Sanskriti Verma

Abstract: This post examines how the Promotion and Regulation of Online Gaming Act, 2025 fails constitutional scrutiny under the Doctrine of Pith and Substance. Its essential character remains gambling regulation, a subject exclusively reserved for States under Entry 34 of List II. Drawing on the Act’s operative provisions and preamble, it refutes Union competence arguments premised on inter-state commerce, telecommunications, residuary powers, and national security, revealing that the Act unconstitutionally bypasses India’s federal structure.

Introduction

The Promotion and Regulation of Online Gaming Act, 2025, which was enacted on August 22, 2025, has officially crowded out the antiquated laws governing digital gaming in India. The act pursues two major objectives; first, enabling the growth of e-sports and social gaming, and second, imposing a comprehensive ban on ‘online money games’ throughout the country. These games, in the act are defined as any games involving monetary stakes, irrespective of whether the outcome is determined by skill, or luck or both. Nevertheless, this legislative move brings a very fundamental question concerning the Constitution, to light: can Parliament even make such laws? The Seventh Schedule of the Constitution very clearly categorizes “Betting and gambling” as well as “Sports, entertainments and amusements” under the list II, or the state list’s domain. This constitutional arrangement decisively and unmistakably grants states exclusive power over these matters, leading to the issue of whether the Act is an unacceptable intrusion by the Centre into state legislative territory being raised.

The Act’s constitutional validity has already attracted scholarly attention. Existing analysis have questioned the legislation on federalism grounds, arguing it intrudes upon State List Entry 34 and challenged the collapse of the judicially entrenched skill-chance distinction under Article 19(1)(g). While these critiques establish important constitutional concerns, this piece advances the discourse through a different analytical framework, it conducts a pith and substance examination demonstrating that the Act’s core character remains gambling regulation under Entry 34 regardless of its digital medium or skill elements, analyses the Act’s operative provisions to establish its true legislative character and pre-emptively addresses and refutes the major Union competence justifications. It expands on this inquiry in four parts- firstly, explicating the doctrine of Pith and Substance; secondly, demonstrating the Act’s true nature under the Seventh Schedule; thirdly, refuting counterarguments defending the Parliament’s authority; and lastly, examining implications for constitutional federalism in the digital age.

Doctrine of Pith and Substance

To understand why this question is being raised in the first place, we need to see what the pith and substance doctrine actually is and how it operates within India’s federal structure. This doctrine developed as a judicial mechanism for addressing the unavoidable overlaps that arise when legislative authority is distributed between parallel and co-existing governmental entities. The Privy Council, speaking through Lord Porter, recognized that creating absolute separations between legislative spheres proves impossible, noting that different legislatures inevitably find their powers intersecting periodically. The doctrine acknowledges that legislation rarely functions in isolation, laws passed under one constitutional entry may tangentially affect subjects listed under another legislature’s jurisdiction. Yet the doctrine instructs courts to examine beyond these incidental effects and impacts, and scrutinize the legislation’s true nature and fundamental character. When the “pith and substance” or the core object of a legislation falls within the enacting legislature’s mandate as given in the Seventh Schedule, the law is valid even though it may have ancillary impact on other entries of the schedule. However, when the core character lies beyond the legislature’s mandate, it fails the doctrine of pith and substance and is not constitutionally legitimate.    

According to A.H.F Lefroy, the way of determining the answer demands that courts inquire about the true aspect of law or the intention of the legislator when the legislation was made. The investigation fundamentally concerns legislative aim and consequence, determining whether the law authentically addresses a matter within the enacting legislature’s constitutional authority or whether it represents a disguised attempt to regulate something constitutionally beyond its reach and ambit. This understanding finds a clear expression in India jurisprudence across multiple judicial decisions both before and after the formation of the Constitution.

True Character of the Online Gaming Act

When the above-mentioned framework is applied to the Online Gaming Act, its fundamental character of being constitutionally flawed becomes apparent. The Act defines “online money game” as any online game, without regard to whether skill, chance, or both determine outcomes, that users play by paying fees, depositing funds or other stakes while anticipating victory that brings monetary enrichment. Section 5 of the act forbids any person from offering, assisting, encouraging, or participating in offering online money gaming services. The expanse of this prohibition is significant, it targets not merely the technological infrastructure or payment mechanisms, but the gambling activity itself. The use of terms like “encouraging” and “assisting” reveals that the legislative focus is on preventing the wagering behaviour comprehensively. Section 6 extends this prohibition to advertising that promotes online money games, while Section 7 bars financial institutions from enabling transactions connected to such services. Both of these sections cut off the financial means through which stakes are wagered and winnings collected. Critically, both prohibitions serve as enforcement mechanisms for the primary ban on gambling itself by addressing the symptoms and enablers of the wagering activity.

