Gaming firms tell India SC, ‘state laws are unconstitutional’
The Supreme Court is currently hearing a significant batch of appeals challenging state laws that ban online gaming platforms offering games like rummy, poker, and fantasy sports. These cases carry major implications for the rapidly growing online gaming industry and the balance of legislative power between the Centre and individual states.
At the centre of the dispute are three state laws: the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021; the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022; and the Karnataka Police (Amendment) Act, 2021. These laws have been challenged for criminalising online games historically classified as games of skill by Indian courts.
Arguments against the state laws
Senior advocates C.A. Sundaram, Arvind Datar, and Mukul Rohatgi are representing online gaming companies and industry bodies. They argue that these state laws are unconstitutional and conflict with established legal precedents.
C.A. Sundaram submitted that games of skill are not harmful or outside the scope of lawful trade. Therefore, they are protected under Article 19(1)(g) of the Constitution, which guarantees the right to practise any profession or carry on any trade or business.
He said that the states lack legislative competence to ban online games of skill. While Entry 34 of List II gives states power to regulate betting and gambling, he argued this does not apply to skill-based online games. Sundaram further stated that online gaming platforms fall under Entry 31 of List I, which is under the jurisdiction of the Centre, as it relates to telecommunications and internet services.
He also raised concerns under Article 14, stating that banning online skill games while allowing their offline versions creates arbitrary and unequal treatment without valid reason.
Legal precedent and arbitrary classification
Appearing for Head Digital Works Pvt Ltd, Arvind Datar supported earlier judgments by the Madras and Karnataka High Courts which struck down the state laws. He referred to Supreme Court rulings such as R.M.D. Chamarbaugwala and K.R. Lakshmanan v. State of Tamil Nadu that clearly distinguished games of skill from gambling.
Datar argued that the mere presence of entry fees or cash prizes does not turn a skill-based game into gambling. He pointed out that the 2023 Tamil Nadu law declared rummy and poker as games of chance without any supporting evidence, contradicting earlier court findings.
He also highlighted that while offline versions of the same games are legal, only the online versions are criminalised, which he said fails the constitutional test of proportionality.
Fantasy sports as a separate category
Senior Advocate Mukul Rohatgi, representing the Federation of Indian Fantasy Sports (FIFS), focused on distinguishing fantasy sports from gambling. He explained that fantasy sports rely on statistical knowledge and strategic decision-making, not chance or outcomes of real-world matches.
Rohatgi stated that fantasy sports platforms charge a fixed entry fee and do not profit based on match results. He cited international rulings such as Humphrey v. Viacom and referred to the US Unlawful Internet Gambling Enforcement Act, 2006 to show that fantasy sports are treated separately from gambling in other jurisdictions.
He also emphasised that fantasy sports platforms operate entirely online and nationwide. Therefore, they fall under the Union List and are beyond the legislative power of individual states. Entry 33 of List II, which deals with sports and entertainment, applies only to physical events and not digital services, he argued.
Key constitutional questions
The Supreme Court is examining whether states have the authority to regulate online gaming services that operate through the internet, especially when central laws like the IT Act, 2000 and Intermediary Rules, 2021 already govern the sector.
The petitioners argue that these state laws amount to legislative overreach and could set a dangerous precedent. If individual states begin banning or regulating internet services independently, it may lead to legal confusion and threaten the stability of the digital economy.
The verdict, expected in the coming months, will not only decide the validity of the challenged laws but also influence the future of digital business regulation, federal power-sharing, and the legal classification of online games of skill in India.
