Rolling the Dice on Regulation: Dissecting the Promotion and Regulation of Online Gaming Act, 2025
Introduction
India’s tryst with regulation often swings like a pendulum - sometimes too cautious and other times too heavy-handed. The most recent swing towards the latter was when the Parliament passed the Promotion and Regulation of Online Gaming Act, 2025 (“Online Gaming Act”)[1] which received the President’s assent. At a time when the country is striving to position itself as a hub for digital innovation, the Act reshapes the landscape of the online gaming sector by imposing an absolute prohibition on all online money games (whether based on skill or chance), while recognizing and regulating only e-sports and online social games.
The Act is framed as a public welfare step to address the risk associated with online money-based games, ranging from addiction and financial agony to debt trap and, in extreme cases, self-harm leading to suicides as well. The Online Gaming Act aims to prohibit and curb the exploitation caused by these platforms while ensuring the digital economy moves towards better alternatives. In this framework, e-sports are elevated as legitimate, skill-based competition, and online social games are encouraged as recreational or educational activities considered safe. Yet this categorical prohibition on an entire segment of this sector, instead of aregulatory framework with licensing, age-gating, or spending limits, risks undermining employment, deterring investment, and inviting constitutionalscrutiny.
Key Features of the Online Gaming Act
The Online Gaming Act is the first dedicated national legislation to govern online gaming in India. Section 2(1)(f) defines an “online game” broadly as any game operated through digital software over the internet[2]. It classifies such games into three categories: online money games, e-sports, and online social games.
The concerning aspect is the sweeping prohibition on online money games, defined under Section 2(1)(g) as any game—whether of skill or chance—that requires financial consideration or other stakes in expectation of cash rewards[3].Section 5 prohibits their backing, facilitation, or participation[4],Section 6 bars advertisements, and Section 7 prohibits financial institutionsfrom processing related transactions[5].
E-sportsare legitimised as skill-driven competitive activities under Section 2(1)(c),provided no wagering is involved[6], while online social games under Section 2(1)(i) are permitted so long as they involve no monetary stakes, though they may be monetized through subscription models.[7]
Section8 gives powers to the Central Government to establish an online gaming authority(“Commission”), the Commission will have the power to classify and register games, look after the compliance, and monitor the complaints[8].Section 9 also discusses penalties, including imprisonment and fines of up to ₹2 crore for repeat offences. [9] Offences under Sections 5 and 7 are cognizable and non-bailable[10], granting powers of arrest even without a warrant.
Constitutional Challenges
Freedom of Trade and Profession
The Constitution ensures every citizen the right to practice any trade or business under Article 19(1)(g), subject to reasonable restrictions. Indian judicial precedents have long distinguished between games of chance (gambling) and games of skill(legitimate business). In State of Bombay v RMD Chamarbaugwala, the Supreme Court held that competitions involving substantial skill fall outside the ambit of gambling and are protected as business activities.[11]The Karnataka High Court in All India Gaming Federation v State of Karnatakareaffirmed this principle, striking down a blanket ban on online skill-based games as arbitrary and unconstitutional.[12]
By prohibiting all online money games—irrespective of whether they are skill-based, the Online Gaming Act ignores these judicial precedents and risks being invalidated as an unreasonable restriction.[13]
Federalism and Legislative Competence
“Betting and gambling” come under Entry 34 of the State List in the Seventh Schedule of the Constitution,[14] giving States the legislative competence to regulate such activities. Some States, such as Nagaland and Meghalaya, have enacted licensing regimes for online skill-based games.[15] By implementing a blanket prohibition, Parliament may inadvertently exceed its authority, potentially leading to conflicts between Union law and State laws. Concerns have been raised about an undue encroachment into areas that the Constitution reserves for the States. Indeed, petitions challenging the Act have already been filed before various High Courts, and the Supreme Court has ordered the transfer of all petitions challenging the validity of the Online Gaming Act, 2025, to itself.[16]
Equality and Proportionality
Article14 of the Constitution requires the State to avoid arbitrary classifications. Yet, questions have been raised about the distinction created by the Online Gaming Act: it allows prize money in e-sports (Section 2(1)(c)) but sanctions similar rewards in money games (Section 2(1)(g)), even though both may involve skill. What makes the inconsistency sharper is that offline skill-based games with monetary stakes remain lawful, while their online counterparts are criminalized. Such uneven treatment is likely to invite judicial scrutiny under Article 14.
