Kedah Lottery Ban Dispute Reaches Federal Court Over State and Federal Powers

KUALA LUMPUR, AUGUST 2026 — The Kedah state government’s legal battle over its move to stop lottery outlets from operating in the state reached the Federal Court on Wednesday, August 12, 2026, as it seeks permission to appeal an earlier Court of Appeal ruling.

The dispute centres on Kedah’s decision not to renew premises licences for lottery and number forecast operators from 2023, even though the companies continued to hold licences issued by the federal government.

In December 2025, the Court of Appeal ruled by a 2-1 majority that the Kedah government had acted unconstitutionally, unlawfully and irrationally by effectively preventing federally licensed lottery businesses from operating through a blanket refusal to renew their premises licences.

The court also upheld an earlier decision requiring compensation to be assessed for losses suffered by the affected lottery operators. Kedah must now obtain leave from the Federal Court before its appeal can proceed.

The case does not directly concern whether gambling should be socially or morally permitted. Instead, the main constitutional question is whether a state government can use its authority over local premises licences to effectively prohibit an activity regulated and licensed by the federal government.

Kedah Menteri Besar Datuk Seri Muhammad Sanusi Md Nor first announced in November 2021 that the state would stop renewing premises licences for lottery and gaming outlets. Local councils subsequently informed operators that their premises licences would not be renewed from January 1, 2023.

However, the Finance Ministry renewed the federal pool betting licences for the affected companies for 2023. This created a situation where the operators were legally licensed at the federal level but could no longer use physical outlets in Kedah.

In 2023, companies linked to Sports Toto and Magnum 4D, together with several agents and officers, filed six judicial review cases challenging Kedah’s decision. The High Court ruled in their favour in June 2024 and declared the state’s action unconstitutional, illegal and irrational.

The Court of Appeal later upheld that decision. The majority judges found that betting and lotteries fall under federal legislative powers, while state and local authorities retain powers over genuine premises-related matters such as planning, zoning, safety, sanitation, traffic and public nuisance.

The majority ruled that local councils may reject individual premises licences for legitimate local reasons, but cannot use those powers as a blanket mechanism to prohibit an activity that has been legally licensed by the federal government.

A dissenting Court of Appeal judge took a different position, arguing that the decision not to renew business premises licences remained within the state’s constitutional powers.

The Federal Court proceedings are therefore expected to focus on whether Kedah should be allowed to pursue its appeal based on six proposed questions of law. The eventual outcome could have wider implications for the division of powers between Malaysia’s federal and state governments.