Fantasy Sports, GST, And Gambling: The Latest Legal Drama Unfolding

Introduction: The Game Just Got Serious

What used to be a harmless fun-drafting dream teams, outsmarting your friends, and pitting small winnings-is now one of India's fastest-growing new digital economies. With fantasy sports like Dream11, My11Circle, and MPL, it not only gamifies cricket, kabaddi, and football but also metamorphoses the way millions engage with sports in general. This multibillion-dollar ecosystem however, is finding itself caught up in another kind of game: in courtrooms, ledgers, and legislative chambers.

It is much more than just money or fitting within regulations; it is a bigger issue. The question tearing through tax tribunals and Supreme Court benches is this: Are fantasy sports games of skill, or have they merely become another form of legalized gambling-wrapped in jerseys and algorithms? It may sound like a legal technicality, but the ramifications are sweeping.

A "game of skill" enjoys constitutional protection under Article 19(1)(g). Gambling activity? It invites the heavy taxations, state regulations, and also criminal liability. That's what it all boils down to as to whether the GST should be levied at 18% on platform fees or at an astonishing 28% on the entire contest value, including player stakes. This issue is very important for fantasy startups; it isn't an accounting issue. It's an existential threat.

Now, here we are, in August 2025, preparing for the Supreme Court's deliberation. And thus, the industry's fate sways perilously in the balance. It's not just going to affect a single sector; it is indeed going to test India's newer approach to innovation, legal clarity, taxation policy, and constitutional fidelity.

The rules of engagement have suddenly changed. And standing in the middle of a high stakes constitutional drama, this is not terrible for the fantasy sports industry: it once seemed an oddball.

The GST Controversy: 28% on What, Exactly?

In August 2023, the GST Council sprung an unexpected surprise on the gaming industry when it declared that the 28% Goods and Service Tax would apply to every deposit made by a player, and not just imposed on the actual earnings, known as Gross Gaming Revenue (GGR) as usually defined by the platform.

To illustrate, if a user deposits ₹1,000 into a fantasy contest, then the platform will be paying ₹280 as GST, even if it earned ₹100 as its commission. This effectively taxes money the company neither earns nor retains.

Government has rationalised it by the reason that such transactions fall under the category of ''actionable claims'' as types of gambling, betting, or lotteries. Response from the industry was swift. Dream11, Gameskraft, and other major companies took the matter up in court. The Gameskraft case, which is currently pending in the Supreme Court, has become very important for the survival of the industry.

Skill vs. Chance: A Battle of Legal Principles

Fantasy sports platforms have emphasised that their product is based on skill rather than luck, which is more than jargon; it has significant legal ramifications.

Because even Indian courts have a history of saying this, in 2019, the Supreme Court made a provision for fantasy sports as skill-based games in the Dream11 case. Similar echoing syllogisms have been reflected by the Bombay High Court, the Rajasthan High Court, and the Kerala High Court. After all, only an 18 per cent tax is levied on the fees paid by the platform for skill games like rummy-any reason to have a different attitude towards fantasy sports?

But, in the light of this judgment, the GST Council may have come with a new interpretation which negates the above jurisprudence. This raises the stakes not only in terms of regulatory overreach, but also in constitutional terms-in violation of Article 19(1)(g) freedom to practise any profession and Article 14, prohibiting equality before law.

The Industry Strikes Back

The over ₹2.5 lakh crore tax demands from industry giants such as Dream11, Gameskraft, and MPL due to the retrospectively imposed 28% GST have driven these companies to refer to this taxation as 'irrational and economically unfeasible; it does not retain the entire deposit amount but is simply a service fee or commission. Consequently, all stakes taxed will amount to revenues the company never receives.

More importantly, it will disproportionately impact on startups and small-to-mid-scale platforms, most of which operate on very thin margins. Mass closure or bankruptcy now seems a real threat. Such warnings are also predisposed to an exodus of ever-increasing investors, exponential job losses likely tied with a shift of operations to offshore jurisdictions that have fairly murky waters regarding consumer risks and ambiguity in regulation.

Regulatory Disarray

India's legal systems for online gaming are riddled with contradictions and confusion.

The GST Council categorizes all real-money gaming, irrespective of the element of skill, as gambling. The state governments, on their part, have taken diametrically opposite stances—some, like Tamil Nadu and Andhra Pradesh, instituted a total ban on fantasy sports. The state of affairs, however, is such that courts tend to pronounce that fantasy sports are legal, skill-based activities unless expressly prohibited by a law.

Meanwhile, ethical self-regulation is championed by industry bodies like the Federation of Indian Fantasy Sports (FIFS) and the All India Gaming Federation (AIGF), but they hold no statutory authority. This fracture in the regulation creates a grey area in which a fantasy contest may be one hundred percent legal in one state while it may be totally illegal in another.

Economic and Social Impact

This problem is more than just a problem of taxing; it is also an issue of the survival of a critical part of India's digital economy. The sector supports jobs in legal, tech, operations, compliance, and marketing for thousands of people. It creates sports viewership and consumer engagement while incubating innovation and entrepreneurship; farther, it brings in huge tax revenues to the state and central exchequers.

