Games24x7, A23, Junglee Games take Tamil Nadu to court over new real-money gaming rules

The current round of petitions from skill-gaming companies will mark the fourth round of litigation between them and the Tamil Nadu government

Skill gaming companies Games24x7, Junglee Games, and Head Digital Works (A23), have moved the Madras High Court, challenging the constitutionality of the Tamil Nadu state's recent rules for the real-money gaming (RMG) industry that came into effect on February 15.

These companies have filed writ petitions seeking to stay the implementation of these regulations and obtain an interim injunction preventing state authorities from initiating any coercive action against them.

The firms have also requested the court to declare the legislation 'arbitrary, void, illegal, and unconstitutional' in its application to online games of skill played for money or other stakes. Moneycontrol has reached out to these companies for a comment and we will update once they respond.

Earlier this month, Tamil Nadu notified a set of state-specific regulations that introduced time and usage curbs on RMG platforms, marking the latest setback for an industry already grappling with higher goods and services tax (GST) rates.

The regulations, issued by the Tamil Nadu Online Gaming Authority (TNOGA), is part of the state's broader efforts to regulate the burgeoning sector. Moneycontrol had earlier reported that the authority's move was likely lead to another legal battle between the state and RMG platforms.

Under these rules, RMG platforms have to impose 'blank hours' between midnight and 5 am, disabling login during these restricted five hours.

The guidelines also prohibit minors from playing real-money games and mandate companies to offer players the ability to set daily, weekly and monthly monetary limits.

Additionally, platforms should display pop-up caution messages when a player has been playing for more than one hour, and continue to display them every 30 minutes to remind them of their playtime. RMG apps should also continuously display caution messages about the addictive nature of these games, with the wordings "ONLINE GAMING IS ADDICTIVE IN NATURE" on their respective login pages.

Whenever players deposit the money, RMG apps should also display the fixed monetary limit and the amount spent so far, in "reasonably bold letters", the guidelines stated.

Other measures include mandatory Know Your Customer (KYC) verification at the time of account creation. The initial login authentication will require KYC verification through Aadhaar, authenticated by a second-layer verification through One Time Password (OTP) sent to the phone number linked to the Aadhaar number.

Roland Landers, CEO of skill gaming industry body All India Gaming Federation (AIGF) said that TNOGA has taken a "consultative and inclusive approach" in drafting regulations aimed at ensuring user protection.

However, some aspects, such as the blackout period, may have "unintended consequences and could push users towards offshore gambling platforms, which pose significant risks to consumer safety and also impact national and economic security", he said.

"Currently, we are focused on addressing the implementation challenges to ensure that the regulations meet their intended objectives without adversely affecting users or the industry. At this juncture, AIGF is not considering any legal challenge against these rules. Instead, we are actively working with the authority and our members to facilitate effective enforcement and constructive engagement" Landers said.

These rules come after the Madras High Court set aside the state ban on online rummy and poker in November 2023. At the time, the court had mentioned that the state government is free to formulate rules to regulate the time spent or impose age limits for these real-money games.

The current round of petitions from skill-gaming companies will mark the fourth round of litigation between them and the Tamil Nadu government. In the past three instances, the Madras High Court has ruled in the favor of the skill gaming companies.

These developments also come at a time when India is yet to implement a central regulatory framework for the sector.

In April 2023, the Ministry of Electronics and Information Technology (MeitY) notified gaming-related amendments to the IT Act, 2021, which allowed multiple self-regulatory organisations (SROs) to determine whether a real-money game could be permitted in India or not. However, the ministry is said to have later dropped the SRO plan.

Over the years, several RMG companies have pushed for a uniform central regulation to eliminate the uncertainty of navigating through various state-specific regulations that frequently disrupts their business operations.

"Since the Central Government has the jurisdiction to regulate the digital space and pay-to-play skill games, a national framework remains the most effective way to curb illegal offshore gambling while ensuring a safe and transparent environment for users" Landers said.

The Indian gaming industry reported revenues of $3.8 billion for the financial year 2024, a 22.6 percent growth from $3.1 billion in FY23, according to a report by the gaming and interactive media venture fund Lumikai. Of the $3.8 billion in revenue, about $2.4 billion came from the real-money gaming segment.

The report also said the sector is estimated to cross $9.2 billion in revenue by FY29 at a 20 percent CAGR over the next five years.