India’s New Online Gaming Law: Implications for the Gaming Ecosystem
INTRODUCTION
On August 22, 2025, the Indian government notified the Promotion and Regulation of Online Gaming Act, 2025 (the “Online Gaming Act”). It will come into force on a date to be separately notified by the government.
The Online Gaming Act, which was issued without a public consultation process, represents a turning point in India’s approach to online gaming. The government has adopted a split regulatory approach – promoting e-sports and social gaming, while imposing a complete prohibition on online money games (regardless of whether such games are based on skill or chance).
The stated objective of the government appears to be “responsible innovation” in the online gaming sector, while simultaneously addressing concerns relating to socio-economic harm, public health, consumer safety, money laundering and national security.
SCOPE OF THE ONLINE GAMING ACT
The Online Gaming Act segregates the online gaming ecosystem into three categories:
- E-sports: These are competitive multi-player games that will be recognized under the recently-enacted National Sports Governance Act, 2025 and registered with the appropriate authority under the Online Gaming Act. The outcomes of such games must depend entirely on players’ skills (e.g., physical dexterity, mental agility or strategic thinking). While any form of betting or wagering is prohibited, e-sports operators can charge participation fees and may also provide a performance-based prize pool.
- Online Social Games: These are games that are offered purely for skill development, entertainment or recreational purposes without monetary stakes, but can be accessed for a one-time or subscription fee.
- Online Money Games: These are games played for real money stakes, such as fees or deposits, with the hope of financial gain, and regardless of whether such games involve skill or chance or both.
With respect to online money games, the removal of the distinction between games of skill and games of chance reverses a line of judicial precedent that had protected games of skill, starting with R.M.D. Chamarbaugwala v. Union of India (1957), where the Supreme Court of India held that competitions where success substantially depends on skill are protected under Article 19(1)(g) of the Constitution of India. That principle was reinforced in K.R. Lakshmanan v. State of Tamil Nadu (1996), where horse racing and even betting on horse races were recognized as skill-dominated and therefore outside the scope of gambling laws. In State of A.P. v. K. Satyanarayana, the Supreme Court reached a similar conclusion on rummy, categorizing it as a “strategic card game”.
These three rulings together became the bedrock of India’s “preponderance of skill” doctrine, and have since been cited to uphold the legality of fantasy sports, ludo, rummy, and poker. By defining “online money games” to include all stake-based games irrespective of skill or chance, the Online Gaming Act discards this jurisprudence entirely.
Since its notification, several challenges have been brought to the Online Gaming Act before the High Courts of Madhya Pradesh, Delhi and Karnataka relating to: (i) the legislative competence of the central government to legislate on matters in the “state list” under the Constitution of India (i.e., matters such as betting and gambling, which are within the state governments’ legislative domain); and (ii) breach of certain fundamental rights guaranteed under Articles 14, 19 and 21 of the Constitution of India. On September 8, 2025, the Supreme Court of India ruled that all challenges to the Online Gaming Act filed before the High Courts will now be exclusively heard by the Supreme Court and that the High Courts would no longer entertain any cases related to the constitutional validity of the Online Gaming Act. All pending petitions have therefore been transferred to the Supreme Court.
The Online Gaming Act is applicable within the territory of India and to online money gaming services offered within India or operated from outside the territory of India. With its clear extraterritorial application, the Online Gaming Act prevents offshore operators from targeting Indian users, or Indian operators from side-stepping the law by hosting server infrastructure abroad.
PROHIBITIONS AND PENALTIES
The Online Gaming Act stipulates prohibitions that seek to comprehensively restrict the operational ecosystem of online money gaming. These restrictions extend beyond the gaming companies themselves, to the entire chain of service providers and facilitators of online money games.
The Online Gaming Act prohibits the offering, aiding, abetting, inducing or otherwise indulging or engaging in offering online money games or online money gaming services. It also prohibits advertising or promotion of online money games, directly or indirectly across any media, including digital platforms. Finally, the Online Gaming Act prohibits banks, financial institutions and financial intermediaries from facilitating or authorizing transactions related to online money games. Taken collectively, these three-fold prohibitions make it illegal to offer, promote, or facilitate payments for such games in India. The offences under the Online Gaming Act are restricted to the actions of service providers in offering online money games or ancillary services, but not those of players or persons that avail of such services.
Violations of the Online Gaming Act are punishable not just with significant financial penalties, but could have criminal consequences. Offering or facilitating any online money game or facilitating any financial transaction or funds authorization for any online money gaming service may attract imprisonment of up to three years and fines of up to INR 10 million (approximately USD 114,000). Repeat offences are punishable with up to five years’ imprisonment and fines of up to INR 20 million (approximately USD 228,000). Violating the provisions related to advertising and promotion could attract imprisonment of up to two years and fines of up to INR 5 million (approximately USD 57,000), with enhanced penalties for repeat offences.
Pertinently, the offences of offering or facilitating any online money game are classified as cognizable and non-bailable, thereby giving law enforcement agencies the power to arrest without warrants, and any person arrested is not entitled to be released on bail as a matter of right.