All this is being affected by the tax regime just recently imposed. If platforms are forced to shut down or relocate to tax-friendly jurisdictions, India stands the risk of creating a regulatory void. Users may start migrating to unregulated apps, where the risks of fraud, addiction, and money laundering are all too real.

This has already impacted investor sentiment. Reports suggest that venture capital investment in Indian gaming dropped by more than 70% in the first half of 2025. The moment the Supreme Court upholds the Centre's interpretation of the law, this figure may be pushed even lower, putting one of India's most vibrant digital sectors into a stall mode.

Constitutional Dimensions

This is not merely a tax scuffle; it is a contest between the constitution and an integrity test by the judiciary.

The Supreme Court now faces the following questions:

• Whether the GST Council can override the judicial findings of classifying fantasy sports as games of skill?
• Whether retrospective taxation of this magnitude violates principles of natural justice?
• Whether companies can be penalised for an interpretive shift in tax policy that took place long after their operations began?

If the verdict is in favour of the government, then it would set up another dangerous precedent, one where regulatory agencies come up with new interpretations over settled legal positions and leave business completely in the dark and devastated financially.

What Happens Next?

The Supreme Court is expected to deliver its judgment in the Gameskraft case by either late August or early September 2025. Its ruling will address three critical questions:

1. Are fantasy sports constitutionally protected as games of skill?
2. Does the 28% GST apply to the entire stake or only the platform's commission?
3. Will such tax be chargeable with retrospective effect, creating liabilities in thousands of crores?

Whatever the court decides, the verdict will have long-term implications for how India governs, regulates, and taxes the digital economy, from e-sports to crypto to content creation a completely new facet would open up.

Conclusion: The Final Whistle

India stands at a crossroads.

This fight over GST and fantasy sports isn't only about cricket scores, gaming platforms, or even whether online games are "skill" or "chance." It's a much bigger thing. It's about how a 21st-century democracy responds to disruptive innovation-who can have faith in the ability of business to function in an environment free of retroactive taxation and ambiguous laws. Whether matters of constitutional protections such as equality, clarity in taxation, and the right to trade get either respected or disregarded for short-term revenue churn is why we are having this fight.

Fantasy sports have become the new legal battleground for some of the late-India's most basic conflicts: between state revenue and economic freedom, between innovation and regulation, and between populism and principle.

Previously the apex court has upheld the distinction between skill games and gambling in RMD Chamarbaugwala v. Union of India where the court said that competitions where success depends substantially on skill are not gambling and thus enjoy constitutional protection under Article 19(1)(g) and this precedent was reaffirmed in K.R. Lakshmanan v. State of Tamil Nadu where horse racing was recognized as a game of skill, not chance. They were no easy decisions; they were robust constitutional interpretations aimed at protecting enterprise and injecting nuance in the law. If the current litigation goes around these precedents and tries to impose a flat 28% GST under the quantum of gambling, it would pose a threat to the jurisprudential clarity achieved over the years.

What will also ultimately determine India's global image as a reliable destination for digital investment is at stake. If rhetoric-based tax policy goes awry, with what is today called innovation being termed evasion there, it does not hurt only gaming. It, in fact, undermines the interest of the startups, investors, and creators across sectors in the digital economy. In a country that is intent on espousing "Digital India" and "Startup India," such a contradiction begs attention.

Such is the time that we put in the hands of policymakers and judges to show what kind of regulatory philosophy India adopts. One that clamps down on ambiguity and uses taxation as a blunt instrument? Or one that treats new industries not as threats but as opportunities, worthy of regulation, yes, but also respect?

The fantasy sports market is now the litmus test for India's commitment to fair taxation, regulatory clarity, and constitutional integrity. The thoughtful, calibrated approach is required not just theoretically; it is non-negotiable.

So when you next log in to set your Dream11 team or make that pick on MPL, remember: the real game, the one determining the outcome of fantasy sports, is not on your phone.

It is being played out in the Supreme Court of India. Stakes? Much bigger than a cash prize.

References

• Economic Times, "Online gaming equals gambling, taxable at 28% GST: Centre tells Supreme Court", May5, 2025.
• Economic Times, "Games of skill not gambling: Online gaming cos tell SC as they challenge Rs 1.12 lakh cr tax demand", May 7, 2025.
• G2G News, "GST on Online Gaming: Supreme Court tags Maha SLP in Dream11 GST case with Gameskraft batch", July 30, 2025.
• CA Club India, "Supreme Court to Conclude Hearings on Online Gaming GST Case", July 31 2025.
• Moneycontrol, "Centre argues online gaming firms are 'suppliers', rejects HSN code as prerequisite for GST payment", August 5, 2025.
• GamesHub, "Fantasy Sports Involve Strategy, Not Betting, Gaming Companies Appeal to India's Supreme Court", July 29, 2025.
• RMD Chamarbaugwala v. Union of India, AIR 1957 SC 628
• K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.