I. Introduction
On 27 May 2026, a Division Bench of the Supreme Court – comprising of Justice P.B. Pardiwala and Justice R. Mahadevan – pronounced two inter-related judgments: The State of Tamil Nadu v Junglee Games India Private Limited (‘Junglee Games case’) and Directorate General of Goods and Services Tax Intelligence (HQS) & Ors v Gameskraft Technologies Private Limited & Ors (‘Gameskraft case’). The former upheld prohibition of online money gaming by the States of Tamil Nadu and Karnataka. While the latter upheld constitutional validity of amendments to Central Goods and Services Tax Act, 2017 – introduced in 2023 – which significantly increased the Goods and Services Tax (‘GST’) burden of online gaming companies.
The issues involved are multi-fold and layered, traverse regulation and taxation of online gaming; but once we peel the onionesque layer the dispute narrows down to legal meaning of gambling and scope of State’s regulatory and taxation powers in relation to it. The Supreme Court, in both decisions, was deferential to the State and approved all the statutory and related amendments. Thus, concretizing a bleak future for online money gaming in India. Though most online gaming companies have already shifted base outside India, downsized or shut shop even before the decisions were pronounced. Writing on the wall is, sometimes, not difficult to read.
In this two-part article, I will comment on the Junglee Games case. Part I contextualizes and summarizes the dispute and Part II comments on the Supreme Court’s response to the dispute. I will comment on the Gameskraft case separately with a sole focus on GST related issues.
II. Brief Overview of the Indian Gambling Law Landscape: 1957-2021
For more than seven decades, Indian gambling law landscape has been defined by Supreme Court’s ratio in State of Bombay v R.M.D. Chamarbaugwala (‘RMDC-I case’) with R.M.D. Chamarbaugwala v Union of India (‘RMDC—II case’). I will spare you the details and skip to the relevant part. In RMDC-I case, the Supreme Court endorsed the ‘pre-dominant element’ test to distinguish a game of skill from a game of chance/gambling. The pre-dominant element test means that to determine if a game is a game of skill or a game of chance, it is important to identify which of the two elements is pre-dominant in a game. If skill dominates chance, the game is a game of skill while if it is vice-versa it is a game of chance/gambling. A secondary observation of the Supreme Court in RMDC-I case was that in determining the nature of a game, the perspective of an ordinary common person is relevant and not an expert. If a game involves guessing a correct solution, its difficulty level, for a common person must not amount to taking ‘a shot at a hidden target’. If it is so, it is a game of chance/gambling. A game of skill must require application of skill by a common person, and such skill should pre-dominate the chance element.
The pre-dominant element test stood was central to gambling law jurisprudence for more than seven decades. And it is worth mentioning two relevant judgments of the Supreme Court which endorsed the test. In State of Andhra Pradesh v K Satyanarayana & Ors (‘Satyanarayana case’), the Supreme Court held that rummy is a game of skill since it requires memorizing cards. Thus, rummy was ‘mainly and preponderantly’ a game of skill. However, an important caveat in the Satyanarayana case was that ‘if there is evidence of gambling in some other way’ or ‘the owner of the house or the club is making a profit or gain from the game of Rummy’ then it will constitute an offence. The above caveat was interpreted to mean that ‘side-betting’ is not permitted. If players staked money in a game of rummy to win prize money it was permissible since rummy was a game of skill. Presumably also because players were pre-dominantly using their skill to earn the money. But if the house/club or a third-party placed money on the outcome of such a game of rummy, it was not permitted since it was assumed to be mere speculation. A third party placing monetary stakes on a game of skill was referred to as ‘side-betting’ or betting simpliciter. Though there was no unanimous or specific definition of either term.
Similarly, in Dr. K.R. Lakshmanan v State of Tamil Nadu (‘Lakshmanan case’), the Supreme Court held that horse racing was a game of skill. The Supreme Court also extended the protection of game of skill to wagering or betting on horse racing. The dictum of Lakshmanan case meant that any a third person/onlooker wagering on outcome of a horse race was also indulging in a game of skill and such wagering cannot be classified as a game of chance. While the Lakshmanan case’s observation, prime facie, diverged from the Satyanarayana case; the betting permitted in the former was only in the context of horse racing. But betting on horse racing only took place in specific horse racing clubs, at a specified time and as per the rules of the horse racing club. So, while the Lakshmanan case expanded the scope of game of skill, it was a limited and contextual expansion and did not permit third party betting on all games of skill. Though the Lakshmanan case was also liberally interpreted to mean that betting or placing monetary stakes on games of skill is also a game of skill.
The above position of law was unchallenged until some States took a step to prohibit online money gaming, i.e., online gaming involving monetary stakes and/or a monetary prize. Let me mention two such prohibitions which were subject of the Junglee Games case.
