The ‘Skill-Chance’ Duality in Peril: Why India’s New Gaming Law is Heading for a Supreme Court Showdown

Introduction : Imagine waking up to find that your favorite strategy game, the one you have spent months mastering through logic and statistical analysis, is now legally viewed the same as an unregulated game of pure hazard. This is exactly what happened when the government passed the Promotion and Regulation of Online Gaming Act, 2025. As we sit in March 2026, the entire gaming industry has been forced into survival mode. While the government argues that these exacting measures are necessary to protect citizens from financial ruin and addiction, gaming companies are vocal about their fundamental rights being compromised. This conflict is not merely a fight about mobile applications but a massive legal battle over who gets to control the digital landscape in India.

For over sixty years, Indian courts were very clear on this issue. If a game required more brains than luck, it was considered a legitimate business. Landmark cases like State of Bombay v. R.M.D. Chamarbaugwala established the Skill vs. Chance rule, which became the cornerstone of the industry. This distinction ensured that skill-based platforms were protected under Article 19(1)(g) of the Constitution, which guarantees the right to carry on any trade or business.

But the new 2025 Act basically deletes this historical distinction. Under Section - 2 of PROGA, if you put money into a game hoping to win a prize, it is categorized as an Online Money Game. This definition intentionally covers games irrespective of whether they are based on skill, chance, or both. In simple terms, the law now treats a professional Poker player or a Fantasy Sports strategist exactly like someone pulling a lever on a digital slot machine.

This legislative shift has created a profound identity crisis for the sector. By ignoring the mental effort involved in strategy based games, the law strips away the constitutional shield that previously separated legitimate entrepreneurs from gamblers. As the industry prepares for a definitive showdown in the Supreme Court, the core question is whether a legislative definition can override decades of judicial wisdom. This battle is not just about the right to play but about the right of an entire digital sector to exist without being branded as a sin industry.

The "Identity Crisis" of Skill-Based Games

For many decades Indian courts followed a very clear principle. A game that depends mainly on skill is not treated as gambling. The Supreme Court explained this position in State of Bombay v. R.M.D. Chamarbaugwala. The Court held that competitions which require substantial skill fall outside gambling laws. They are considered legitimate commercial activities and therefore receive constitutional protection under Article 19(1)(g).

Later decisions continued to apply the same reasoning. Courts accepted that a game may include some element of chance. That alone does not make it gambling. The important question is whether skill plays the dominant role in determining the outcome. This reasoning was reaffirmed in K.R. Lakshmanan v. State of Tamil Nadu where the Supreme Court recognised horse racing as a game of skill.

Because of these decisions the Indian gaming industry developed around the idea that skill games are lawful. Poker rummy fantasy sports and similar competitions relied on this legal distinction. Players succeed through strategy, probability analysis, experience and judgment.

The Promotion and Regulation of Online Gaming Act 2025 has created uncertainty around this long standing doctrine. Section 2 of the statute defines an online money game in very broad terms. If a participant deposits money in a digital game with the expectation of winning a prize the activity may fall within this category. The definition does not clearly preserve the traditional skill versus chance distinction recognised by courts.

This creates a practical problem. A person using analytical skill in fantasy sports or poker may now be treated under the same legal framework as someone participating in a purely chance based slot game. Critics argue that this approach ignores decades of judicial reasoning. Supporters of the law argue that online platforms raise new risks such as addiction fraud and financial exploitation. Because of these competing views the legal identity of skill based games has become uncertain.

Federal Tension Between the Centre and the States

Another major issue raised by the 2025 law concerns the constitutional division of legislative powers. The Constitution distributes law making authority between the Union and the States through the Seventh Schedule. Entry 34 of the State List places betting and gambling within the legislative domain of state governments. Traditionally each state enacted its own gambling legislation and decided how such activities should be regulated.

The new central law regulates online gaming at the national level. The Union government justifies this step by relying on its powers over digital communication and internet based services. Online platforms operate through telecommunications networks and cross state boundaries. According to the Centre a uniform regulatory framework is therefore necessary.

This reasoning has generated a constitutional debate. Many scholars in their recent legal analysis of online gaming regulation in India argue that the real subject matter of the legislation remains gambling. If that is correct then the law should fall within the competence of state legislatures. Merely moving an activity onto a digital platform should not automatically transfer legislative authority to the Union.

Courts often resolve such disputes by applying the doctrine of pith and substance. This doctrine examines the true nature and purpose of legislation rather than its formal wording. If the primary objective of the law is regulation of gambling the legislation may fall within the State List even if it incidentally touches digital communication.

