Flutter, PokerStars India, Games24x7 join review challenge against SC online gaming ruling

The legal battle over the Supreme Court's landmark online gaming rulings has widened, with Flutter-owned Junglee Games, Sachiko Gaming (which operates PokerStars India) and Play Games24x7 moving the apex court seeking a review of its twin judgments in the Junglee Games constitutional case and the Gameskraft GST ruling.

e4m had first reported about Head Digital Works filing a review petition in the SC challenging the twin rulings. 

https://www.exchange4media.com/digital-news/head-digital-moves-sc-to-review-twin-online-gaming-rulings-156281.html

The three companies have filed review petitions questioning the correctness of the judgments, arguing that the issues involved required consideration by a larger Constitution Bench as they depart from decades of settled jurisprudence distinguishing games of skill from gambling. The latest petitions come days after Head Digital Works, operator of A23, approached the Supreme Court with a similar plea seeking a review of both judgments. 

The latest review petitions indicate that the country's leading real-money gaming operators are pursuing a coordinated legal strategy to revisit what many in the industry describe as the most consequential judicial pronouncements governing online gaming and its taxation.

Larger Bench reference sought

According to the review petitions, the companies contend that the Supreme Court ought to have referred the matters to a larger Bench instead of deciding them through a two-judge Bench, as the judgments effectively reinterpret constitutional principles laid down in earlier Constitution Bench decisions, including the R.M.D. Chamarbaugwala rulings.

The petitions argue that the judgments have significantly altered the legal distinction between online and offline games of skill and have expanded the scope of "betting and gambling" beyond what earlier precedents envisaged.

Industry executives tracking the litigation said the review petitions seek to establish that the rulings have created fresh questions of constitutional importance that warrant authoritative determination by a larger Bench.

"The review petitions essentially argue that the judgments have unsettled more than six decades of gaming jurisprudence without referring the issue to a larger Bench. The industry believes such a departure from established precedent requires consideration by a Constitution Bench," a person familiar with the matter said.

GST interpretation challenged

Apart from the constitutional issues, the companies have also questioned the interpretation adopted in the Gameskraft judgment concerning the levy of Goods and Services Tax (GST).

One of the principal grounds raised in the petitions relates to the Supreme Court's interpretation of "supply" under the Central GST Act.

The companies argue that the judgment incorrectly equated the creation of an actionable claim with the transfer of an actionable claim, despite the CGST Act specifically recognising only the transfer of actionable claims under the definition of supply.

According to the petitions, this distinction has significant implications for determining when GST liability arises on online gaming transactions and whether deposits made by players can be treated as taxable supplies.

The review applications also reportedly contend that the Court's interpretation departs from the statutory framework governing actionable claims and consequently warrants reconsideration.

Challenge to online-offline distinction

Another key plank of the review petitions relates to the treatment of online games vis-à-vis their offline counterparts.

The companies have argued that the judgments incorrectly create a legal distinction between online and physical versions of games such as rummy and poker, even though earlier judicial precedents recognised that the predominance of skill determines the character of a game irrespective of the medium through which it is played.

The petitions contend that merely moving a game to a digital platform does not alter its intrinsic character or convert it into betting or gambling.

This issue formed the central basis of the constitutional challenge after the Supreme Court upheld the legislative competence of states such as Tamil Nadu and Karnataka to regulate online games played for stakes by holding that online gaming raises distinct concerns relating to public order and cyber regulation. 

Background

In May, the Supreme Court delivered two landmark judgments that fundamentally altered India's online gaming landscape.

In the constitutional challenge arising from the Junglee Games litigation, the Court upheld the powers of state governments to regulate and prohibit online games played for stakes, holding that legislatures were competent to enact such laws under Entries relating to betting, gambling and public order. The judgment overturned earlier High Court decisions that had struck down amendments enacted by Tamil Nadu and Karnataka. 

Subsequently, in the Gameskraft matter concerning GST, the apex court ruled that once money is staked on an uncertain outcome, the transaction attracts GST on the full face value of the stake, effectively affirming the government's position that online real-money gaming platforms are liable to pay 28% GST on player deposits rather than platform fees. 

The twin rulings have been viewed as watershed decisions for India's real-money gaming industry, carrying far-reaching implications for taxation, constitutional protections available to skill-based games, and the regulatory powers of state governments.

Industry mounts coordinated legal response

With Head Digital Works, Junglee Games, PokerStars India and Play Games24x7 now seeking review, a substantial section of India's organised online gaming industry has formally challenged the judgments before the Supreme Court.

Legal experts note that review petitions are entertained only on limited grounds, including errors apparent on the face of the record. However, the petitions also seek to persuade the Court that the constitutional and taxation issues raised have ramifications extending beyond the parties involved and merit reconsideration by a larger Bench.

The Supreme Court is yet to decide whether the review petitions warrant admission and further hearing.