REGULATORY OVERSIGHT AND COMPLIANCE
The Online Gaming Act contemplates the establishment of a central Gaming Authority (the “Authority”) with broad supervisory and enforcement powers. The Authority is envisaged as the nodal agency to regulate e-sports and social gaming, and enforce prohibitions on money gaming.
Powers of the Authority
The Authority’s mandate may extend beyond registration of permitted games, to include functions that could influence the sector’s future development:
- Categorization: The Authority has the power to categorize games into the three distinct groups, i.e., e-sports, online social games and online money games. The Authority may also be vested with powers to determine the legal status of new formats and hybrid games that do not fit the current definitions.
- Registration: The Authority will recognize and register permissible games (namely e-sports and online social games).
- Oversight: In order to establish guidelines for responsible gaming and operational safety, it is expected that the Authority will publish guidelines, codes of conduct, and compliance procedures.
- Grievance Redressal: The Authority is expected to serve as the initial forum for resolving user grievances and conflicts. Players will therefore be able to voice concerns about unfair tactics, misclassification, or consumer harm through a formal framework.
Investigative powers
The Online Gaming Act contemplates that the government may, by notification, vest the Authority with investigative powers. Designated officials may have the authority to conduct search and seizure, order the blocking of illegal platforms, and even arrest without warrants if there is reasonable suspicion of a breach. The power to conduct searches extends to physical and digital spaces, including buildings, vehicles, computer resources, electronic records and electronic storage devices.
IMPLICATIONS FOR THE INDUSTRY
1. Prospects in social gaming and e-sports
By explicitly recognizing e-sports and online social games, the Online Gaming Act provides a regulated environment for investment and expansion in this space. In addition to the stated objectives, the Online Gaming Act specifically contemplates that the central government may take steps towards the promotion and development of e-sports, including establishing training academies and research centers, launching awareness schemes and public outreach programs, and introducing incentive schemes. With such legal recognition and promotion by the government, e-sports and online social games operators can now better position themselves for sponsorship and brand agreements.
2. Hazards for operators of real-money gaming
Poker, rummy and fantasy sports platforms, all of which were previously shielded by the legal acknowledgment of the “skill versus chance” distinction, will now find their business models untenable. A number of prominent operators have already announced their intention to withdraw from the real-money gaming market, including Dream11, Gameskraft, and MPL. Operators offering skill-based money games have withdrawn such games from their platforms, or are looking to convert such games into “social games” rather than stake-based money games.
Taxation presents a further paradox. For nearly two years, real money gaming operators have been subject to a 28% GST on deposits, while players were subject to income tax on winnings. The Directorate General of GST Intelligence raised demands exceeding INR 1.12 trillion on gaming operators from August 2017 until June 2022, which was challenged before various courts. With the Supreme Court of India reserving its judgment on the challenge, the industry is caught between a regulatory double bind, i.e., a prohibition under the Online Gaming Act and punitive taxation under the erstwhile GST regime for prior periods.
3. Legal and reputational risk
With the introduction of criminal liability for directors, along with severe penalties and the classification of offenses as cognizable and non-bailable, the Online Gaming Act creates enhanced legal risks for businesses that do not operate squarely within the prescribed parameters. Beyond gaming operators, marketers, payment intermediaries, and even investors and influencers may find themselves under regulatory scrutiny and exposed to reputational risk.
4. Regulation v. prohibition
Industry associations have argued that the government should have relied on appropriate regulation rather than imposing an outright ban on online money games. Safeguards such as KYC, age-gating, and ID-linked accounts were already in place, with payments and withdrawals traceable through banking channels and supported by audits and monitoring systems. These measures ensured a fair degree of transparency and consumer protection. Further regulatory tools like licensing, enhanced KYC, and time-based restrictions, some of which were already contemplated under the Information Technology Act, 2000, could have addressed certain socio-economic concerns.
By outlawing games that involve real money, the government risks driving Indian users to illicitly access offshore platforms, often relying on tools like VPNs or using questionable payment structures. While such offshore businesses are not permitted to target Indian users and such users would be subject to restrictions on overseas remittances under the Indian exchange control regulations, any such shift in user activity could complicate enforcement and make it harder to effectively monitor cross-border operations.
FUTURE OUTLOOK
The Online Gaming Act is arguably the most disruptive intervention in India’s digital gaming economy.
Businesses in this space will need to explore strategic shifts towards e-sports and social gaming and keep a close watch on government announcements regarding effective dates and other regulatory specifics. In the meantime, these businesses must also start evaluating their current contracts and platforms for potential compliance issues.
Several operators are already pivoting in response to the Online Gaming Act. A major player in the paid fantasy sports eco-system has phased out its real money offerings and has shifted focus towards free-to-play social gaming while also branching into adjacent areas like fintech. Additionally, gaming companies and studios have united to form an industry association, the Indian Game Publishers and Developers Association, the primary focus of which is policy advocacy, setting industry standards, providing training and mentorship, facilitating better access to capital, supporting intellectual property development and export readiness, as well as scaling up e-sports and community engagement initiatives.
In parallel, the raft of constitutional challenges will test the Online Gaming Act’s reach and enforceability. These petitions will likely impact the timeline of its rollout and the manner in which it is implemented. The resulting judgments could reset the balance between consumer protection, innovation, and state control, and will shape the competitive landscape of India’s online gaming industry.