Beyond the Ban: Rethinking Online Gaming Regulation in India

Introduction

In recent years, India’s online gaming sector has undergone a dramatic transformation. What began as a niche form of entertainment has evolved into a sprawling digital economy, encompassing e-sports, casual social games, and real money gaming (RMG) platforms. Companies like Dream11 and Mobile Premier League (MPL) have become common names, attracting millions of users and crores in investment. However, this rapid growth has also triggered concerns around addiction, financial exploitation and deceptive algorithms.

In response, the Indian Parliament enacted the Promotion and Regulation of Online Gaming Act, 2025 (the Act)¹ which introduces a blanket ban on online money games and establishes a centralised regulatory authority. While the Act aims to protect vulnerable users and curb illicit activities, it raises serious constitutional and policy questions. Moreover, it fails to make a distinction between games based on skill and games based on chance while banning it. This article critically examines the Act’s structure, implications, and enforceability, and proposes a more proportionate regulatory alternative.

Legislative framework and classification of online games

Section 2(1)(f)² of the Act defines “online game” as any game played on an electronic or digital device, managed through software and facilitated via the internet or other electronic communication technologies. It classifies online games into three categories:

(a) E-sports: Section 2(1)(c)³ of the Act defines it as games played as part of multisport events, recognised under the National Sports Governance Act, 2025⁴. These are skill-based and do not involve monetary stakes.

(b) Online social games: Section 2(1)(i)⁵ of the Act defines it as non-monetary games played for recreation, education or skill development.

(c) Online money games: Section 2(1)(g)⁶ of the Act defines it games involving stakes, fees, or deposits with the expectation of monetary returns. These may involve elements of both skill and chance but are excluded from the definition of e-sports.

The Act imposes a complete ban on online money games, prohibits advertisements promoting such games, and bars financial institutions from processing related transactions. It also establishes a Central Authority under Section 8⁷ of the Act to classify games, enforce compliance, and determine whether a game qualifies as an online money game.

Salient features and enforcement mechanism

Prohibition and penalties

The Act criminalises the offering, facilitation, and advertisement of online money games. Key penalties in the Act include the following:

(a) Any person who offers an online money gaming service in contravention of Section 5⁸ of the Act shall be punishable under Section 9(1)⁹ with imprisonment for a term that may extend up to three years, or with a fine that may extend up to one crore rupees, or with both.

(b) Any person who in violation of Section 6¹⁰ of the Act makes or causes to make an advertisement in any form of media promoting online money games shall be punishable with imprisonment for a term that may extend up to two years, or with a fine that may extend up to fifty lakh rupees, or with both.

(c) Any person who engages in or authorises any financial transaction in violation of Section 7¹¹ of the Act shall be punishable with imprisonment for a term that may extend up to three years, or with a fine that may extend up to one crore rupees, or with both.

(d) Any person who having been convicted under sub-section (1) or sub-section (3) of Section 9¹² of the Act is subsequently convicted again under the same provision shall face enhanced penalties as per sub-section (4) of Section 9¹³. For the second and every subsequent offence, such individual shall be punished with imprisonment for a term not less than three years, which may extend up to five years, and shall also be liable to a fine not less than one crore rupees, which may extend up to two crore rupees.

Under the Act all offences are classified as cognizable and non-bailable under the Nagarik Suraksha Sanhita, 2023 (BNSS)¹⁴, thereby enabling law enforcement authorities to make arrests without a warrant.

Enforcement powers

The proposed authority under the Act is granted sweeping powers, including:

(a) Blocking access to online platforms hosting money games.

(b) Conducting warrantless searches of digital and physical premises.

(c) Overriding access codes and passwords to seize evidence.

These provisions raise concerns about privacy, due process, and the potential for unregulated surveillance.

Constitutional challenges and federalism concerns

Legislative competence

Under Entry 34¹⁵ of the State List in the Seventh Schedule to the Constitution¹⁶, the State Governments have exclusive legislative competence over betting and gambling. In exercise of this power, most States have either extended the application of the Public Gambling Act, 1867¹⁷ or enacted their own statutes to regulate gambling and gaming activities, including online gaming. Given that betting and gambling fall squarely within the domain of State Legislatures, any attempt by Parliament to impose a blanket prohibition through Central legislation arguably exceeds constitutional boundaries.

This is so because several States have enacted their own laws to prohibit and regulate online games and platforms. For instance, Tamil Nadu enacted the T.N. Prohibition of Online Gambling and Regulation of Online Games Act, 2022¹⁸ to regulate online games. Similarly, States like Nagaland and Sikkim¹⁹ have enacted their own legislations to regulate online games.

Furthermore, judicial pronouncements have affirmed this position, recognising the authority of State Governments to regulate online games. Moreover, in response to State-level bans such as those enacted in Tamil Nadu and Karnataka, courts have consistently held that blanket prohibitions on games of skill are unconstitutional. Instead, States are required to adopt regulatory frameworks that address potential harms without infringing on lawful skill-based gaming.

