New Delhi: Underlining concerns like risk of addiction and adverse impact on player’s mental health, the Madras High Court Tuesday upheld the ban imposed by the Tamil Nadu Online Gaming Authority (TNOGA) on real money gaming between midnight and 5 am.
The term “real money games” (RMG) refers to online games where users deposit money or its equivalent, with the expectation of winning actual money or other valuable prizes on that deposit.
The court emphasised that the Tamil Nadu government has the legislative competence to make laws that are meant to protect public health and regulate trade within the state, and rejected the petitioners’ arguments about encroaching on the central government’s domain.
The court was acting on a plea filed by a group of online gaming companies, player associations and individual players, who had challenged provisions of the Tamil Nadu Prohibition of Online Gaming and Regulation of Online Games Act, 2022, and Tamil Nadu Online Gaming Authority (Real Money Games) Regulations as “unconstitutional”.
By way of the ruling, the bench of Justices S.M. Subramaniam and K. Rajasekar rejected the challenge and affirmed the validity of the restrictions imposed by the state’s online gaming authority, which curtails the playing of real money games between 12 am and 5 am–a timeframe which has been described as “blank hours”.
Speaking to ThePrint, senior advocate Sajan Poovayya, who appeared for the petitioners, said: “We are disappointed with the judgment. While regulation is welcome, it can’t be overly-intrusive. Any regulatory framework must work within permissible constitutional limits. I believe the TNOGA regulations are over-intrusive both from player and platform perspectives.”
Asserting that the issue will ultimately have to be decided by the Supreme Court, Poovayya added: “In India, we are perfectly entitled to entertain ourselves by all methods that are permissible in law. I have no doubts that online gaming activities based on games of skill are absolutely legal.”
The court asserted that online games are subject to regulation when they affect the health of people. “This court is of the view that any online games or online entertainment is subject to regulation when it affects the health of people at large. The focal test is that the ill-effects of such online activity must be directly linked to public health and must result in serious social repercussions if left unregulated,” it said.
Any such online entertainment, game or trade then shall be subjected to regulation, the court said, adding that the state “cannot remain a mute spectator when the population at large is exposed to serious physical, mental and financial risks due to constant exposure” to a specific online game, entertainment or trade.
“In circumstances where a total prohibition is not possible, at least a minimum of regulation becomes a necessity,” the court ruled, while underlining widespread reports of the adverse impact of these games on people, including reports of suicide, higher stress levels and other mental health issues.
The court in its ruling also confirmed the need to adhere to the requirement of Know Your Customer (KYC) verification along with furnishing one’s Aadhaar details at the time of opening an account to play online games.
Also Read: Online gaming & gambling: Operating in regulatory vacuum, thriving in space between ‘skill & chance’
The challenge & court’s stand
In the present case, the online gaming companies, players and player associations challenged Section 5(2) of the 2022 Act, read with Section 14(1)(c). While the former allows the government to make regulations with respect to time-limits or hours between which these games can be played, age of players and monetary limits, the latter bars non-local gaming providers from offering services contrary to state regulations.
Apart from this, the petitioners in Play Games 24×7 Private Limited vs State of Tamil Nadu also challenged Regulations 4 (III) and (VIII) of the Tamil Nadu Online Gaming Authority (Real Money Games) Regulations, 2025, which were released this February. The former regulation mandates the KYC-registration of players, complete with Aadhaar numbers for opening gaming accounts, while the latter bans the playing of these games between the “blank hours”.
The petitioners argued that the 2025 regulations along with provisions of the 2022 Act, which was passed to regulate online gaming in Tamil Nadu, were not only “unconstitutional” but also lacked legislative competence since they encroached on fields covered by central legislations.
The gaming companies, in tandem with the players, also argued before the court that by imposing such regulations on online content, the state was exhibiting a “paternalistic attitude”. They pointed out that while there was restriction on playing these games during the “blank hours”, there was no such restriction on watching movies on Netflix and Prime Video.
Rejecting these arguments, the court said the contention that no blank hour restrictions were imposed by the state on movies on Netflix and Prime was “unsustainable as there are no stakes involved”. The court also rejected the argument that the state was being paternalistic, pointing to social repercussions.
“A state should work towards the welfare of the people and the comparison that only online RMGs are regulated, other online activities are not regulated is not justifiable. Every such activity which is inconsistent with the welfare of the people must stand regulated by the state. The decibel level of right to privacy or personal autonomy granted across different countries may fluctuate based on the social, economic and cultural backgrounds in each country,” the court said in its 57-page ruling.
Dismissing the petitioners’ plea, the court said the Tamil Nadu government was “fully within its competence” to enact laws relating to online RMGs. It also rejected the argument that since the Information Technology Rules, 2021, already prescribed a regulatory framework for intermediaries including online gaming platforms, the state cannot frame a subordinate legislation regarding online real money games due to the presence of the central legislation.
Underlining the risks inherent in such online money games, the court remarked that while physical games or sports entail a sense of discipline and a professional attitude within the players, online RMGs “do not seem to possess such level of discipline or professionalism” and are played more for the thrill of winning, and owing to a certain level of addiction that sets in after a point.
“This addiction begins to tamper with reasoning abilities, thereby deterring the player’s cognitive decision-making abilities,” the court said.
Confirming the requirement for KYC and Aadhaar verification, the court noted that often when games are played online, a player has no opportunity to read the opponent. “There is no chance to read the opponent and hence the player is in a slightly disadvantageous position. So, it is imperative that the government take adequate steps to streamline and regulate these unexplored waters to ensure fair play and secure the physical and financial safety of players indulging in these online RMGs,” it observed.
Earlier rulings
In September 2023, the Supreme Court had stayed the Karnataka High Court ruling in which the latter had held that online games like rummy would not be taxable as “betting” and “gambling” under the Central Goods and Services Tax Act, 2017.
The Karnataka HC ruling had differentiated between games of skill and games of chance. In that case, Gameskraft, an online intermediary company, had contended that the majority of rummy games were “games of skill” that are taxable at only 19 percent, while the GST department argued that these rummy games were “games of chance” and should be taxed at 28 percent.
Although the HC had said the GST’s department’s notice to the gaming company for dues worth Rs 21,000 crore was “arbitrary” and set it aside, the Supreme Court nullified this order, and effectively confirmed the position that such games were taxable at 28 percent.
The top court had in a 2020 ruling in Skill Lotto Solutions vs Union of India upheld the levy of GST on gambling, betting and lottery.
(Edited by Nida Fatima Siddiqui)