Supreme Court Upholds Tamil Nadu, Karnataka Online Betting Laws; Skill Game Betting Not Protected
The Supreme Court on Wednesday upheld the constitutional validity of the Tamil Nadu and Karnataka laws regulating and prohibiting online betting and wagering, while setting aside the Madras High Court and Karnataka High Court judgments that had struck down portions of the legislation.
A bench of Justices J. B. Pardiwala and R. Mahadevan was hearing appeals arising from challenges to the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021 and the Karnataka Police (Amendment) Act, 2021.
The Supreme Court held that the Madras High Court and Karnataka High Court had erred in adopting a narrow interpretation of Entry 34 of List II of the Constitution relating to “betting and gambling."
“The High Court of Madras and the High Court of Karnataka respectively committed an error in giving a very narrow interpretation to Entry 34 of List II. Both the High Courts failed to take into account the power intended to be bestowed upon the State Legislature under the said entry by the framers of the Constitution.”
The bench clarified that even if a game predominantly involves skill, betting or wagering on such games can still be regulated or prohibited by the State.
“While it may be true that games of skill may not get covered by the expression gambling, it is not correct to say that even betting on games of skill would be out of the competence of the State Legislature to legislate upon.”
The Court further held that constitutional protection available to games of skill does not extend to betting activities connected with such games.
“The protection afforded to games of skill under Entry 34 cannot be construed as protection to betting on games of skill which essentially becomes a gambling enterprise. When the element of betting and gambling enters the picture, the nature of the game ceases to be of relevance.”
Distinguishing earlier decisions including State of Bombay v. R.M.D. Chamarbaugwala and K.R. Lakshmanan v. State of Tamil Nadu, the Court observed that those rulings did not examine the scope of “betting and gambling” under Entry 34 in the context of online money gaming.
The bench also took note of the serious social consequences associated with online money gaming, including addiction, depression, and suicides.
“The addiction and depression that stems from indulging in online money gaming, and the frequent suicides that are reported, would go on to indicate that this poses a widespread public health issue as well.”
Rejecting challenges based on proportionality and Article 19(1)(g), the Court held that betting and gambling activities are res extra commercium and therefore do not enjoy constitutional protection as trade or business activities.
“Games of skill would be protected by the constitutional guarantee laid down under Article 19, but betting or wagering on any game, be it a game of skill, would not be entitled to receive any such protection.”
Allowing the appeals filed by the States of Tamil Nadu and Karnataka, the Supreme Court set aside the High Court judgments and upheld the validity of the impugned provisions.
“In view of the aforesaid, the appeal preferred by the State of Tamil Nadu, and the appeal preferred by the State of Karnataka, stand allowed. The impugned judgments passed by the High Court of Madras and High Court of Karnataka respectively are set aside.”
The Court finally declared the challenged provisions of the Tamil Nadu and Karnataka legislations to be constitutionally valid.
“Part II of the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, Sections 2(i), 21(iv), and Schedule II of the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Gaming Act, 2022, and Sections 2, 3, 6, 8 and 9 of the Karnataka Police (Amendment) Act, 2021 respectively, are declared intra vires the Constitution.”
Background
The dispute arose from a challenge to the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, which prohibited wagering and betting in cyberspace, including online games such as rummy and poker played for stakes. Several online gaming companies, including Junglee Games India Private Limited, Play Games24x7, Gameskraft and the All-India Gaming Federation approached the Madras High Court contending that the amendment unlawfully criminalised games of skill played online for money.
The State defended the legislation by arguing that online gaming had become addictive, led to financial losses and suicides, and required strict regulation to protect the public. The amendment expanded the definition of “gaming”, introduced Section 3A prohibiting wagering or betting in cyberspace and amended Section 11 to bring even games of skill within the penal framework if played for stakes.
The petitioners argued that rummy and poker are games predominantly involving skill and therefore protected as legitimate business activities under Article 19(1)(g) of the Constitution.
The Madras High Court struck down the amendment holding that the State could regulate gambling and games of chance but could not impose a blanket ban on games of skill played online for stakes. The Court held that the amendment was excessive, disproportionate and violative of constitutional protections relating to trade and business.