India Supreme Court Upholds States’ Right to Regulate Online Gaming

India’s online gaming industry has been hit with another major legal setback, this time from the country’s highest court.

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In a ruling likely to reshape how operators navigate the market, the Supreme Court has confirmed that individual states retain the authority to regulate, restrict, or even ban online gaming activities within their borders, despite the rollout of the federal Promotion and Regulation of Online Gaming Rules (PROGA) 2026.

The decision arrives only weeks after New Delhi began implementing the first phase of PROGA, a national framework intended to bring greater oversight to the fast-growing sector. Instead of settling the debate over regulatory control, the new rules prompted states to seek clarification over where federal authority ends and local powers begin.

States Win Jurisdiction Battle

The dispute was driven largely by southern states Tamil Nadu and Karnataka, both of which have spent years trying to tighten controls on online gaming and betting products.

State governments argued that the arrival of PROGA should not strip them of their ability to intervene when gaming activities are viewed as harmful to public welfare. Particular attention was placed on real-money games such as rummy and poker, which have long occupied a legal grey area in India.

The Supreme Court ultimately sided with the states.

A bench led by Justices J.B. Pardiwala and R. Mahadevan concluded that state governments continue to hold legislative powers in matters linked to public order and consumer protection. That authority, the court found, allows states to impose their own restrictions on online gaming when they believe such measures are necessary.

The ruling overturns earlier decisions from the Madras and Karnataka High Courts, which had determined that online gaming regulation fell outside state jurisdiction.

Earlier State Restrictions Revived

The judgment restores key parts of Tamil Nadu’s 2021 gaming reforms as well as amendments made to Karnataka’s police laws.

Both states had introduced measures targeting online betting, virtual gambling operations and unregulated gaming platforms. Those efforts faced legal challenges and suffered setbacks in lower courts. The Supreme Court’s intervention now gives those provisions fresh legal standing.

In its reasoning, the court placed significant weight on concerns surrounding consumer harm and the potential exploitation of younger players through gambling and wagering products involving real money.

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For operators hoping PROGA would create a single set of national rules, the verdict points in the opposite direction.

A Tough Summer for Real-Money Gaming

The judgment is the latest in a string of Supreme Court decisions affecting India’s real-money gaming sector.

Only days earlier, the court backed the federal government’s controversial position on taxation, allowing authorities to apply a 28% Goods and Services Tax to real-money gaming businesses, including retrospectively. Industry groups had argued that applying the tax to periods before October 2023 would severely damage commercial viability.

That challenge failed.

The court also signalled that once real money is involved, legal distinctions between games traditionally classified as skill-based and those considered gambling carry far less weight for taxation purposes.

Taken together, the recent rulings strengthen both federal and state regulators at the expense of operators.

Patchwork Rules Ahead

India remains one of the world’s fastest-growing online gaming markets, but the regulatory picture is becoming increasingly fragmented.

PROGA was introduced to establish nationwide standards, yet the Supreme Court has now confirmed that states remain free to chart their own course. Some may embrace the federal framework. Others could move toward stricter controls or outright prohibitions.

For gaming companies, that means compliance will no longer be a matter of following one rulebook. Success in India may increasingly depend on navigating dozens of different regulatory approaches at the state level, each with its own restrictions, enforcement priorities and political pressures.

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Source: igamingexpert.com