All in: The online real money gaming industry goes bust

In blackjack, going ‘bust’ means exceeding 21 – the hand is lost and there is no coming back. India’s online real money gaming industry has, over the past several years, been playing an increasingly risky hand. It went ‘all in’ on one central argument – that games of skill, as distinct from games of chance, are not gambling and should neither be taxed nor banned as gambling. That bet has now been called. On May 27, 2026, the Supreme Court delivered its verdict across two companion judgments and the answer, across both, was an unambiguous 'no'.

Three blows have landed in quick succession. First, the Supreme Court’s ruling in State of Tamil Nadu & Ors v. Junglee Games India Pvt Ltd & Ors upheld the constitutional power of States to ban online money gaming outright – holding that once stakes enter any game, regardless of the skill element involved, the activity becomes res extra commercium and operators lose all constitutional protection under Article 19 of the Constitution. Second, parliament had already legislated the Promotion and Regulation of Online Gaming Act, 2025 (PROGA) - brought into force with effect from May 1, 2026 - which imposed a nationwide prohibition on real-money games. Third, on the same day as Junglee Games, the Supreme Court also decided DGSTI & Ors v. Gameskraft Technologies Pvt Ltd & Ors, where it held that GST applies on the full value of every stake deposited on every online gaming platform – not merely the platform’s commission or service fee. The ruling applies retrospectively from July 1, 2017.

Together, these three developments have delivered what the industry long feared – not a regulatory setback, but a constitutional, legislative and fiscal reckoning arriving almost simultaneously. This article examines both Supreme Court judgments and considers what, if anything, of the online real-money gaming industry as it existed survives.

The Junglee Games judgment is, in constitutional terms, the more fundamental of the two rulings. Its core question was whether States have legislative competence - under Entry 34 of List II (betting and gambling) and Entry 1 (public order) of the Seventh Schedule to the Constitution - to ban online money gaming even where the underlying game is one of skill. The Supreme Court answers this question in the affirmative and without qualification.

The industry’s central argument had always been that skill-based games enjoy protection under Article 19(1)(g) of the Constitution as a legitimate trade or business – a position buttressed by an established line of High Court decisions – and that any State prohibition must satisfy a proportionality test. The Supreme Court rejects this argument at the outset. Once a game is played for stakes, the Court held, the activity becomes res extra commercium – outside the scope of commerce and trade – and the question of the applicability of Article 19 of the Constitution does not arise. The finding applies irrespective of the quantum and scale of the stakes involved.

Equally significant is the Court’s reformulation of the ‘skill vs. chance’ inquiry. It held that the foundational Constitution Bench decisions – State of Bombay v. RMD Chamarbaugwala (1957) (RMDC-I) and RMD Chamarbaugwala v. Union of India (1957) (RMDC-II) and the three-judge Bench judgment in Dr KR Lakshmanan v. State of Tamil Nadu,(1996), were never called upon to determine whether betting on skill-based games fell within Entry 34 of the Seventh Schedule. Those decisions, which the industry had long relied upon as its constitutional shield, are held to be inapplicable to the present question. The Court held plainly that when the element of betting enters the picture, the nature of the underlying game ceases to be of relevance. The State need not show that the game involves chance and it need only demonstrate that stakes are wagered on an uncertain outcome.

The Court upheld the States’ independent power to legislate on public order grounds. The judgment delivers findings of fact that online money gaming has disturbed public tranquillity by normalising betting and gambling, that addiction and depression arising from such gaming – together with the reported incidents of suicide – constitute a widespread public health concern and that legislative interventions are supported by empirical data. The Court draws upon RMDC-I to reinforce that the Constitution makers who envisioned a welfare State could not have intended to elevate betting and gambling to the level of a protected trade or business. Viewed through this lens, the State’s act of prohibition is an expression of constitutional fidelity, not an instance of regulatory overreach.

The judgments of the High Courts of Madras and Karnataka – which had for years provided constitutional shelter to the industry – are described as having “committed an egregious error”. The constitutional question that has long been contested between the States and the industry – prohibition versus regulation – is now conclusively settled, insofar as it concerns real-money gaming.