III. 2021 Onwards: The Prohibition of Online Money Gaming
In 2021, Tamil Nadu amended the Tamil Nadu Gaming Act, 1930 while Karnataka amended the Karnataka Police Act, 1963. As per the amendments online gaming intermediaries could constitute ‘common gaming houses’. Relatedly, facilitating betting and wagering through collection or solicitation of bets for distribution of prizes through electronic funds was also made a punishable offence under the respective statutes. Another crucial amendment was that betting and wagering on online games was made a punishable offence. And the offence of betting or wagering was defined to include betting on uncertain events including online games of skill. Prohibiting betting on online games on skill was unprecedented as previously all games of skill – including betting on game of skill – were permissible activities and considered outside the purview of gambling laws.
Prior to 2021, Tamil Nadu Gaming Act, 1930 and Karnataka Police Act, 1963 recognized two kinds of games: games of chance/gambling and games of skill. The former were punishable while the latter were permissible. The amendments of 2021 created a new category – online money games. Any online game which involved monetary stakes was defined as online money game. And all online money games were prohibited irrespective of whether they were a game of skill or a game of chance. Only online games of skill that did not involve monetary stakes remained outside the scope of gambling laws.
To exemplify. In Satyanarayana case – physical rummy was held to be a game of skill. Thus, until 2021, both online and physical rummy if played for money or otherwise was not a punishable offence under the Tamil Nadu Gaming Act, 1930 and Karnataka Police Act, 1963. The amendments in 2021 stated that wagering or betting on online rummy was a punishable offence. Playing online rummy for money was equated to gambling and made punishable. Whether the monetary stakes were those of players or a third party was irrelevant. Equally, gaming intermediaries that facilitated the playing for monetary stakes could be labelled as common gaming houses and be made liable for penalties.
In short: in 2021, States used money to distinguish between online games of chance and online games of skill. Any online game involving money was termed as gambling. But the High Courts held use of money as a distinguishing element was at odds with the pre-dominant element test laid down in RMDC-I case.
IV. High Courts Question a Blanket Prohibition on Online Money Games
The amendments to both the legislations were struck down in Junglee Games India Pvt Ltd v The State of Tamil Nadu and All India Gaming Federation v State of Karnataka by the Madras High Court and the Karnataka High Court respectively. While both the High Courts cited various reasons for not upholding the constitutional validity of both amendments, two reasons are worth mentioning. To begin with, the High Courts reasoned that a blanket prohibition on all forms of online money games including games of skill was disproportionate. A narrowly tailored prohibition was recommended. The legislatures of both States introduced amendments on the assumption that all online games involving monetary stakes amounted to gambling. While a more considered approach would have involved determining which physical games, when played online, partake the character of gambling. If physical poker played for money was a game of skill, then the same game played online for money does not amount to a game of chance/gambling. The High Courts suggested that an inquiry into the surrounding circumstances, identifying the terms and conditions of online games that transformed them into gambling was necessary. And the legislature must accordingly determine which online money games amounted to gambling instead of imposing a blanket prohibition on all online money games.
The High Courts also questioned competence of the States to legislate on games of skill. Entry 34, List II, Seventh Schedule is ‘Betting and gambling’. The High Courts interpreted the two words conjunctively and held that States do not have legislative competence to enact laws on betting alone as betting is not a standalone category. Under Entry 34, List II, States can enact laws only on betting related to gambling. Thus, any laws that prohibited betting on games of skill were outside the purview of State’s legislative competence under Entry 34, List II.
One implication of the above is that, if online games of skill or betting on games of skill are not included within the scope of Entry 34, List II then they cannot be termed as ‘res extra commercium’. In RMDC-I case, the Supreme Court had termed gambling as res extra commercium and undeserving of protection under Part III of the Constitution. But games of skill remained eligible for protection under Part III of the Constitution. Most notably Article 14 and Article 19(1)(g) read with Article 19(6). Thus, any restrictions on games of skill cannot be arbitrary, need to be reasonable and must satisfy the proportionality test. And the High Courts in their respective judgments – concluded that the blanket prohibitions on online money games were disproportionate and struck them down.
States introduced money as the criteria to distinguish online games of chance from online games of skill, but the High Courts cited the pre-dominant element test and held that latter cannot be clubbed with the former only because they involve monetary stakes. The skill-chance parameter remains relevant for online games as well.
Both the States resisted the High Court’s views and in Junglee Games case, filed an appeal and the Supreme Court decided the petitions together since they raised analogous issues.
V. Appeal before the Supreme Court
(a) Justification by States
States justification for prohibiting wagering or betting on online games was multi-pronged. The State of Tamil Nadu relied on financial distress, predatory practices of online gaming companies, suicides, addiction among other similar reasons. And argued that even if States were found to not possess legislative competence under Entry 34, List II it was competent to prohibit the wagering or betting under other legislative entries. For example, public order (Entry 1, List II), public health (Entry 6, List II), or sports, entertainments and amusements (Entry 33, List II).
