Gaming Report: SC Stays Bombay HC Order in Dream11 Case, Delta Corp to Buy Back Shares Worth ₹125 Crores & More

The Coronavirus global pandemic has shaken the entire world, bringing routine life to a halt. As India observes a 21-day lockdown, the global cases of Covid-19 infected rallied up to 700,000 on Sunday, with 1,050 reported cases in India. The country’s death toll stood at 29 by the time this report was filed. While all casinos and gaming venues are closed, the ongoing shutdown has led to an indefinite postponement of all sports gatherings, including the Indian Premier League (IPL).

Amidst the ongoing crisis and the massive losses it stands to face, fantasy gaming giant Dream11 was delivered another big jolt this month. Hearing a Special Leave Petition (SLP) filed by the Maharashtra government on March 6, a three-judge bench of the Supreme Court is reported to have issued a notice to the company, and also to the Union of India and social activist Gurdeep Singh Sachar. Expressing reservation at the hasty manner in which the Bombay High Court had dismissed the PIL against Dream11 on April 30, 2019, the bench comprising of Chief Justice DA Bobde and Justices BR Gavai and Surya Kant stayed the above mentioned Bombay High Court order. While the date for a further hearing has not been disclosed yet, the bench is likely to hear the matter next month – that is if the Coronavirus situation subsides by then.

While this places Dream11 and all the other fantasy gaming sites in a tight spot, India’s other gaming giant, Delta Corp, saw its stock prices crashing. Finding the situation favorable, the company will be buying back its own shares worth up to ₹125 Crores. The company’s Board of Directors made the decision in a meeting on Saturday in an attempt to deal with the falling prices of the company shares on the stock exchange. The buy-back will take place at a price not exceeding ₹100 per share.

Moving over to the international updates, UK-listed gambling firm, Flutter Entertainment, confirmed that its merger with online giant The Stars Group (TSG) was on track. According to reports, however, TSG CEO Rafi Ashkenazi will no longer be the Chief Operating Officer (COO) of the merged entity. Ashkenazi will join Flutter’s Board as a non-executive director and will reportedly act only as a consultant for the integration of the two companies.

With casinos shut down for over 30 days, the US gambling hub, Nevada, has quickly moved to legalize betting on eSports. Gaming regulators approved sportsbooks to accept wagers for Season 11 of the Counter-Strike ESL Pro League, making Nevada the first US state to legalize eSports betting.

Meanwhile, the land-based casinos and racetracks across Russia have all suspended operations. With mounting losses, Russian bookmakers have appealed to the government for tax relief.

Supreme Court Issues Notice to Dream11 in GST Evasion & Skill-Game Issue

For more than two years now, fantasy gaming giant Dream11 has been embroiled in a legal storm with both the skill factor in fantasy sports and its manner of GST payment being challenged in various courts in the country.

Just when it looked like the company`s legal woes were behind them after obtaining favorable decisions from both the Bombay High Court and the Supreme Court, the legal issues have re-surfaced. As the latest development goes, a three-member bench of the Supreme Court comprising of Chief Justice DA Bobde and Justices BR Gavai and Surya Kant has, while hearing the SLP by Maharashtra government on March 6, stayed the Bombay High Court order deeming Dream11 to be hosting games of skill and correct in its manner of GST payment.

While we currently don’t have specific information on when the next hearing will now take place, let’s run through what happened in the case earlier.

Dream11’s Legal Challenges – The Rundown

>Last April, Advocate Gurdeep Singh Sachar filed a Public Interest Litigation (PIL) at Bombay High Court against Dream11. Sachar claimed that games hosted by Dream11 amounted to gambling and so the company should be paying GST at 28% instead of 18%.

>On April 30, 2019, the Bombay High Court dismissed Sachar’s PIL and asserted clearly that Dream11 was hosting games of skill and was correct in the manner of paying GST.

>The Union Government and Maharashtra Government filed Special Leave Petitions (SLPs) challenging the Bombay High Court order.

The Department of Revenue, Union of India, had, in its submission, claimed that Dream11 had evaded GST to the tune of ₹2,173 Crores. It charged that the company was liable to pay 28% GST on the face value of bets, and alleged that the Bombay High Court did not allow it to present its views as it passed the order within two working days from the case being registered, without issuing any notice.

>October 4 – A third SLP filed in the Supreme Court against the Bombay High court order by a lawyer, Varun Gumber, was dismissed by the court.

> On December 13, 2019, the Supreme Court rejected the two Special Leave Petitions (SLP) filed by the Union Government and Maharashtra government. The Apex Court also rejected the intervention appeals by Sachar and social activist Avinash Mehrotra.

The Supreme Court, however, left it to the Union Government to file a review petition at the Bombay High Court to pursue the alleged GST evasion matter.

>In January 2020, Sachar filed a clarification petition at the Supreme Court seeking how the Union Government was permitted to submit a review petition on the GST issue but why the skill-gaming contention of the petition could not be reviewed?

>On January 31, 2020, the Supreme Court dismissed Sachar’s clarification application.

The Latest…

On March 6, while hearing the SLP filed by Maharashtra government, a three-bench pane of the Supreme Court stayed the Bombay High Court order that it had earlier upheld.

The bench noted that the High Court’s decision of last year was given without hearing the Central or State government, or issuing notice to any of these parties. Justice Gavai expressed displeasure at the fact that the Bombay High Court gave the judgment within three working days without hearing any of the parties involved.

The bench also rejected the argument put forth by Senior Counsel and former Attorney General of India, Mukul Rohatgi, who had stated that a lawyer had appeared on behalf of the state government on April 30, 2019, in the Bombay High Court.