The Central Act²⁰, by prohibiting online money gaming, including games of skill creates a direct conflict with existing State-level gaming enactments. This overlap raises serious concerns about legislative competence and federal harmony in the regulation of online gaming.

The skill versus chance distinction

Through numerous judgments, courts have consistently upheld the distinction between games of skill and games of chance. In All India Gaming Federation v. State of Karnataka²¹, the Court held certain provisions of the Karnataka Police (Amendment) Act, 2021²² which banned online games played for stakes to be ultra vires the Constitution²³ and accordingly struck them down. In doing so, it examined the legal distinction between a game of skill and a game of chance, and concluded that online gaming, wherein users exercise skill through superior knowledge, judgment, and attention, cannot be classified as a game of chance. Furthermore, the Allahabad High Court reaffirmed the distinction in DM Gaming (P) Ltd. v. State of U.P.²⁴, and held that Poker and Rummy are absolutely a game of skill and not gambling.

However, the Act²⁵ disregards this distinction by broadly defining “online money games” to include all games played for stakes, irrespective of their skill component. By imposing a blanket prohibition without evaluating the nature of the game or the degree of skill involved, the Act effectively collapses the distinction and enforces an indiscriminate ban.

Denial of livelihood for professional players: Article 19(1)(g)

The blanket ban on online money games (skill-based) also amounts to a denial of the constitutional right to livelihood for thousands of professional players who earn a living through skill-based platforms. By banning all online games without a distinction between skill and chance, the Act arbitrarily extinguishes a legitimate source of livelihood, violating Article 21²⁶ of the Constitution which guarantees the right to life and personal liberty, including the right to pursue a profession.

Such a right is also recognised by various judicial pronouncements, which have held that banning online skill-based games violates Article 19(1)(g)²⁷ of the Constitution. In Junglee Games India Private Limited v. State of T.N.²⁸, the Madras High Court held that when a game is demonstrably based on skill rather than chance, the activity qualifies as a legitimate business protected under Article 19(1)(g)²⁹. The Court emphasised that competitions involving games of skill must be regarded as business activities, and any blanket prohibition on such games would amount to an unconstitutional restriction on the right to trade and profession.

By failing to distinguish between skill and chance, the Act³⁰ collapses this significant distinction and imposes a sweeping ban that directly infringes upon the rights of professional gamers. It not only disregards settled jurisprudence but also undermines the livelihoods of thousands of professional players.

Missed fiscal opportunity: The cost of prohibition

The Goods and Services Tax (GST) Council’s decision to raise the tax rate on online RMG from 28% to 40%³¹ reflected a clear intent to treat the sector as a high-revenue category. This elevated slab could have significantly boosted government’s revenue collections from a rapidly growing digital economy. However, the blanket ban imposed under the Act may effectively nullify this potential.

Instead of leveraging regulation and taxation to harness revenue, the Government’s prohibition risks driving users toward offshore and unregulated platforms that operate outside India’s tax net. This not only erodes tax collections but also undermines broader economic activity linked to the gaming ecosystem. The 40% GST, if paired with a robust licensing framework, could have transformed RMG into one of India’s most lucrative and accountable digital sectors. The current approach, however, sacrifices long-term fiscal gains.

Policy alternatives and recommendations

Proportionate regulation

A blanket ban on online money games, while aimed at curbing addiction and financial exploitation, risks dismantling a thriving digital economy. A more balanced alternative would be a licensing and regulatory regime that distinguishes between games of skill and games of chance, allowing legitimate platforms to operate under strict compliance standards. The key components may include:

(a) Independent technical audits to detect deceptive algorithms.

(b) Mandatory age and identity verification.

(c) Spending limits.

(d) Clear distinction between skill and chance-based games.

Such a model would preserve and enable innovation and address public concerns without dismantling the entire ecosystem.

Transparent enforcement mechanisms

To ensure that the enforcement of the Act³² does not violate individual rights, it is essential to place limits on how authorities exercise their powers especially when it comes to conducting searches and seizures. Without proper checks and balances, such powers could lead to arbitrary action, undermining the constitutional guarantees of privacy, and due process.

Additionally, the Act should provide clear and accessible grievance redressal mechanisms for users and gaming platforms who may be unfairly targeted or affected by enforcement measures. This would allow individuals and companies to challenge wrongful actions, seek remedies, and hold authorities accountable. In essence, these safeguards are not just procedural formalities, they are vital to maintaining trust in the regulatory system and ensuring that enforcement is fair, transparent and constitutionally sound.

Conclusion

The Act represents a bold attempt to tackle legitimate concerns around addiction, fraud and illicit financial flows. However, India’s online gaming sector is a complex landscape rich with economic potential, legal nuance and technological innovation. While the Act aims to protect users, its blanket ban risks undermining a thriving industry that generates substantial public revenue. A more balanced and thoughtful regulatory approach, one that clearly distinguishes between games of skill and chance, enforces consumer safeguards, and promotes responsible innovation, can help India build a safe, vibrant, and economically rewarding gaming ecosystem.