The State of Tamil Nadu (State) recently introduced the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act 2022 (TN Act) under the Tamil Nadu Online Gaming Authority (Real Money Games) Regulations 2025 (2025 Regulations). These regulations impose certain stringent restriction and increased compliance requirements for online gaming companies. Read the previous blog on the same here – https://compass.khaitanco.com/tamil-nadu-gaming-regulations-implications-on-gaming-companies
Soon thereafter, the constitutionality of Section 5 and 14 of the TN Act, along with the entirety of 2025 Regulations (Impugned Provisions) was challenged before the Madras High Court (Court) by several key players of the gaming industry in the case of Play Games 24x7 Private Limited and Others Vs. State of Tamil Nadu and Others.
This was not the first time the TN Act faced judicial scrutiny. When initially enacted, the Court had upheld its general constitutionality but struck down its schedule which classified skill-based games like rummy and poker as game of chance (AIGF Case). The ruling of the Court in the AIGF Case became a key reference point for the Court in the extant case. Drawing on this precedent, the Court ultimately ruled completely in favour of the State and upheld the constitutionality of the Impugned Provisions.
The fundamental points discussed in the case are:
Legislative Competence and Federal Conflict: The Petitioners argued that the Impugned Provisions intruded upon central government’s legislative competence as the subject matter falls under Entry 31 (Communications) of List I of Schedule 7 of the Constitution of India (Constitution) and the Impugned Provisions conflicted with central laws regulating online gaming. The State countered this by stating that it acted basis the powers conferred upon it by Entry 6 (Public Health) and Entry 26 (Trade and Commerce) of List II of Schedule 7 of the Constitution. The Court agreed with the State, and applying the doctrines of repugnancy along with doctrine of pith and substance it concluded that: (A) true intent of the Impugned Provisions was to protect public mental and physical health and not regulate the internet infrastructure, and since public health is a state subject, the State has the right to legislate on the same, and (B) any incidental overlaps with legislative powers of the central government does not invalidate the law.
Constitutionality of Blank Hours: The 2025 Regulation requires access to gaming websites to be blocked between 12 am to 5 pm (Blank Hours). The Court rejected the petitioners’ claim which stated that Blank Hours violated freedom of trade enshrined under the Constitution, holding that the restriction-imposed falls within the aegis of reasonable restriction to freedom of trade stated under the Constitution, and the same is required to protect public health. The Court emphasised that, as per the directive principles of State policy (as enshrined under the Constitution), it is the State's duty to prioritise public welfare over freedom of trade.
Differentiation from OTT Platforms and Physical Games: The Court differentiated real-money online games from OTT content, freemium games, and other physical games, noting the higher risk of addiction and the chances of poor financial decision-making by a user in case of online games. It highlighted that; online players are at a disadvantageous position due to lack of any physical cues from opponents. The Court described online games as a new societal challenge, warranting regulation. Despite the widespread legal developments which have taken place in the field of online gaming, this observation by the Court throws us back at least by a decade.
Mandatory Aadhaar-Based KYC: The petitioners opposed mandatory Aadhaar verification, but the State defended the measure, stating that it is the most reliable way to confirm users’ age and prevent the misuse of identification of another person. The Court agreed with the State, and emphasised that in the AIGF Case, the petitioners had previously endorsed Aadhaar-based e-verification method as a legitimate method of age verification.
Unlike previous attempts by the State which sought blanket bans on online games and were struck down by the courts, the present framework reflects a more calibrated approach, basis the lessons learned by the State from previous judicial setbacks. The TN Act and the 2025 Regulations were framed based on the recommendations of a committee chaired by a retired judge of the Court, lending them legal credibility and a constitutionally sound robust legal framework. With the Court now upholding the validity of these Impugned Provisions in this judgement, it may prompt other states, with similar ambitions, to adopt similar legislation.
While this judgement fortifies the legal authority of states to regulate online gaming in this manner, it poses significant challenges for the gaming industry. The cumulative effect of stringent compliance requirements, operational constraints and potential user attrition may impact the viability of online gaming businesses operating in states with such regulatory frameworks.
