State power to ban online lotteries upheld under a non-discriminatory reading of the Lotteries Regulation Act.

Section 5 of the Lotteries (Regulation) Act, 1998 empowers a State to prohibit the sale within its territory of lottery tickets, and that power was held capable of extending to online lotteries as a distinct class through an updating construction of the Act. The scheme of Sections 4, 5 and 6 permits State prohibition of lottery sales, while the earlier interpretation of Section 5 was read as requiring non-discriminatory treatment of similarly situated lotteries rather than a ban on every lottery in every situation. Because the State applied the prohibition uniformly and the courts below found additional breaches of Section 4 conditions, the challenge to the notification failed and the prohibition on online lotteries was upheld.

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Issues: Whether a State Government can prohibit the sale of online lotteries under Section 5 of the Lotteries (Regulation) Act, 1998 while permitting paper lotteries, and whether such prohibition is inconsistent with the Act, the constitutional distribution of legislative power, or the earlier ruling on lotteries.

Analysis: Section 5 empowers a State Government to prohibit the sale within its territory of tickets of lotteries organised by other States. The scheme of the Act shows that Section 4 regulates the conditions for State-run lotteries, Section 6 enables the Central Government to act where lotteries are conducted in breach of Section 4 or where tickets are sold contrary to a State prohibition under Section 5, and Section 12 authorises rule-making. The Act was enacted in a factual setting dominated by paper lotteries, but its language is capable of being applied to later technological developments by an updating construction. Online lotteries were later recognised as a separate category in the 2010 Rules, and the Court treated them as a distinct class for the purpose of applying Section 5. The earlier interpretation of Section 5 in the lottery case did not confine the State's power to a total ban on every form of lottery in all situations; rather, the controlling principle is that the State must not pick and choose between similarly situated lotteries in a discriminatory manner. If a State decides to prohibit a particular class of lottery within its territory, it may do so only on a uniform basis, including as to its own lottery activities of that class. On the facts found by the courts below, the online lottery scheme also involved violations of Section 4 conditions, reinforcing the validity of the State's action.

Conclusion: The prohibition on online lotteries was upheld as valid, and the challenge to the notification failed.

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