The prescribed penalties under Section 9 include potential imprisonment extending to three years alongside fines reaching one crore rupees for providing these services and platforms, with increased punishment for subsequent violations. These penalties attach to the act of facilitating gambling itself and criminalizes online money gaming universally. This uniform criminalization reveals that the legislative target is the gambling activity in its entirety. The penalties operate as traditional gambling prohibitions, punishing those who enable wagering for the wagering itself, not for any ancillary technological or commercial aspects of how that activity occurs.

The Act’s preamble reiterates this fundamental character. It recognizes that rapid popularization of online money games accessible through mobile devices and internet infrastructure has generated severe social, financial, psychological and public health impacts. It states how such games frequently have manipulative design elements which include addiction inducing frameworks and undisclosed stakeholders and that this compromises fairness and might lead to huge monetary losses. These concerns of addiction, financial injury, manipulative methodologies, mirror precisely the anxieties that have been the justification for states to control gambling. From a sociological perspective, this reflects how state’s regulation of gambling has been driven less by the form of the activity and more by its social consequences. Because these patterns of social harm and exploitation now arise in a digital format, what we see is a continuance of a social risk rather than the emergence of a new activity. The fact that these dangers now materialize through digital infrastructure rather than physical establishments like casinos fails to transform the activity’s essential nature.      

When it comes to the change in the medium of this gambling being done, one can draw a parallel with Entry 33 which encompasses “sports, entertainments and amusements.” The Supreme Court’s interpretation in State of Kerala v. Asianet Satellite Communications Ltd. granted Entry 33 an expansive, technology agnostic construction, determining that “entertainment” cannot be interpreted in a narrow sense, especially with the advancement of technology. This interpretation carries a lot of weight because it establishes that delivery medium, whether it is physical or digital, is not material. Parallels can be drawn between online gaming and this judicial understanding of entertainment and amusement. Read together, Entries 33 and 34 construct a comprehensive legislative umbrella reserved for States encompassing the full spectrum of gambling activities. The Constitution creates no distinct entries for physical gambling versus digital gambling. It simply assigns “betting and gambling” to States, and that assignment must encompass all manifestations regardless of technological development.

Entry 34 constitutes a specific, unequivocal entry addressing betting and gambling. Any Parliamentary attempt justifying the Act through more general Union List entries like those concerning communication or commerce must give way to this specific State List entry. Harmonious construction doctrine requires interpreting legislative entries to minimize conflict, but when a specific entry unambiguously encompasses a subject matter, that specific entry must receive effect. Otherwise, Parliament could invade State domains simply by emphasizing the technological mediums through which an activity occurs rather than the activity itself. Applied to the Online Gaming Act, this means Parliament cannot regulate gambling which falls squarely within Entry 34 by invoking general entries citing communication networks,  commercial infrastructure or other ancillary entries. 

Rejection of Union Competence Arguments

While the Act’s fundamental character as gambling regulation under Entry 34 is clear, examining potential Union competence arguments further illuminates why Parliament lacks authority here. These counterarguments do have serious considerations since they reflect genuine concerns regarding unique challenges digital technologies present.

1. Inter-State Trade and Commerce

The first counterargument builds upon the transcendent character of online gaming and its relationship to inter-state commerce. Entry 42 of List I grants Parliament exclusive authority over “Inter-state trade and commerce”. Online gaming platforms function across State boundaries, a player sitting in one state can access servers in other states as well, while the platform operates from a fourth or even a foreign jurisdiction. This generates an elaborate commercial network going beyond any individual State’s jurisdiction. Unlike physical casinos situated entirely within a particular State’s territory, online gaming platforms cannot be confined within geographical limits.  It can be contended that this inherent character of having no defined boundaries, necessitates central regulation, as fragmented State-level approaches would not be as effective and generate regulatory loopholes where operators could select the jurisdiction most suitable for them and their operations.

