SC verdict tomorrow on states’ power to ban online games played for stakes

The Supreme Court will on Wednesday pronounce its much-awaited judgment on the constitutional validity of legislations enacted by the Tamil Nadu and Karnataka governments banning online games played for stakes, including games of skill such as rummy and poker.

A bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan has listed the matter for judgment in Court May 27. 

The case, titled State of Tamil Nadu and Others vs Junglee Games India Private Limited and Another, pertains to challenges mounted by online gaming companies and industry bodies against state laws that prohibit wagering and gaming for stakes, including in games where skill is argued to predominate over chance.

The matter has emerged as one of the most significant legal battles for India’s real-money gaming industry, which has been locked in disputes with multiple state governments over the extent of regulatory powers, consumer protection concerns, and the distinction between games of skill and gambling.

The case filed by State of Tamil Nadu involving the All India Gaming Federation and other stakeholders from the online gaming ecosystem.

Key constitutional questions

The dispute is whether states can impose blanket prohibitions on online games played for stakes, even when such games are judicially recognised as games of skill.

The Tamil Nadu and Karnataka legislations sought to curb online wagering amid rising concerns around addiction, financial distress and alleged suicides linked to online gaming. The laws were challenged by gaming companies on grounds including violation of the fundamental right to trade and business under Article 19(1)(g) of the Constitution, as well as arbitrariness and disproportionate restrictions.

The industry has consistently argued that games such as rummy, fantasy sports and poker involve substantial skill and have repeatedly been recognised by courts as distinct from gambling activities based purely on chance.

The outcome of the ruling is expected to have implications far beyond the two states, potentially shaping the future regulatory framework for the online real-money gaming sector across India. Several other states have either explored or implemented restrictions on online gaming and betting activities in recent years.

It should be noted that the Centre has notified the Promotion and Regulation of Online Gaming Act which effectively bans online money gaming be it a game of skill or chance. 

GST issue not part of tomorrow’s ruling

The Supreme Court had initially heard these matters alongside a separate but closely watched batch of cases involving retrospective GST show-cause notices issued to online gaming and casino companies.

Those tax disputes involve the government’s demand for 28% GST on the full face value of bets placed on gaming platforms, triggering tax claims running into thousands of crores against several operators.

The judgment scheduled for delivery tomorrow is limited to the constitutional validity of the Tamil Nadu and Karnataka legislations.

There is currently no announcement from the Supreme Court regarding the judgment in the GST-related matters concerning retrospective tax demands and show-cause notices issued to online gaming and casino companies.

The gaming industry, investors and state governments are expected to closely track Wednesday's verdict, given its potential impact on India’s rapidly growing online gaming market and the evolving debate around regulation versus prohibition of skill-based gaming platforms.