Gaming firms to approach Karnataka High Court, challenging Online Gaming Act

Gaming firms to approach Karnataka High Court, challenging Online Gaming Act

The Act had recently received the assent of the President

The real-money gaming industry is set to plead before the Karnataka High Court against the Promotion and Regulation of Online Gaming Act, 2025.

The Act seeks to promote e-sports and social games, while imposing a complete ban on real-money gaming, which involves stakes purchased with money, or through virtual assets.

The government defended the ban citing social, financial, and psychological harms and asserting that it posed a risk to young players and poor sections of society. Officials also cited concerns of fraud and money laundering.

However, the industry views the Act as an attack on a sector that has contributed significantly to revenue and employment.

Data revealed that the Goods and Services Tax (GST) collections from real-money gaming grew sharply after the new tax regime was applied in 2023. It rose four times in six months, to Rs.20,000 crores in 2024-25.

Industry experts claim that over two lakh persons are employed directly or indirectly with it and for many startups and investors, the sector’s growth signified promise of a sustainable future.

The industry stalwarts have opted to approach the Karnataka High Court, as in 2021, the Karnataka government had passed an amendment to the Police Act that prohibited wagering on games of skill and chance.

Several companies challenged the law in court, and in 2022, the Karnataka High Court struck down key provisions of the amendment.

It held that states did not have legislative competence to impose a blanket prohibition on games of skill. The court held that the Constitution of India recognised a difference between games of skill and games of chance. Citing this clause, it said that a game with substantial skill was not gambling, even if some chance was involved.

The court also clarified that skill-based games did not lose their character when played online or when stakes were involved. It rejected the state’s claim that online gaming was a menace, without data to support the argument. Adding that regulation must be based on evidence rather than fear. Thus, it struck down provisions that made most gaming offences cognizable and non-bailable.

However, the Central government’s new Act is now set for a courtroom battle.

Industry leaders have stated that the government ignored the structured data and relied on anecdotal evidence. Similarly, critics viewed that lawmakers gave weightage to negative stories, while ignoring the positive impact of digital services. They added that a blanket ban would drive players to offshore platforms, which evade regulations.