Karnataka High Court To Hear On August 30 Plea Against Centre's New Law Banning 'Online Money Games'

The Karnataka High Court will hear on Saturday (August 30) plea by online gaming company Head Digital Works–which operates 'A23 Rummy'–challenging the Promotion and Regulation of Online Gaming Act 2025, which seeks to prohibit 'online money games' and offering of bank services, advertisements related thereto.

The plea was mentioned on Thursday (August 28) before a bench of Justice B M Shyam Prasad, who said the matter would be listed for hearing on August 30.

Notably, the newly encated law applies not only to online money gaming services offered within the territory of India, but also to those operated from outside India.

The plea claims that the Act has been passed without  any consultation, or deliberation, and is contrary to the avowed policy of the Respondent, who, till the enactment of the Impugned Act actively promoted and encouraged the online skill gaming sector.

It states that this abrupt action has resulted in the potential disruption of employment of employees of the petitioner, and crores of rupees in investment in the Petitioner company being lost overnight, but also potential loss of livelihood of over two lakh employees across the sector.

It states that as established by the Supreme Court, it is settled law that games of skill (involving risking of money or otherwise) are not res-extra commercium but are a legitimate business activity protected under Article 19(1)(g) of the Constitution. Therefore, the State cannot completely prohibit such activities and any restrictions placed on these activities must be proportionate and reasonable, within the parameters of Article 19(6). 

The plea claims that the prohibition imposed is not proportional, or the least restrictive step that could be taken, and is not protected by any of the grounds enumerated in Article 19(6). The Impugned Act is manifestly arbitrary, capricious, unreasonable, and is violative of Article 14 of the Constitution. The Act imposes a restriction on freedom of expression protected under Article 19(1)(a), and is violative of the right to livelihood and choice under Article 21 of the Constitution.

The plea seeks that Sections 2(1)(g), 5, 6, 7 and 9 of the Act be struck down as being beyond the legislative competence of Centre and violative of Articles 14, 19, 20, 21, 22 and 301 of the Constitution of India.

As interim relief the plea seeks that operation of Sections 2(1)(g), 5, 6, 7 and 9 of the Act to the extent these provisions apply to online games of skill such as rummy and poker be stayed. It further seeks that the Union of India be directed not to take any coercive action or penal action against Petitioner. 

On August 22, the President of India gave its assent to the bill which was passed by both the houses.

The Act defines 'online money game' as "an online game, irrespective of whether such game is based on skill, chance, or both, played by a user by paying fees, depositing money or other stakes in expectation of winning which entails monetary and other enrichment in return of money or other stakes; but shall not include any e-sports".

As per Section 2(h), 'online money gaming service' shall mean a service offered by a person for entering or playing the online money game.

Any person who extends such service in contravention of the proposed law shall be punishable with upto 3 years imprisonment, or upto Rs.1 crore fine, or both. A person who engages in advertisement thereof shall be punishable with imprisonment upto 2 years, or fine upto Rs.50 lakhs, or with both.

It also provides for establishment of an Authority by the Central government, which can be vested with the authority to suo-motu consider whether any online game constitutes an online money game.

It allows the government to endow vast investigative powers on authorized officers, that would include arrest and search of property, without warrant, if there's 'reasonable suspicion' of offense being committed/about to be committed.

"In case of failure to comply with the provisions of section 5, section 6 and section 7, notwithstanding anything contained in this Act or in section 69A of the Information Technology Act, 2000, any information generated, transmitted, received or hosted in any computer resource in relation to online money gaming service shall be liable to be blocked for access by the public in such manner as provided in that Act", the Bill enunciates.

While the law prohibits 'online money games', it excludes from the scope of prohibition 'e-sports' which may be recognized and promoted by the Central government, as deemed appropriate, as a legitimate form of sports in India.

Along with e-sports, the government may also consider promoting and recognizing 'online social games' for educational and recreational purposes, which may include a subscription fee for entry but nothing in the nature of a wager/betting.

According to the text, 'e-sport' means an online game played as part of multi-sports events or one that involves organized competitive events between individuals or teams, conducted in multiplayer formats. It shall be duly recognized under the National Sports Governance Act, 2025, and registered with the Authority or agency constituted in terms of the proposed law.

Further, its outcome should depend solely by factors like physical dexterity, mental agility, strategic thinking or other similar skills of players. 'E-sports' may include payment of fees solely for entering the competition or covering administrative costs. It may also include performance-based prize money. However, it shall not involve "placing of bets, wagers or any other stakes by any person, whether or not such person is a participant, including any winning out of such bets, wagers or any other stakes."

The Act's Statement of Object and Reasons, states:

"the unchecked and widespread proliferation of online money games which readily accessible through mobile devices, computers, and the internet, and offering monetary returns in exchange for deposited funds has led to grave social, economic, and psychological consequences across the country".

Underlining the need for a robust legal framework, the law adds that the proposed law seeks to regulate, promote and encourage the gaming sector for innovation and economic growth, while ensuring a developed, safe and responsible digital environment for all citizens.

Case title: Head Digital Works Private Limited and Anr v/s Union of India