Startups prepare Supreme Court challenge

On Tuesday, the Union cabinet cleared the Promotion and Regulation of Online Gaming Bill, 2025, which seeks a complete ban on any game involving money. The bill prohibits not only play but also payments and advertising for services such as fantasy sports apps Dream11 and My11Circle, online rummy platforms RummyCulture and RummyCircle, and casual games like Pool Champs and Online Carrom.

Lawyers representing startups told Mint the legislation is almost certain to be challenged in the Supreme Court, with the dispute likely to centre on whether the Centre has authority to legislate in a domain historically overseen by states.

Crucially, the bill does not distinguish between games of “skill” and games of “chance”—a line the Supreme Court itself has previously ruled upon. That omission is expected to become the central point of contention.

Meanwhile, with the Bill being tabled in Parliament today, industry groups have begun lobbying for political intervention. Earlier today, Mint reported that representative bodies wrote to union home minister Amit Shah, warning that the ban would lead to the loss of 200,000 jobs and force 400 companies to shut down.

Legal pushback

Five lawyers representing various online gaming startups at the top court confirmed that legal recourse is under consideration. Lawyers say the Supreme Court can step in to shield the industry with interim relief if the proposed bill becomes law and is immediately challenged.

“If the bill becomes law and is immediately challenged, the Supreme Court may not strike it down at the very first hearing. But there is a strong likelihood that it will grant interim relief—such as a stay on prosecutions or a status quo order—to prevent irreparable harm while arguments are heard. The Court could also issue notice to the government to explain the rationale behind introducing such a law,” said Sahil Kothari, associate partner, Economic Laws Practice.

According to Kothari, since the Supreme Court has already reserved its verdict on the challenges to the 28% GST levy on gaming companies, the new law cannot automatically come under consideration in that matter. To bring it before the court, parties would either have to file a fresh petition or move an application or additional affidavit highlighting the new provisions.

Even with interim relief possible, the stakes remain high.

“There were no consultations held with the industry, and if it becomes law, we’re staring at a game-changer for online gaming firms that were growing fast and generating significant revenue,” said Sajan Poovayya, senior advocate at the Supreme Court. “There is no doubt that it would be challenged in court—there is precedent of such challenges having been made before, especially since the proposed bill makes no effort to distinguish between a game of chance and skill—and paints any title with the same brush.”

He added that the bill will “hit the startups hard.”

Arun Prabhu, partner and co-head for digital and tech-media-telecom (TMT) at Cyril Amarchand Mangaldas, said the government is overlooking existing frameworks.

“There is already a long-standing body of law recording the distinction between games of skill and games of chance, which has distinguished permitted and non-permitted formats in online games,” Prabhu said.

“While the Bill apparently aims to make distinctions in favour of some formats like esports and social games through certification, a more nuanced and granular co-regulatory framework was already created as rules for online gaming intermediaries (in 2023). This provided mechanisms to regulate or even ban operators, including offshore platforms. If the government simply implements these frameworks effectively, many of the sector’s concerns—such as unregulated operations and social risks—could be addressed without resorting to a blanket ban,” he said.

Other lawyers warned that the legislation conflates gaming with gambling and could push players to unregulated foreign platforms.

“The Centre’s legal move would basically destroy the startups in terms of being able to operate anywhere, and lead to interested players moving to offshore operators and playing such games anyway. The bill leaves no room for interpretation, and correlates money games to gambling—which too is unconstitutional since gambling itself is a state subject,” said Jay Sayta, a technology and gaming lawyer.

The government, however, has defended its position.

A senior official involved in drafting the bill told Mint that, “the law is not unconstitutional at all, because on behalf of the Centre, we are cracking down on the industry and its role in cross-border money laundering—which is clearly a central subject, and not for states to adjudicate.”

“Plus, the sector has for long been clamouring to get regulated by the Centre. Them claiming now that the industry was a state subject is rather unfair,” the official added.

Lawyers said the broad scope of the bill, covering criminal liability, advertising, and classification, gives startups multiple grounds for challenge.

“Startups could argue that the law is arbitrary or irrational, particularly if it criminalizes activities previously recognized as legal under the ‘game of skill’ framework. Secondly, the provisions on criminal liability and advertising are broadly drafted, raising questions about intent, responsibility, and fairness. Thirdly, since betting and gambling are state subjects, conflicts could arise between state-permitted formats—like those in Nagaland and Sikkim—and a central prohibition, opening the door to challenges,” said CAM’s Prabhu.

He added that stakeholders may also question whether the Centre has legislative competence to impose such a ban, and whether “such a classification fairly balances public interest with the right to conduct legitimate business.”

The looming battle adds to the industry’s troubles. A separate dispute is already before the Supreme Court over retrospective goods and services tax demands of more than ₹2 trillion, dating back to fiscal year 2017.