There is no fundamental right to engage in betting and gambling, the Supreme Court said on Wednesday while upholding the laws enacted by Tamil Nadu and Karnataka criminalising online games played for money or stakes, including games such as rummy, poker and fantasy sports (State of Tamil Nadu Vs Junglee).
In another case, the SC upheld retrospective Goods and Services Tax (GST) demands against online gaming companies in a dispute over whether 28% GST could be levied on the full face value of bets placed through their platforms (Directorate of Revenue Intelligence v. Gameskraft).
A Bench of Justices JB Pardiwala and R Mahadevan set aside the rulings of Madras and Karnataka High Courts which had struck down the laws.
"Since betting and gambling are treated as res extra commercium (things outside commerce), no fundamental right can be claimed to carry on such activities," the Court said.
Pertinently, the Court said that even if such online games involve skill or chance, States can ban the same if money element enters the picture.
“When the element of betting and gambling enters the picture, the nature of the game ceases to be of relevance,” the Supreme Court held.
The Court said staking money on an uncertain event brings in concerns of addiction and the desire to gain more.
The Court rejected the argument that betting on games of skill falls outside State legislative power. It said games of skill may not amount to gambling by themselves but betting on games of skill can still be regulated or prohibited by States.
The Supreme Court also accepted the public health and public order concerns raised by the States. It noted concerns over addiction, monetary losses and suicides linked to online money gaming and hence, proceeded to uphold the laws.
The legal battle over ban on online gaming has its roots in a series of amendments passed by Tamil Nadu and Karnataka to criminalise online games played for money or stakes, including games such as rummy, poker and fantasy sports.
Tamil Nadu first brought in an ordinance in November 2020, later replaced by the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021.
The law amended the Tamil Nadu Gaming Act, 1930 by expanding the meaning of “gaming”, introducing Section 3-A to prohibit wagering or betting in cyberspace, and changing the earlier protection for “games of mere skill”.
The effect was that even skill-based games such as rummy and poker could be treated as offences if played online for money, wager, bet or other stakes. The State justified the law on the ground that online gaming was addictive, that people were being cheated and that suicides had been reported.
Online gaming companies challenged the law before the Madras High Court. They argued that rummy and similar games had already been recognised by courts as games of skill, and that the State could regulate or prohibit gambling only when the activity was predominantly based on chance.
]They relied on Supreme Court rulings including Chamarbaugwala, K Satyanarayana and KR Lakshmanan cases to argue that games involving substantial skill are business activities protected under Article 19(1)(g) of the Constitution.
In a verdict delivered in August 2021, the
Madras High Court accepted the challenge and struck down Part II of the 2021 amendment in its entirety, holding that the expanded concept of gaming ran through the law and that no meaningful part could be saved. It, however, clarified that the State could bring in a fresh constitutionally valid law on betting and gambling.
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