The Lift Line
“A prohibition may be morally appealing yet administratively futile, or, worse, positively counterproductive.”
Why This Editorial Matters for Your Exam
This Lead article connects three syllabus lines: federalism and the Seventh Schedule (GS2), State finances (GS3) and the ethics of state paternalism (GS4). The author, K. Ashok Vardhan Shetty, a retired IAS officer and a member of the Justice Kurian Joseph Committee on Union-State Relations, makes a specific legislative proposal that sharpens the answer: amend Section 5 of the Lotteries (Regulation) Act, 1998.
GS Paper 2: Distribution of powers between the Union and the States; statutory frameworks; judicial interpretation. GS Paper 3: Mobilisation of resources; State finances. GS Paper 4 (link): Paternalism versus autonomy; regressive revenue.
| Concept | Meaning | Why it is testable |
|---|---|---|
| Entry 40, Union List | “Lotteries organised by the Government of India or the Government of a State” | Parliament legislates on State lotteries |
| Entry 34, State List | “Betting and gambling” | Private gambling is a State subject |
| Res extra commercium | An activity outside commerce, so not protected as a trade | Why States can ban gambling |
| Public-operator model | The State or its entity runs the lottery; private firms only supply services | About 70 per cent of jurisdictions |
| Concession model | The State licenses a private operator | The alternative |
Background and Context
The law. The Lotteries (Regulation) Act, 1998 allows States to organise lotteries subject to the conditions in Section 4. The author describes Section 5 as letting a State prohibit other States’ lotteries within its territory, and Section 6 as letting the Union prohibit lotteries that violate the conditions.
The judgment. In B.R. Enterprises v. State of U.P. (1999), the Supreme Court upheld the Act and treated lotteries as res extra commercium, but read Section 5 down: a State may shut out other States’ lotteries only if it runs none of its own.
Who runs lotteries. A Lok Sabha reply of 14 March 2023 (background) listed nine States operating lotteries: Arunachal Pradesh, Goa, Kerala, Maharashtra, Mizoram, Nagaland, Punjab, Sikkim and West Bengal. Tamil Nadu (2003) and Karnataka (2007) chose total prohibition.
Kerala’s model. Kerala runs its lottery departmentally. In 2023-24, it earned Rs 2,883.80 crore: Rs 1,129.71 crore in net lottery revenue and Rs 1,754.09 crore in State GST, with surpluses directed to health care and welfare, the author notes. Other official figures differ: the Directorate of State Lotteries, in an RTI reply reported in August 2026, put the 2023-24 operating surplus at Rs 1,203.27 crore, so the author’s net-revenue figure and the Directorate’s surplus appear to be measured differently.
The Analysis
1. Vices are fiscally valuable, and bans do not end demand. The author opens with Napoleon III’s retort on tobacco and the US experience of Prohibition (1920-1933), repealed by the 21st Amendment: suppressing legal supply while demand remained fed organised crime and cost revenue.
2. What lottery bans actually do. They drive players to smuggled tickets, matka, satta, single-digit rackets and offshore portals run through cash agents and mule accounts, with no audits, age checks or remedies against fraud. Vendors, many of them poor or disabled, lose livelihoods.
3. Paternalism with a class bias. The affluent can speculate in derivatives or crypto-assets, though SEBI studies found most retail F&O traders lose money; the state regulates those markets through disclosure and fraud control rather than bans. Lotteries could follow the same principle, with stricter safeguards.
4. What other federations do. Lotteries operate in 45 US States, all Canadian provinces, all Australian States and all 16 German Lander, usually under a public operator, with cross-border sales only by consent or through pooled multi-jurisdiction games.
5. The fix. Amend Section 5 so that it applies “whether or not the prohibiting State organises a lottery of its own”, with destination-State consent decisive but uniform (admit all outside lotteries or none); add a Section 4A for multi-State lotteries by agreement; prefer departmental operation with small vendors, persons with disabilities, SHGs and cooperatives over marketing agents.
The precision that earns marks. Distinguish the two entries: State-run lotteries fall under Entry 40 of the Union List, so Parliament made the 1998 Act; betting and gambling in general fall under Entry 34 of the State List. Taxes on betting and gambling are no longer a State List entry: the 101st Amendment (2016) rewrote Entry 62 to cover only entertainment taxes levied by local bodies, and betting, gambling and lotteries now come under GST, at 40 per cent since the 2025 rate rationalisation.
Data and Institutions Vault
Prelims-grade facts:
The Constitution:
- Entry 40, List I: lotteries organised by the Government of India or of a State.
- Entry 34, List II: betting and gambling.
- Since the 101st Amendment (2016), Entry 62, List II covers only entertainment taxes levied by local bodies; betting and gambling are taxed under GST.
The statute and the case:
- The Lotteries (Regulation) Act, 1998 lets States run lotteries subject to the conditions in Section 4.
- B.R. Enterprises v. State of U.P. (1999): a State may exclude other States’ lotteries only by becoming lottery-free.
- Courts treat gambling, including lotteries, as res extra commercium, outside Articles 19(1)(g) and 301.
The numbers (as cited by the author):
- Nine States ran lotteries, per a Lok Sabha reply of 14 March 2023.
- Kerala, 2023-24: Rs 2,883.80 crore in all, including Rs 1,754.09 crore of State GST.
Prelims, the traps:
- Lotteries are not a pure State subject: State-organised lotteries are in the Union List.
- The Promotion and Regulation of Online Gaming Act, 2025 separately bans online money games.
⚠️ Watch the trap: res extra commercium means a State can ban gambling without having to justify the ban as a “reasonable restriction” on a fundamental right to trade.
The Debate
For the author’s view. A regulated, transparent public lottery protects players better than an illegal market, keeps revenue for public purposes and preserves adult choice, just as regulated financial markets do.
The complication. Lotteries are a regressive tax on hope: they draw mainly on poorer households, and a State that depends on their revenue has an incentive to promote play, not restrain it. States that chose prohibition did so partly to protect poor households from that pull.
The balanced verdict. If lotteries are to be legal, legality must come with strict safeguards: disclosed odds, limits on draw frequency and instant games, no credit sales, curbs on advertising, age checks and support for problem gamblers. The Section 5 fix is a sound federal reform either way, since it gives each State a real choice.
How to Think About This
Before choosing a ban, ask where the demand will go. For any vice (alcohol, tobacco, gambling, drugs), compare two regimes: the harm under regulation and the harm under prohibition, including the illegal market a ban creates. Bihar’s alcohol prohibition, Gujarat’s long-standing ban and the US Prohibition are useful examples for answers on this trade-off.
Diagram-in-Words
Takeaway Box
- Framework: Entry 40, List I (State lotteries); Entry 34, List II (betting and gambling); Lotteries (Regulation) Act, 1998.
- Case: B.R. Enterprises (1999): exclude others only by going lottery-free.
- Argument: prohibition fails; regulate with safeguards; public-operator model.
- Proposal: amend Section 5; add Section 4A for multi-State lotteries.
- Example: Kerala’s departmental lottery (Rs 2,883.80 crore in 2023-24 by the author’s count, including State GST).
Sources: The Hindu, India Code
Source: Regulate, Don't Prohibit: The Case for Accountable State Lotteries and a Fix to Section 5 of the Lotteries Act — Ujiyari.com | Free UPSC & State PCS Editorial Analysis
