Breaking: SC flags need for three judge bench, pushes Online Gaming Law challenge to January

The Supreme Court on Thursday indicated that the constitutional challenge to the Promotion and Regulation of Online Gaming Act (PROGA), 2025 will likely be placed before a three-judge Bench and taken up only in January 2026, despite repeated pleas from the industry for an urgent hearing.

A Bench headed by Chief Justice Suryakant, sitting with Justice Joymalya Bagchi, heard an application for early listing filed by Head Digital Works (HDW), operator of A23, which warned that the sector is facing an unprecedented shutdown even though the law is yet to be notified.

Senior advocates Aryama Sundaram and Arvind Datar, appearing for Head Digital Works and other petitioners, told the court that the matter had unexpectedly gone off the board of the Bench of Justices JB Pardiwala and KV Viswanathan, which had been hearing connected appeals concerning state-level online gaming bans. “The matter has been removed from the board and we plead for early hearing as the industry has been shut and people are unemployed,” Sundaram submitted, stressing that the petition challenges the very constitutionality of PROGA.

The Bench, however, underscored that challenges involving the “vires of a statute”—particularly those raising questions of legislative competence—are ordinarily assigned to a three-judge Bench. “As a matter of policy, most statutes where such issues arise are placed before a three-judge bench,” the Chief Justice observed. He added that the entire batch of PROGA-related matters, including HDW’s plea, is “likely to be listed in January,” once the appropriate Bench is constituted.

When counsel pressed for an earlier date citing the collapse of industry operations, the Chief Justice responded: “Everything is shut down… We are listing in January. That is what I am promising.” The assurance, while acknowledging the severity of the situation, signalled that the court is unlikely to intervene before the turn of the year.

The direction assumes significance because the core issue in both the PROGA challenge and the already-argued Gameskraft batch is the question of legislative competence. The earlier batch—heard for several weeks by a Bench led by Justice Pardiwala, which has since reserved judgment—concerns whether states can regulate or prohibit online gaming under the Constitution.

The present batch raises the mirror question: whether Parliament can impose a nationwide ban through PROGA. Counsel told the court that the two sets of cases are “intertwined,” since a finding that one level of government lacks competence will necessarily impact the other. This overlap is a key reason the court is inclined to place the matter before a larger Bench in January, along with the reserved state-law appeals.

Petitioners Warn of Sector-Wide Paralysis

HDW has argued that the delay in listing has created a crisis that amounts to a de facto enforcement of the law before it has been notified. The company submitted that banks, payment gateways and intermediaries began withdrawing services within days of PROGA being published on August 22, fearing penal exposure. UPI facilities were blocked, settlements frozen, and WhatsApp business communication channels suspended until undertakings of compliance were given.

The petitioner claims it has had no revenue for nearly three months while continuing to bear monthly operating costs above ₹10 crore. Its workforce has dropped from 606 to 178. Foreign investor Clairvest has written off its entire ₹760-crore investment, citing an adverse regulatory climate. According to the filings, user attrition, halted advertising, and frozen payment infrastructure have made continued operations untenable.

HDW warned the Supreme Court that “every week of delay” is accelerating what it describes as an existential threat to the company and the wider online skill gaming industry, which employs two lakh people and contributes significant direct and indirect taxes.

Centre Defends Law; Says Regulation Was Needed to Address Risks

The Union government, in its affidavit, has defended PROGA as a necessary intervention to counter an unregulated online money-gaming ecosystem that poses risks to public order, financial integrity and vulnerable users. It accused several operators of resisting regulatory oversight and highlighted findings by enforcement agencies regarding foreign-controlled entities, dummy directors, opaque algorithms and manipulative designs.

The government has insisted that Parliament is fully competent to legislate in this area, arguing that the sector’s rapid expansion without a statutory framework has led to social and economic harm.

With the court signalling that the next listing will be in January before a three-judge Bench, the fate of India’s ₹23,000-crore online skill gaming industry will hinge on a constitutional determination early next year. The ruling will clarify whether the Union, the states, or both have the power to regulate or prohibit online money games—an outcome that will shape taxation, investment, employment and platform operations across the sector.

Until then, the industry remains in limbo, awaiting a hearing that could determine its ability to survive.