The development follows a February petition where companies challenged regulations that required mandatory KYC verification, Aadhaar authentication and restricted hours of gameplay.
These restrictions were imposed under Sections 5(2) and 14(1)(c) of the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022.
A division bench comprising Justices SM Subramaniam and K Rajasekar ruled that the State has the authority to make laws on online gaming under Entry 6 (public health and sanitation) and Entry 26 (trade and commerce within the State) of the State List in the Constitution, which covers matters exclusively under states’ jurisdiction.
In their arguments, Head Digital Works Pvt. Ltd., which develops online games of skill in India, and two other gaming companies, Junglee Games India Pvt Ltd, and WinZO, insisted that the current restrictions based on time, age and monetary factors are unconstitutional.
Code of ethics and regulatory framework
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In March, ET reported that real money gaming industry bodies All India Gaming Federation (AIGF), E-Gaming Federation (EGF) and Federation of Indian fantasy Sports (FIFS), jointly came up with a “code of ethics” encouraging responsible gaming practices.
The gaming industry bodies include companies such as Dream11, My11Circle, Khelo Fantasy Live, SG11 Fantasy, WinZO, Games24X7, Junglee Games etc. The code of ethics had provisions similar to the curbs placed by the Tamil Nadu government.
Under the new GST regime, the real-money gaming (RMG) industry faces a 28% GST levy on the deposits made by players on these platforms.
Last September, India’s top GST investigation agency, the Directorate General of GST Intelligence (DGGI), stated that the real money gaming sector topped the list of tax evasion, with dues to the tune of Rs 1.1 lakh crore. The agency issued show cause notices to 34 entities and took action against 118 Indian and 658 foreign companies.
Trends shaping the RMG sector
In FY22-23, India’s largest RMG platform, Dream11, recorded gross gaming revenue of Rs 7,167 crore. Of this, Rs 976 crore was spent as promotional credits to players.
There are close to 568 million users of online games in India, and nearly 25% of them are pay-and-play customers. In fiscal year 2023, the RMG segment in online gaming was estimated to be a $2 billion business.
According to the latest EY-FICCI report, Esports and casual gaming grew to Rs 5,300 crore in 2024, and is projected to reach Rs 6,300 crore in 2025 and Rs 8,300 crore in 2026.