At present several petitions challenging the validity of the law have been filed before the Supreme Court. These petitions raise questions concerning federalism legislative competence and the limits of central regulatory power in the digital economy.

The "Civil Death" of an Industry

Since the Act was enforced the industry has faced what lawyers call Civil Death. The enforcement of the new regulatory framework has produced significant economic consequences. Many companies operating in the online gaming sector relied heavily on digital payment systems. When regulatory uncertainty arose several financial intermediaries became cautious about processing transactions related to such platforms. Without reliable payment channels the operational structure of gaming platforms becomes difficult to sustain. Entry fees cannot be collected smoothly and prize distribution becomes complicated. This has affected the functioning of several companies in the sector.

Investment in gaming startups has also slowed in recent months. Investors prefer regulatory certainty before committing capital. When the legal framework appears unstable venture funding often moves to other technology sectors. Detailed discussions on these financial and legal hurdles can be found in policy analyses regarding the regulatory challenges of online gaming in India which highlight how regulatory ambiguity stifles innovation. For users the impact is visible in the closure or restriction of several popular applications.

However the problem does not end there. When regulated domestic platforms disappear users frequently shift to foreign websites that operate outside Indian jurisdiction. These offshore platforms usually do not follow Indian consumer protection standards. They may not provide proper grievance mechanisms and they often operate through opaque financial structures. If a dispute arises users may have little legal remedy. In this sense a strict prohibition may unintentionally push gaming activity toward unregulated international operators.

What Lies Ahead?

As the legal debate continues, the final determination will likely come from the Supreme Court. The Court will examine whether the government’s approach is a reasonable regulatory measure or an excessive restriction on legitimate business activity. Many legal scholars argue that a balanced regulatory framework would be more effective than a complete prohibition. Such a model could introduce safeguards like age verification, spending limits, and technological monitoring to prevent addiction and financial harm. At the same time, it would allow lawful businesses to operate and contribute to the digital economy. Until the judiciary clarifies the constitutional position, the legal status of online gaming in India will remain uncertain and the future of the industry will depend largely on the Court’s interpretation of regulatory powers.

Author: Rohini Garg in case of any queries please contact/write back to us via email to content@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney

Endnotes

1. The Promotion and Regulation of Online Gaming Act, 2025, Act No. 32 of 2025, § 2(1)(g), defines an “online money game” as an online game played by paying a fee, depositing money or other stakes in expectation of winning, irrespective of whether the game is based on skill, chance, or both. The provision excludes e-sports from this definition.

2. State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699. The Supreme Court considered the distinction between gambling and competitions involving skill, observing that a competition involving a substantial element of skill is distinguishable from a lottery or game determined by chance.

3. Dr. K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226. The Supreme Court held that a game in which success depends substantially or preponderantly upon skill does not constitute gambling and specifically recognised horse racing as a game of skill. The Court also explained that the presence of some element of chance does not necessarily transform a skill-based activity into gambling.

4. Constitution of India, art. 19(1)(g), read with art. 19(6). Article 19(1)(g) guarantees citizens the right to practise any profession or carry on any occupation, trade or business, subject to constitutionally permissible restrictions under Article 19(6).

5. Constitution of India, Seventh Schedule, List II, Entry 34 — “Betting and gambling.” The constitutional allocation of legislative powers forms the basis of the federalism challenge concerning whether regulation of online money gaming falls substantially within the States’ legislative domain.

6. The Promotion and Regulation of Online Gaming Act, 2025, § 5. The Act prohibits persons from offering, aiding, abetting, inducing or otherwise engaging in the offering of an online money game or online money gaming service.

7. The Promotion and Regulation of Online Gaming Act, 2025, §§ 6–7. Section 6 prohibits advertisements promoting or inducing participation in online money games, while Section 7 restricts banks, financial institutions and other persons from facilitating transactions connected with online money gaming services.

8. The Promotion and Regulation of Online Gaming Act, 2025, § 8. The provision establishes an Authority with powers including determining whether a particular online game constitutes an online money game and recognising, categorising and registering online games.

9. Challenge to the Promotion and Regulation of Online Gaming Act, 2025, Supreme Court Observer. The constitutional challenge raises issues concerning Article 14, Article 19(1)(g), legislative competence under Entry 34 of the State List, Article 21, and the validity of the statutory treatment of skill-based and chance-based online money games.

10. Centre for Accountability Systemic Change (CASC) & Anr. v. Union of India & Ors., W.P. (C) No. 1008/2025, Supreme Court of India, order dated 17 October 2025. The proceedings concern the interpretation and implementation of the Promotion and Regulation of Online Gaming Act, 2025 and the regulation of unlawful online betting and gambling platforms.