State Legislatures Possess Competence to Prohibit Betting on Games of Skill under Entry 34 List II.

The States of Tamil Nadu and Karnataka enacted amendments to their respective gaming and police laws in 2021 to prohibit online betting and gambling, including on games of skill like Rummy and Poker when played for stakes.

These amendments removed long-standing "saving clauses" that protected games of "mere skill" from the rigors of anti-gambling penal provisions.

The High Courts of Madras and Karnataka struck down these provisions, holding that "betting and gambling" under Entry 34 of List II is restricted only to games of chance and that games of skill constitute protected trade/business under Article 19(1)(g).

The States appealed to the Supreme Court, contending that staking money on any uncertain outcome, regardless of the level of skill involved, constitutes "betting and gambling" and affects "public order".

1. Whether "betting and gambling" in Entry 34, List II must be read conjunctively, confining State competence only to betting on games of chance.

2. Whether the State Legislature derives competence to regulate/prohibit online gaming with stakes from Entry 1, List II ("Public Order").

3. Whether a game of skill metamorphoses into a game of chance (gambling) when played for monetary stakes.

4. Whether a total prohibition on online games of skill with stakes violates Articles 14 and 19(1)(g).

The Court applied Entry 34 ("Betting and gambling") and Entry 1 ("Public order") of List II, Seventh Schedule.

It interpreted the "concentric circles" doctrine from Ram Manohar Lohia v. State of Bihar to distinguish law and order from public order and the "even tempo of life" test from Arun Ghosh v. State of West Bengal.

It refined the "skill vs. chance" jurisprudence from RMDC-I and RMDC-II, which established that while games of skill are business activities, "betting" is the act of staking on an uncertain future event.

It also applied the Principle of Liberal Interpretation of Legislative Entries, asserting that entries are fields of legislation, not mere definitions.

Furthermore, the doctrine of res extra commercium was applied to gambling activities, excluding them from Article 19(1)(g) protection.

The Court reasoned that the High Courts erred by interpreting Entry 34 as "betting on gambling," which effectively rewrote the Constitution; "betting" and "gambling" are interchangeable terms centered on the "stake".

It clarified that while RMDC protected games of skill, it never held that staking on such games was immune from state regulation.

The Court found that online platforms, through algorithms, AI, and "pseudo-random generators," create a "veil of invisibility" that makes outcomes inherently uncertain, thus distinguishing them from the highly regulated, physical horse-racing seen in K.R. Lakshmanan.

It further held that "Public Order" is a valid source of competence, as online gaming addiction, financial distress, and resultant suicides disturb the "even tempo" of the community and impact "public health".

Because the activity of staking money on an uncertain victory is res extra commercium, the State has the absolute power to prohibit it without meeting the proportionality test under Article 19(6).

The Supreme Court allowed the appeals, setting aside the High Court judgments and declaring the 2021 TN and Karnataka Amendment Acts intra vires.

The Court issued a specific holding that Part II of the 2021 TN Amendment Act, the Schedule to the TN Online Gambling Act 2022/23, and Sections 2, 3, 6, 8, and 9 of the 2021 Karnataka Amendment Act are constitutionally valid.

No order as to costs was made.