From the point of view of practical enforcement obstacles, this argument does hold some water. If Karnataka prohibits online money gaming and gambling while Maharashtra permits it, what prevents platforms from operating from Maharashtra while targeting the users in Karnataka? The internet thus renders the users’ physical location largely irrelevant. The crux of this argument is that only Parliament possesses the capacity to implement uniform nationwide legislation and can thus effectively address this challenge.

However, this seemingly robust argument collapses as soon as one analyses what the Act actually regulates. The pith and substance inquiry demands examining whether the legislation’s essential character involves regulating commercial flow and trade logistics, or whether it targets the underlying activity itself. The Act does not primarily regulate how money moves between states or how payment systems function. Rather, it prohibits a specific activity of gambling regardless of where it occurs or which and how commercial infrastructure operates. The inter-state commercial dimensions remain merely incidental and ancillary to the Act’s core purpose which is very clearly stated as preventing people from gambling online. Accepting the inter-state trade argument would break down the entire State List concept. Nearly every modern economic activity possesses some inter-state commercial dimension. State regulations governing liquor, drugs, or local businesses, all influence inter-state commerce, yet the Supreme Court has consistently maintained that such incidental effects do not strip States of legislative competence. As the Court observed in R.D. Joshi v. Ajit Mills, the pith and substance principle means that when legislation’s substance falls within a legislature’s legitimate power, the legislation remains valid despite incidentally affecting matters beyond its authorized limits. The inverse must equally be given      importance; Parliament cannot regulate a State subject merely because that subject carries incidental inter-state commercial dimensions.

B. Communication

Another significant argument, that has been made by the Union is  Entry 31 of List I, granting Parliament power over “Posts and telegraphs; telephones, wireless, broadcasting and other like forms of communication”. Online gaming transpires through digital communication networks, transmitted via internet through telecommunications infrastructure Parliament regulates. Could the Act therefore be characterized as communication regulation rather than gambling regulation? One might argue that in regulating what content transmits through communication networks, it merely exercises its established power governing telecommunications.

The argument mixes up the way something is communicated with what is actually being said. Entry 31 empowers Parliament to regulate communication infrastructure and means that is the physical networks, technical standards, spectrum allocation, operational frameworks. It does not grant comprehensive authority to regulate every activity utilizing communication networks as its medium. If this interpretation were accepted, virtually all human activity in the digital era would fall under Parliament’s domain, as nearly everything now involves electronic communication. States regulate countless activities involving contracts, marriages, property transactions, professional licensing that increasingly occur through digital means. The fact that parties communicate electronically does not transform these State subjects into telecommunications regulation matters.

C. Residuary Powers

The third counterargument can draw upon Parliament’s residuary powers under Article 248 read with Entry 97 of List I, granting Parliament exclusive power to legislate on matters not enumerated in State or Concurrent Lists. The Union might argue that online gaming represents a unique phenomenon not contemplated by the Constitution’s framers in 1950. Entry 34’s reference to “Betting and gambling” presumably intended covering physical, traditional wagering forms like card games in physical spaces, horse racing at tracks, mechanical slot machines in casinos. The internet did not exist in its contemporary form when the Constitution was drafted. Could it not be argued that online gaming, particularly in its sophisticated modern manifestations with complex algorithms, virtual currencies, and global player networks, constitutes a genuinely novel subject matter falling into Parliament’s residuary domain?

This argument possesses superficial appeal but ultimately fails because it misunderstands how constitutional interpretation functions in a country with a living constitution. Constitutional entries must be interpreted dynamically, evolving with technological transformations while remaining faithful to their core meaning. The essential question is not whether the specific technological implementation existed in 1950, but whether the fundamental nature of the activity falls within the constitutional entry’s core meaning. ‘Betting and gambling’ describes an activity defined by its essential characteristics of staking something valuable on uncertain outcomes expecting gain. These characteristics remain the same whether gambling occurs through dice in a physical room or through pixels on a screen. The technology may change, but the essential nature of staking value on uncertain outcomes remains unchanged, whether the activity occurs online or on a casino floor. What matters is not the specific technological medium through which an activity happens, but its fundamental character. Otherwise, every technological innovation would create a need for new legislative entries and would come under the residual powers of the union, continuously changing and reshuffling constitutional powers in ways the framers never intended. The Constitution’s distribution of powers would become of no use with time as technology advances., as each technological development would displace subjects from their constitutional fields rendering the Seventh Schedule incapable of adapting to social change. Every new medium that is adapted would then transform Article 248’s residuary power from a gap filling provision into a tool of centralization.      