Further, State’s argument – which proved crucial to fate of the case – was that the phrase ‘betting and gambling’ in Entry 34, List II should not be construed conjunctively. And both terms can be interpreted independently. Entry 34, List II should not be restricted to mean ‘betting on gambling’ denying States authority to regulate betting on games of skill. States argued that a third-person betting on a game of skill is merely guessing the outcome of game and not applying their skill in the game. States are competent to prohibit such betting even if the underlying game is a game of skill.
States also resisted terming the prohibition on betting and wagering as a blanket ban by suggesting that some online games of skill are still permitted. For example, online games of skill which do not involve monetary stakes. Alternatively, a prohibition was justified on the ground that online gaming is a complex area and designing a regulatory landscape was a significant financial burden on States. Thus, States are entitled to impose a ban on betting and wagering on online games and cannot be questioned on the ground for not choosing the ‘least intrusive option’ and violating the doctrine of proportionality.
(b) Online Gaming Companies Resist the Prohibition
Online gaming companies tried to resist the prohibition on wagering and betting by pointing to its wide scope, lack of States legislative competence under Entry 34, List II, and a misapplication of the well-founded distinction between games of chance/gambling and games of skill recognized by the Supreme Court in RMDC-I case.
Online gaming companies’ argument was that betting and gambling (Entry 34, List II) only provides States legislative competence for betting on gambling. And State cannot treat betting as an independent category and legislate for betting on games of skill. The phrase ‘betting and gambling’ must be interpreted conjunctively. The implication, as suggested, above, was that betting on games of skill would not be ‘res extra commercium’ and any restrictions on it would be examined on the touchstone of reasonableness under Article 19(6) and whether they adhere to the doctrine of proportionality.
To support their argument, online gaming companies relied on relevant judicial precedents, especially the Lakshmanan case. Online gaming companies relied on the Lakshmanan case to reinforce the argument that wagering or betting on game of skill is also a game of skill and cannot be included within Entry 34, List II.
Further, online gaming companies argued that it was the Parliament which had competence to regulate online games and fantasy sports. Entry 31, List I: ‘Posts and telegraphs; telephones, wireless, broadcasting and other like forms of communication’ covered online games that were solely dependent on the internet. Permitting States to regulate online games would lead to ‘regulatory chaos’ and regulation of online games also involved an inter-State trade element which should be exclusive preserve of the Parliament. Online gaming companies also underlined that they were online gaming intermediaries under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 and under regulatory purview of Ministry of Electronics and Information Technology of India.
Additionally, online gaming companies argued that the amendments disregarded well-established distinction between games of skill and games of chance as per the pre-dominant element test laid down in RMDC- I case. Merely because monetary stakes were involved in an online game of skill does not convert it into a game of chance. The pre-dominant element test needs to be applied to online games as well to distinguish an online game of chance from an online game of skill. To apply the pre-dominant element test, each game will have to be scrutinized on the skill-chance parameter. Instead, States had chosen to prohibit all online money games, i.e., all online games involving monetary stakes.
VI. ‘Stakes’ Before the Supreme Court
A perusal of the lengthy arguments – which also involved challenge by online gaming companies on grounds of Article 14 – reveals that the entire online gaming sector faced an existential threat. If all online money games were prohibited, the entire revenue model of online gaming companies would come to a halt. And that seemed to be intention of the States. Why?
States of Tamil Nadu and Karanataka put forth allegations of predatory practices by online companies, fears of addiction among general population, mounting debts, and adverse impact on mental and emotional well-being of people. And while States’ concerns should have invited a nuanced regulatory response, a blanket prohibition was an easy and quick solution for States.
Nonetheless, a distillation of arguments of both sides suggests that stakes before the Supreme Court were as follows:
Firstly, relevance of the pre-dominant element test for online gaming. In RMDC-I case, the Supreme Court had laid down the test for a prize competition that invited entries from participants. Whether the test could be seamlessly applied to online gaming or do the latter constitute a separate category of games altogether? The High Courts did not permit ‘medium-based regulation’ and dismissed the States’ argument that online games were a distinct category that can be regulated differently as compared to physical games. However, States insisted that the nature of online games – their pervasiveness, propensity for addictive behavior, constant availability – demanded a separate and customized regulation.
Secondly, understanding and applying dictum of the Lakshmanan case. Players staking money in a game of skill is different from a third-party staking money on the outcome of a game of skill. Former is permissible, but in the Lakshmanan case even the latter was interpreted to be within scope of game of skill in the context of horse racing. Though in the Satyanarayana case side betting or the club earning more money than its expenses was prohibited. These positions needed reconciliation in view of online games especially fantasy gaming.
Thirdly, meaning of betting and whether betting constituted an independent category. Monetary stakes are an essential element of games of chance/gambling but optional in games of skill. Thus, meaning of betting assumes a more crucial role for games of skill. Playing poker without monetary stakes does not involve ‘betting’ by players, but third parties can still ‘bet’ by staking money on the outcome. If players themselves stake money does that count as betting, or does it remain protected under the umbrella of game of skill?
The Supreme Court had a few things to say on all the above though it did not provide adequate or all the answers. Supreme Court’s response is elaborated here.
