India's real-money gaming industry associations have welcomed Madras High Court's verdict that restricts Tamil Nadu's recent online gambling law to only "games of chance".
On November 9, the Madras High Court refused to entirely strike down the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022. However it did rule that the law will not apply to skill-based games such as online rummy and poker, providing a relief to online money gaming operators.
The state government, however, is free to formulate rules to regulate the time spent or age limits for these online money games, the division bench of Chief Justice Sanjay Gangapurwala and Justice Audikesavulu said.
"By reiterating that online rummy and online poker are games of skill, this decision by the Madras High Court is yet another validation of what the online skill gaming industry has always maintained in relation to online skill games being a legitimate business activity protected under the Constitution of India," said Roland Landers, CEO of All India Gaming Federation (AIGF).
"This also adds to a long line of judgments from the Supreme Court, Karnataka, Kerala and Madras High Courts upholding the legitimacy of such games," he said.
AIGF claims to have over 100 members including skill-gaming companies and game developers across all formats and genres. Among its prominent members include Nazara Technologies, Gameskraft, Mobile Premier League (MPL), Deltatech Gaming, Head Digital Works (A23) and WinZO.
Landers said this decision is a step in the right direction and will generate more certainty among investors and the gaming community at large, thereby providing a "great boost for this sunrise sector".
This judgment however comes amid a turbulent time for the country's real-money gaming industry that is navigating through a turbulent period posed by the government's new 28 percent goods and services tax (GST) regime which became effective from October 1 and a slew of retrospective tax notices that have hit several skill-based gaming firms.
Tamil Nadu's online gambling law saga
Moneycontrol had reported in April 2023 that AIGF along with real-money gaming firms Gameskraft, Games24x7, and Head Digital Works had moved the Madras High Court, challenging the constitutionality of the Tamil Nadu government's online gambling law that came into effect on April 21, 2023.
This was after the government had banned online rummy and poker in the southern state earlier in April, terming them as online games of chance in the legislation, thereby bringing them under the purview of online gambling. Gambling is a state subject in India.
The legislation had led to several online rummy and poker platforms barring users from playing paid contests in the state, Moneycontrol reported on April 24. The Madras High Court had initially refused to grant an interim stay on the operation of the law in April 2023.
"The verdict today by the Madras High Court holding online rummy and poker as games of skill is yet another validation for the legitimate online skill gaming industry. Time and again, the Indian judiciary has struck down provisions seeking blanket prohibitions on skill gaming as Ultra Vires in the constitution" said Anuraag Saxena, CEO of E-Gaming Federation in a statement.
E-Gaming Federation represents prominent online rummy and poker operators such as Games24x7, Head Digital Works and Junglee Games.
Saxena said that they are optimistic that these judgments will urge state governments to explore "more progressive" policy frameworks and regulatory structures for the sector.
"A forward-looking policy has the potential to significantly drive and support the growth of this emerging sector. Central as well as state governments have realized the sector's potential as an employment and revenue generator and this decision will further investor confidence, encourage and foster innovation" he said.
State vs Centre
This online gambling law came into being after Tamil Nadu chief minister MK Stalin set up a five-member committee led by retired Justice K Chandru to analyse the negative effects of these games and make recommendations for a new law prohibiting "online gambling games" on June 10, 2022.
The Madras High Court had earlier overturned the previous AIADMK-led government's November 2020 ban on online money games, stating that such a ban was unconstitutional. The state government had challenged this judgment in the Supreme Court where it is currently pending hearing.
The Tamil Nadu cabinet, led by Chief Minister MK Stalin, had passed a bill to prohibit these games in the state on March 23 and the state governor RN Ravi approved the bill on April 10.
That said, the law sets the stage for a dispute with the Centre over regulating the burgeoning skill-based gaming industry in the country.
On April 14, Union Minister of State for Electronics and Information Technology Rajeev Chandrasekhar had said that the internet cannot be regulated by states, hence it is "meaningless" for a state government to try and legislate sectors such as online gaming.
This was on the heels of MeitY notifying gaming-related amendments to the IT Act 2021 on April 6, that will allow multiple self-regulatory organisations (SROs) to determine whether a real-money game is permitted to operate in India or not. The ministry is yet to notify SROs for the sector.
Jay Sayta, a technology and gaming lawyer, said that the Tamil Nadu government may file an appeal in the Supreme Court against this judgment and it is expected that all appeals on the question of whether online games played for stakes can be banned will be heard together by the Supreme Court.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