D. National Security

The fourth and perhaps most politically compelling counterargument is regarding national security, public order, and financial integrity. The Act, in its preamble states that unchecked expansion of these online money gaming services has been connected to unlawful activities including financial fraud, money-laundering, tax evasion, and terrorism financing, thereby threatening national security and state integrity. These are matters of profound national importance. The Union could argue that while “public order” appears in the State List, large-scale money laundering when related to terrorism financing go beyond state boundaries and threaten national security and are very clearly Union subject. The argument of national security might emerge from the preamble, which states that the unchecked expansion of online gaming services have been linked to fraud, money laundering etc, thereby “posing threat to national security, public order and the integrity of State.” Moreover, the scale and sophistication of modern online gaming platforms, often operated from foreign jurisdictions beyond any single state’s reach, create enforcement challenges that only the central government can address. Parliament might contend that the Act fundamentally concerns protecting national security and financial system integrity, with its impact on gambling being merely incidental.

This argument deserves careful consideration because it touches upon grave concerns. However, it ultimately fails the pith and substance test because it mixes up an activity’s consequences with the activity’s essential nature.

The pith and substance inquiry requires examining what the legislation primarily targets, not what broader problems might be connected to that activity. The Act does not establish a specialized framework for investigating money laundering or terrorist financing, those subjects are already addressed by special and dedicated Union legislation like the Prevention of Money Laundering Act, 2002. Instead, the Act prohibits all online money gaming, regardless of the chances that any particular platform is involved in money laundering or terrorism. The large coverage and extent of the prohibition reveals its true character. It clearly targets gambling itself, not the criminal activities that might sometimes accompany gambling. As Justice A.P. Sen noted, “in determining whether an enactment is legislation with respect to a given power, what is relevant is not the consequence but whether, in its pith and substance, it is a law upon the subject-matter in question”. The Act’s subject matter remains betting and gambling, regardless of what other problems might be associated with that activity.

Furthermore, accepting this reasoning would establish a dangerous precedent that could lead to a breakdown of the entire federal structure. If Parliament could regulate any State subject by pointing to its potential connections with national security or inter-state crime, the State List and for that matter the Seventh Schedule would become meaningless. If these potential connections sufficed to justify parliamentary intervention, the carefully calibrated federal distribution of powers would collapse. Federalism is a basic feature of the Constitution that cannot be undermined through creative legal arguments that convert every State subject into a Union concern by pointing to its broader implications. These rejections collectively affirm what the pith and substance analysis revealed, the Act’s true character remains betting and gambling regulation, a subject the Constitution reserves exclusively for States

Conclusion

The conclusion thus becomes abundantly clear, the Online Gaming Act, 2025, fails the doctrine of pith and substance because its essential character is the regulation and prohibition of betting and gambling which is explicitly a subject matter explicitly and exclusively reserved for State legislatures under Entry 34 of List II.  The Act represents what the Supreme Court has termed “colourable legislation”, an attempt to regulate a subject outside Parliament’s competence by focusing on ancillary aspects      while actually targeting the core activity itself.

The implications of this analysis extend beyond this particular Act. India’s digital advancement raises profound questions about how constitutional federalism would adapt to technologies that transcend physical boundaries. Online activities do create genuine regulatory challenges that our federal structure which was designed in a different technological era may struggle to address. Yet the solution cannot be to abandon and break down constitutional principles. The Constitution provides mechanisms for addressing inter-state and national challenges. The Concurrent List allows both Parliament and States to legislate on certain subjects. Article 252 permits Parliament to legislate on State List subjects if two or more States pass resolutions requesting such legislation. Article 356 allows central intervention in extraordinary circumstances. These constitutional solutions and ways exist precisely because the framers understood that rigid federalism could lead to conflict in certain situations. The Online Gaming Act however bypasses these constitutional mechanisms, asserting parliamentary authority over a state subject without following the procedures the Constitution establishes for such interventions.

As Sir Maurice Gwyer noted, “the pith and substance doctrine exists because rigid adherence to strictly verbal interpretation would result in numerous statutes being held invalid.” The doctrine seeks to be      flexible, allowing complex problems to be addressed by different levels. Still, one thing that needs to be kept in mind is that flexibility cannot become so elastic that it disregards the very concept of limited legislative competence.      

Sanskriti Verma is a second-year student at National Law University, Delhi, with a keen interest in Constitutional law and intersectional studies.