While Junglee Games resolves the constitutional question, the Gameskraft decision addresses the fiscal one. The lead dispute arose from show cause notices issued by the Directorate General of GST Intelligence to an operator of online rummy platforms in September 2022, proposing recovery of approximately ₹21,000 crore. The Revenue’s position was that players were staking money on uncertain outcomes, making the activity gambling and that gambling is taxed under Rule 31A(3) of the CGST Rules on the full face value of the stake – not merely on the platform’s commission. The operator argued that Rummy is a game of skill and Rule 31A has no application. Similar disputes had multiplied across the country, involving other operators wherein the aggregate demands exceeded ₹1,50,000 crore. For an industry that had paid GST only on platform fees of 10–20%, the exposure was existential.

The Court held that whether a game requires skill is irrelevant once a player stakes money on its outcome. The determinative factor is the act of staking on an uncertain result. A player, however skilled, is engaged in gambling in the fiscal sense when money rides on the outcome.

It also held that gaming platforms create and supply a legal interest (‘contingent beneficial interest’) in winning – upon each deposit, constituting an actionable claim within the Transfer of Property Act, 1882. The consequence is direct – 28% GST on the full deposit, not the commission. For an operator taking a 15% platform fee, this is not a marginal adjustment; it is a fundamental recharacterisation of the entire business model.

The CGST (Amendment) Act, 2023, which came in force from October 1, 2023, introduced definitions of ‘online gaming’, ‘online money gaming’ and ‘specified actionable claim’. It inserted Rules 31B and 31C prescribing valuation on gross deposits. The Court upheld the contention of the Revenue that these amendments are clarificatory in nature and, therefore, held them to operate retrospectively from July 1, 2017. As a consequence, every pending demand for the nine-year pre-amendment period is now to be adjudicated on this basis.

The industry can no longer seek protection under the Constitution

The Junglee Games holding that betting on games of skill is res extra commercium and, therefore, outside the protection of Article 19 of the Constitution removes the core layer of the industry’s constitutional defence. The proportionality argument, the manifest arbitrariness challenge and the invocation of Article 19(1)(g) as a shield for skill-based enterprises all fall away. The combined effect is, for the existing real-money gaming business model, a death knell.

Retrospective application raises questions that remain open

The 2023 CGST amendments, held to be clarificatory, introduced new statutory vocabulary, a deemed-supplier construct and entirely new valuation rules. Operators who paid GST on platform fees in good faith and in reliance on High Court orders that expressly protected their position will now have to assess whether to challenge the retrospectivity finding in review applications, on the ground, among others, that it prejudicially affects vested/substantial rights. Gameskraft also leaves open the question of penalty and interest. Section 73 of the CGST Act distinguishes bona fide misclassification from fraud or wilful evasion, carrying a materially lower penalty for the former. Operators who structured their businesses in reliance on then-prevailing judicial authority may have a credible case for the lower penalty regime. Whether the Revenue agrees with this argument will be the real battleground of the next phase.

PROGA 2025 has already caused a disruption in the market

As reported in the press, within 24 hours of PROGA 2025 clearing both Houses, some of the sector’s leading names began shutting down their real-money operations. The criminal liability under PROGA 2025, read alongside the Supreme Court’s confirmation that no constitutional right attaches to a staking enterprise, leaves no meaningful scope for the continuation of existing online real-money gaming operations.

The practical reach of both judgments is, therefore, largely historical – they govern the period from July 1, 2017 to the commencement of PROGA 2025. After that date, there can be no lawful real-money gaming activity for GST to attach to, nor any constitutional protection to invoke. What the legislative framework now permits is e-sports, online social gaming and genuine skill competitions without monetary staking. These remain untouched by the Supreme Court and presents a distinct and, potentially, unresolved set of legal questions.

The online gaming sector was once placed at approximately $23 billion in value, with aggregate GST demands exceeding ₹1,50,000 crores. The two recent judgments, taken together mean that the constitutional protection argument is foreclosed and the fiscal exposure is confirmed. And through the PROGA< legislative prohibition is in place. The online real money gaming industry, as it has been commercially structured, has, to all practical intents, gone ‘bust’.

What is not bust is the concept of online gaming itself. The Constitution permits e-sports and skill-based competition and PROGA 2025 gives them a framework. The Gameskraft judgment’s careful articulation of the genuine-entry-fee exception offers a doctrinal foundation for those who can demonstrate that their platform charges a true competition fee rather than a stake. The challenge now is building a business model that stays on the right side of that line – one the Supreme Court has now drawn with considerable precision.

In blackjack, when the dealer goes ‘bust’, the remaining players win. The question for India’s online gaming sector is whether there are any players still at the table, whether they have the capacity and willingness to continue playing against the State and, more importantly, whether the cards they hold are worth playing.

Varun Khanna is an independent legal practitioner.