The court will now re-evaluate the issue of whether Dream11 is hosting games of skill or does that amount to gambling. The court will also address the contention of whether or not Dream11 should be paying GST at 18% or at the rate of 28%.

Delta Corp Board Approves ₹125 Crore Share Buy-back

The ongoing Coronavirus pandemic has severely impacted the live gaming sector. Delta Corp that owns offshore and onshore casinos in Goa and Sikkim as well as poker site Adda52 and rummy site Adda52rummy is India’s only BSE-listed gaming company.

After witnessing a sharp fall in its stock price over the past month, Delta Corp has decided to buy back its own shares worth up to ₹125 Crores.

The decision has had a positive impact on the company’s share price. Delta Corp was trading at ₹59.50 on the Bombay Stock Exchange (BSE) till Friday. After the board approved the buy-in, the share price shot up to ₹62.45 on BSE.

While talks of a buy-back by Delta were doing the rounds for some time now, the company’s Board of Directors discussed a proposal for the same last Saturday. The board has approved the buy-back of shares worth ₹125 Crores at a price not exceeding ₹100 per share.

Confirming the same in its latest regulatory filing, the company also informed that it will be utilizing around 50% of the total amount, i.e., ₹62.50 Crores for the buy-back. The process will be overseen by a Buy-Back Committee headed by Chairman Jaydev Mody.

None of the promoters and persons in control will participate in the buy-back scheme. As on March 28, the promoters and the promoter group held a 32.77% stake in the company. Incidentally, along with a buy-back plan, Delta Corp had also declared a ₹0.75 interim dividend per equity share earlier in March.

The buy-back will take place through the open market route and represents 4.61% of the total paid-up capital of the company. The move is expected to help the company arrest the sharp fall in its share prices and deal with the losses it is incurring since all of its casinos have shut down due to the Coronavirus outbreak.

Flutter-Stars Group Merger Gets Green Light; Stars Group CEO Rafi Ashkenazi Not Part of Executive Team

UK-listed gambling giant Flutter Entertainment recently announced that its merger with online competitor The Stars Group (TSG) will not be put on hold due to the COVID-19 pandemic. However, the cash dividend to investors may take some time to go through.

On March 27, Flutter updated its plans to absorb TSG’s operations, which Flutter CEO Peter Jackson said would proceed despite the “challenging times” brought on by the coronavirus. Jackson said he was “more convinced than ever of the strategic fit of these two complementary businesses.”

Flutter also announced that it had rejigged its debt arrangements earlier this month through a term loan and revolving credit facility totaling £1.3B to provide “ongoing financial flexibility.” The enlarged company’s debt was supposed to be around 3.5x earnings, but Flutter now says this figure is “likely to be above 3.5x (excluding synergies).”

Also, diverging from the previous plan, TSG CEO Rafi Ashkenazi will not take up the post of COO at the combined Flutter/Stars entity.

Following the March 27 update by Flutter, TSG also announced that Ashkenazi will instead be available as a consultant to Jackson. He’ll additionally join the board in a non-executive capacity.

The companies said they reached their decision following extensive discussions about “the optimal construction” of the senior executive team. The groups also cited “a number of personal considerations” for Ashkenazi.

Gambling on Esports Legalized by Nevada During COVID-19 Shutdown

At a time when the world seems to be falling apart, the north-western US state of Nevada became the first to legalize betting on eSports. This happened when gaming regulators approved sportsbooks to accept wagers for season 11 of the Counter-Strike ESL Pro League.

Though it comes during a time of worldwide crisis, it is still a landmark decision. With businesses shutting down due to ‘social distancing,’ sportsbooks are desperate for revenue, and sports bettors are desperate to bet on something. With the spread of COVID-19 throughout the country, all major sports professional sports leagues have suspended operations until it is safe to operate.

Nevada just released its gaming revenue for February, with the state coming in second to New Jersey in total sports bets settled. With casinos in both states currently closed over COVID-19 concerns, revenues for March will be far worse from what they were in February.

According to CBS Sports, betting on eSports is already legal in Europe. New Jersey allowed gamblers to bet on the League of Legends World Championship Final, but the market as a whole is still not legal to bet on.

Russian Betting Operators Ask Government For Tax Relief During Current Crisis

Russia’s land-based gambling operators have finally decided to shut shop in the face of the COVID-19 pandemic. On March 27, Hong Kong-listed Summit Ascent Holdings announced that its Tigre de Cristal casino in Russia’s Primorye gaming zone outside Vladivostok was temporarily suspending its gaming operations starting Saturday (28) and extending through April 5. The intention is to “prevent crowds from gathering” during the COVID-19 coronavirus pandemic.

Casinos in Russia’s Krasnaya Polyana gaming zone in Sochi announced on March 26 that they would “temporarily suspend the admission of guests” on the advice of the region’s medical authorities. The Altai Palace casino in the Siberian Coin gaming zone is also shutting down its gaming operations “until a new government order” is issued.

Russian bookmakers, like those around the world, were already suffering due to the mass cancellations of global sports events. They have appealed to the government for tax and rate relief, including foregoing their mandatory annual contribution of 5% of their betting revenue – with minimum payments of RUB15 Million (US$190,000) per quarter – to local sports leagues.

Russian bookies like Betcity has begun offering prop bets on when certain sports leagues will resume activity, with the Russian Premier League (RPL) currently pegged as the league that will be first out of the gate.

Russia’s online bookies have also begun promoting eSports wagering as a means of filling the void. Market leader Fonbet has started taking wagers on Electronic Arts’ new eWBSS Heavyweight Legends virtual boxing tournament, while Liga Stavok is taking wagers on a FIFA 20 virtual football tourney featuring real-world RPL players at the controls.