AIGF, skill gaming startups take Tamil Nadu to court over online gambling law

Several online rummy and poker platforms including A23, Classic Rummy, RummyCircle, and PokerBaazi had prohibited users from playing paid contests in Tamil Nadu

Skill gaming industry body The All India Gaming Federation (AIGF) along with real-money gaming firms Gameskraft, Games24x7, and Head Digital Works have moved the Madras High Court, challenging the constitutionality of the Tamil Nadu government's online gambling law that came into effect on April 21, Moneycontrol has learnt.

In its writ petition, AIGF has sought interim relief by staying the operation of the impugned Act known as Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022.

The industry body has also sought the court to declare the law as unconstitutional since it is lacking legislative competence and is in violation of the constitution. The high court has agreed to hear the cases on April 27.

The Tamil Nadu government had banned online rummy and poker in the southern state earlier this month, 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.

As reported by Moneycontrol on April 24, several online rummy and poker platforms, including A23, Classic Rummy, RummyCircle, and PokerBaazi, barred users from playing paid contests in Tamil Nadu.

Southern India is an important market for skill-based games such as rummy, which has a significant penetration in these states, industry executives have told Moneycontrol.

AIGF CEO Roland Landers told Moneycontrol that they have challenged the constitutionality of the law since it "disregards over six decades of established legal jurisprudence and seems to be based on a completely wrong understating of technology"

"We have full faith that our judicial system will uphold the fundamental rights of the gaming platforms and their users, as it has been doing for over 60 years" he said. AIGF counts Mobile Premier League (MPL), Gameskraft, and Head Digital Works among its members.

The legislation will also likely set the stage for a dispute with the Centre over regulating the burgeoning skill-based gaming industry in the country.

On April 6, the union ministry of electronics and information technology (MeitY) notified new gaming-related amendments to the IT Act 2021. It will allow multiple self-regulatory organisations to determine whether a real-money game, where the transfer of money is involved, is permitted in India or not.

On April 14, minister of state for electronics and information technology Rajeev Chandrasekhar said the internet cannot be regulated by states, hence it is "meaningless" for a state government to try and legislate sectors such as online gaming.

Apart from Tamil Nadu, several state governments including Andhra Pradesh, Telangana, Kerala, and Karnataka, have banned or tried to ban these skill-based games or real money games, bringing them under the purview of online gambling as gambling is a state subject.

Many of these bans were later challenged in state high courts by skill gaming startups and industry associations, and the suspensions were overturned, with the state courts declaring it unconstitutional.

The Tamil Nadu government had moved the Supreme Court in December 2021 challenging a Madras High Court decision that overturned the previous AIADMK-led government's November 2020 ban on online games involving the transfer of money. The case is still pending a hearing with the apex court.

Revenue in India's gaming sector increased from $2 billion in FY21 to $2.6 billion in FY22 and is expected to expand at a compound annual growth rate of 27 percent to $8.6 billion in FY27, according to a report by gaming and interactive media venture fund Lumikai.

Of the $2.6 billion revenue, about $1.5 billion came from the real-money gaming segment, accounting for nearly 58 percent of the industry's revenues.