The Central government’s move to ban all forms of online money gaming -whether based on skill or chance - has sparked intense debate on its constitutional validity, federal implications and impact on ongoing Goods and Services Tax (GST) litigation.
The Promotion and Regulation of Online Gaming Bill, 2025, which classifies offences related to real money gaming as cognisable and non-bailable, marks a sharp departure from the Centre’s earlier stance that recognised games of skill as legal and taxable.
In this conversation with Bar & Bench's S N Thyagarajan, Senior Advocate Abhishek Malhotra shares his views on the potential constitutional challenges to the proposed law and its consequences for the gaming industry and pending GST disputes.
Watch the video of the interview here
Edited excerpts of the interview below.
The Bill seeks to ban online money gaming, regardless of whether it is a game of skill or chance. What are the main constitutional challenges you see?
All along, since the Chamarbaugwala cases, the Supreme Court has consciously made the distinction between games of chance and games of skill, categorically saying that games of chance do not enjoy constitutional protection, whereas games of skill do. Each game will have an element of chance, but it is the preponderance of skill or chance which decides whether or not there is any protection.
Fantasy money games also raise another argument. These are not only about Rummy or Poker. There are multiple other casual games that present an element of creativity. That is also creative expression, therefore protectable under Article 19(1)(a) of the Constitution.
Once you decide that e-sports are protected because of physical dexterity, mental ability or strategy, and that social games without money are protected because they are creative, how could you create a sub-classification only because there is betting? That, to my mind, is an Article 14 violation also.
The Bill makes all related offences cognisable and non-bailable. How do you assess this provision?
To my mind, yes, it is very, very draconian. Till 2023, the government categorically took a stand, including before courts of law, that games of skill are not just protected under the law, but they are also charged to GST under a lower slab of 18 per cent versus the others, which are 28 per cent.
In October 2023, you bring this in the fold of 28 per cent also. But all along, there is recognition that this is legal activity. Suddenly, there’s a change -not just to say we are going to excessively tax you, but to outlaw you to the extent that you will be treated as criminals.
There is also the issue of legislative competence. Betting and gambling are in the State List. Can the Centre enact such a law?
This is going to be a huge issue of conflict. Betting and gambling is a specific entry in the State List where the states have absolute power to legislate.
Gaming companies have been arguing before states that competence extends only to games of chance, not games of skill. Now the Centre is saying it will regulate everything - games of skill, games of chance, combinations - and outlaw all of them. If that be the case, then it is no different from the State List. The Centre had itself told the GST Council that this is regulated by the states. Once you’ve taken that stand, how can you go back?
You recently appeared in the GST litigation concerning retrospective tax demands on gaming companies. How does this Bill affect the litigation?
This legislation, I believe, has just been passed by the Rajya Sabha to get Presidential assent. Assuming challenges are not able to succeed in getting a stay, then clearly there is illegality, but that illegality will only be prospective, not retrospective.
There will be a double whammy for the industry. One, they will necessarily have to change their business model or close shop. Second, once they do, there is nothing really to pay to the exchequer in the event they lose the GST matter. It may probably render the entire GST issue completely moot, because there is really nothing to recover from.