Shares of gaming companies such as Delta Corp, Nazara Technologies, and OnMobile Global plummeted up to 18% on Friday after the Supreme Court upheld the constitutional validity of the 28% goods and services tax (GST) levy on online gaming and validated retrospective tax demands raised by authorities.

The ruling is being seen as a major setback for India’s online gaming industry, which is already grappling with sweeping regulatory changes and a sharp contraction in market size following the ban on real-money gaming (RMG).

Weighed down by the development, shares of Delta Corp plunged as much as 17.8% to ₹66.60 on the BSE, dragging the company’s market capitalisation down to ₹1,795 crore. Nazara Technologies declined 3.5% to ₹279.35, taking its market value to ₹10,520 crore, while OnMobile Global slipped 1.2% to ₹51.10, with a market capitalisation of ₹543 crore.

The broader market also remained subdued, with the Sensex and Nifty trading over 0.2% lower amid caution surrounding developments related to the reported U.S.-Iran peace negotiations.

The Supreme Court, in a judgment delivered by a bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan, dismissed petitions filed by online gaming companies, casinos, turf clubs, and industry associations challenging GST notices and the legal framework governing online gaming taxation.

The apex court upheld the Centre’s interpretation of the GST regime and validated retrospective tax demands estimated at nearly ₹1.5 lakh crore. The verdict is expected to have far-reaching implications for the financial viability and regulatory structure of the sector.

The judgment comes at a time when the industry is already undergoing structural changes following the enactment of the Promotion and Regulation of Online Gaming Act in August 2025, which effectively prohibited online money games involving monetary stakes.

The legislation led to several real-money gaming ventures either shutting operations or pivoting toward esports and social gaming categories, which are yet to achieve meaningful monetisation.

Industry estimates suggest the combined tax exposure, including interest and penalties, could exceed ₹1.3 lakh crore following adjudication.

According to a recent ICICI Securities report, India’s gaming industry has shrunk nearly 80% after the August 2025 ban on real-money gaming, reducing the market size from around $6 billion to nearly $1 billion.

Before the ban, real-money gaming contributed nearly 88-90% of the sector’s revenue, with companies such as Dream11, Games24x7, Zupee, and WinZO dominating the ecosystem.

Post-ban, the industry has become significantly smaller and more concentrated, with 70-80% of the current ₹10,000 crore market controlled by two to three major players, including Krafton’s PUBG/BGMI and Garena’s Free Fire, the report noted.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)