Supreme Court Upholds State Laws Banning Online Betting on Games of Skill

Cause Title: State of Tamil Nadu and Karnataka vs. Online Gaming Operators

Background

The Supreme Court has recently upheld the constitutional validity of laws enacted by the States of Tamil Nadu and Karnataka, which prohibit online betting and wagering on games played with stakes. The Court observed that betting on games of skill does not enjoy constitutional protection merely because the underlying activity involves skill.

Court's Observation

The Bench of Justice JB Pardiwala and Justice R Mahadevan held that State legislatures are fully competent to regulate and prohibit betting and gambling activities under Entry 34 of List II of the Seventh Schedule to the Constitution, which deals with “betting and gambling”. The Court clarified that while games predominantly involving skill may receive constitutional protection, wagering or betting conducted on such games stands on a different footing and falls within the regulatory domain of the States.

Decision

Allowing appeals filed by the States of Tamil Nadu and Karnataka, the Court set aside judgments of the Madras High Court and the Karnataka High Court, which had earlier struck down provisions aimed at regulating online gaming platforms offering games such as rummy and poker for stakes. The litigation arose from challenges to the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Gaming Act, 2022/2023, and the Karnataka Police (Amendment) Act, 2021.

Key Points

• The Court rejected the reasoning that the constitutional expression “betting and gambling” should be interpreted narrowly as “betting on gambling”.
• The distinction between a game of skill and a game of chance becomes irrelevant once wagering enters the equation.
• Online gaming companies cannot claim protection under Article 19(1)(g) of the Constitution, which guarantees the freedom to practise any profession or carry on any trade or business.

Significance

The Court’s decision has significant implications for the online gaming industry, as it upholds the validity of State laws that prohibit online betting and wagering on games of skill. The judgment also highlights the importance of regulating online gaming activities to prevent social and economic harms associated with betting and gambling.