risk.”

The Karnataka government recently made amendments to the Karnataka Police Act, 1963, prohibiting the online games of chance and skill where money is risked. Following the ban, the complainant had searched the Google Play Store to know how many online games are withdrawn. The complainant found that many companies have blocked their apps except Dream 11.

“Despite this, they have continued betting on online games by promoting their online mobile gaming application called 'Dream 11'. The people are still putting and risking their money by creating their own fantasy cricket team and losing huge amounts of money giving a chance to the accused to earn unlawfully," the complainant had stated.

Under the Karnataka Police (Amendment) Act 2021, the state government has banned all formats of online games involving wagering, betting and gambling of all nature and forms in the state. Under the new law, online gaming is considered a non-bailable offence with a fine of Rs 1 lakh and imprisonment of up to three years. Along with banning games of skills, the Karnataka government has categorised online games using electronic means and virtual currency, electronic transfer of funds in connection with any game as gambling.

The online gaming companies are planning to challenge the new legislation in the court. Earlier, the Madras High Court had set aside Tamil Nadu government's decision to ban online rummy and poker games in the state. The government had amended the Tamil Nadu Gaming Act 1930 to online betting games.

IAMAI is of the view that the bill may hurt Karnataka’s position as the country's startup hub and lead to the loss of jobs and revenue for the state. There are 92 gaming companies registered in Bengaluru which employ over 4,000 people. In the past three years, international investors have invested around Rs 3,000 crore in gaming and animation startups in the state.
According to financial data accessed by business intelligence platform Tofler, Dream11's advertisement expenses zoomed 148% to Rs 821.73 crore in FY20 from Rs 330.48 crore in FY19. Business promotion expenses rose 40% to Rs 405.5 crore from Rs 289.6 crore. Sponsorship expenses was down 39% at Rs 100.74 crore compared to Rs 164.9 crore.

The company reported a 166% jump in revenue at Rs 2,130 crore for FY20 against Rs 775.45 crore a year ago. The company further reported a net profit of Rs 181 crore versus a net loss of Rs 87.75 crore. The company’s total expenses for the fiscal almost doubled to Rs 1,868 crore from Rs 934.36 crore.

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