How do federal lottery licences conflict with state premises licences?

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Federal Lottery Licences vs. State Premises Licences: A Constitutional Clash

Lottery operators in Kedah have been unable to operate their physical outlets since 2023, despite possessing valid federal business licences. This situation arises from the Kedah state government's decision not to renew premises licences for these businesses, a move that has been deemed unconstitutional by the Court of Appeal. The core of the conflict lies in the division of powers between the federal government, which regulates betting and lotteries, and state governments, which oversee local government matters including the issuance of premises licences.
State Power to Refuse Premises Licences

While state governments, through their local authorities, possess the power to refuse premises licences, this authority is circumscribed. Such refusals must be based on legitimate local government concerns, such as planning, zoning, safety, or public health. However, the Kedah state government's blanket refusal to renew premises licences for lottery businesses was not based on these grounds. Instead, the Court of Appeal found that the state government's action was an attempt to prohibit an activity that falls under federal jurisdiction, thereby overstepping its constitutional boundaries.
Federal Authority Over Lotteries

The Federal Constitution explicitly places "betting and lotteries" under the legislative powers of the federal government. This means that the federal government, through bodies like the Finance Ministry, has the authority to grant and renew annual pool betting licences for lottery companies. In Kedah's case, lottery operators had secured these federal licences, which are subject to specific conditions, including the printing of religious disclaimers on tickets and signage at outlets. Despite holding these federal permits, the state's refusal to grant premises licences effectively prevented these federally-licensed activities from operating within Kedah.
Court of Appeal Ruling and Constitutional Implications

The Court of Appeal's decision in December 2025 highlighted this constitutional tension. The court ruled that the Kedah state government acted unconstitutionally by refusing to renew premises licences for lotteries, viewing it as an encroachment on federal powers. By using its authority over premises licences to effectively ban a federally-licensed activity, the state government was found to be impeding the federal government's exercise of its authority, contrary to Article 81 of the Federal Constitution. This ruling implies that state powers, while extensive in local matters, cannot be wielded to prohibit activities constitutionally reserved for federal regulation.

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How do federal lottery licences conflict with state premises licences?

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