A bench led by Justice J B Pardiwala said the two high courts had committed an error by adopting a “very narrow interpretation” of Entry 34 of the State List in the Constitution, which deals with “betting and gambling”.
Also Read: SC upholds govt retrospective 28% GST levy on online gaming companies
Reading out the judgment, the Court said states cannot be rendered “powerless” to regulate betting and gambling activities merely because they are linked to games involving substantial skill.
“If games of substantial skill are conducted in a manner that they start to pose problems for the state or cause harm to the public, the state will not be powerless to regulate such games of substantial skill as well,” the bench observed.
The Court held that betting and wagering do not enjoy constitutional protection even when attached to games of skill, noting that once the element of staking money on uncertain outcomes enters the picture, the activity becomes a gambling enterprise.
“Games of skill would be protected under Article 19, but betting or wagering on any game, be it a game of skill, would not be entitled to such protection unless the legislature creates an exception,” the Court said.The bench also rejected the argument that “betting and gambling” under Entry 34 applies only to games of chance, calling such an interpretation a “constitutional aberration”.
“The expression betting and gambling cannot be split to mean that the staking angle alone would amount to betting, whereas the chance element would amount to gambling,” the Court observed.
The apex court further said online money gaming had become a matter of public order and public health due to increasing addiction, financial losses and reported suicides linked to such activities.
“Online money gaming has been disturbing the tranquility of the public by making betting and gambling more normalised and accessible,” the Court said, adding that states were competent to invoke powers relating to public order, police and public health to curb such activities.
The judgment also noted that the Tamil Nadu government had relied on findings of the Justice Chandru Committee, which examined the harms linked to online betting and gaming, including addiction and mental health concerns.
The Supreme Court additionally held that online gaming operators are not merely facilitators or intermediaries, but suppliers of actionable claims that are amenable to Goods and Services Tax (GST).
With the ruling, the Court upheld the validity of provisions under the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act and the Karnataka Police Amendment Act that sought to regulate or prohibit online gaming with stakes.