Furthermore, the doctrine of proportionality, as recognized in Anuradha Bhasin v Union of India,[17] mandates that restrictions be the least intrusive means of achieving a legitimate aim. Instead of imposing an outright ban, Parliament could have employed less restrictive measures, its absence underscores why the Act is seen as heavy-handed prohibition rather than true regulation.
Economic and Industry Impact
The Real Money Gaming (RMG) sector has been one of the leading segments of India’s digital economy, employing lakhs of people, generating significant tax revenues, and attracting foreign investments.[18] The industry has weathered regulatory turbulence, including GST disputes such as Directorate General of GST Intelligence v Games kraft Technologies Pvt Ltd, where the Supreme Court is examining whether GST applies retrospectively to player deposits.[19]
The Act threatens to undermine the existing ecosystem and hurts an industry that has positioned itself as a significant factor in growing the country’s digital economy. It will have large scale impacts on employment, investor confidence, and innovation. Companies that complied with laws, including AML/KY obligations, paid their respective taxes, and followed internal regulations are now being punished alongside illegal operators. It is pertinent to ensure that prohibition does not eliminate demand; otherwise, it will just push players towards unregulated offshore platforms, exposing them to greater risks of scam and manipulation.
Paternalismversus Autonomy
Ata normative level, the Act embodies a paternalistic approach. Should the State dictate how consenting adults spend their leisure money? Cigarettes, alcohol, and lotteries—industries with demonstrably greater social costs which continue under regulated regimes.[20] Why then must online games, which have created jobs and contributed taxes, be criminalised outright? The paternalistic assumption is that prohibition will protect citizens, but it may inadvertently lead them towards unregulated and unsafe alternatives.
From Regulation to Prohibition: A Policy Shift
The unexpected shift from the regulatory framework contemplated under the IT Rules,2023,[21] which sought to regulate online gaming through intermediaries, to a blanket ban in 2025 signals a loss of faith in regulatory mechanisms. International jurisprudence, however, demonstrates the option of having robust regulation. In the United Kingdom, the Gambling Act of 2005 rather went for a strict licensing framework, restrictions on advertising, and strong safeguards for players instead of imposing a blanket ban on the industry. Similarly, the United States licensing regimes function alongside the Unlawful Internet Gambling Enforcement Act, 2006,[22] which monitors and supervises online gaming activity without completely prohibiting it. India’s choice of prohibition, in contrast, risks driving the industry underground and alienatingresponsible domestic players.
Conclusion
The Online Gaming Act is a decisive intervention. Its stated objectives, which are consumer protection, prevention of financial crimes, and youth welfare, are laudable. Yet the Act jeopardizes a thriving sector that has generated employment, investment, and tax revenues, and this approach may ultimately lead users to unregulated and illegal platforms. In the long run, its constitutional validity is likely to be challenged before the courts, and these courts will have to determine whether the Online Gaming Act has constitutional backing or whether a more balanced approach is needed, one that respects constitutional freedoms and promotes innovation.
References
[1] Promotion and Regulation of Online Gaming Act, 2025
[2] ibid s 2(1)(f)
[3] ibid s 2(1)(g)
[4] ibid s 5
[5] ibid ss 6–7
[6] ibid s 2(1)(c)
[7] ibid s 2(1)(i)
[8] ibid s 8
[9] ibid s 9
[10] ibid ss 10, 16
[11] State of Bombay v RMD Chamarbaugwala 1957 SCR 874
[12] All India Gaming Federation v State of Karnataka WP (C) No 18703 of 2021 (Karnataka HC, 2022)
[13] Constitution of India, art19(1)(g)
[14] Constitution of India, Seventh Schedule, List II, Entry 34
[15] Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016;
Meghalaya Regulation of Gaming Act,2021
[16] Parmod Kumar, ‘Supreme Court transfers to itself all pleas challenging the Online Gaming Act, 2025, pending before the High Courts’ The Leaflet (8 September 2025). Link - https://theleaflet.in/leaflet-reports/supreme-court-transfers-to-itself-all-pleas-challenging-the-online-gaming-act-2025-pending-before-the-high-courts
[17] Anuradha Bhasin v Union of India (2020) 3 SCC 637
[18] FICCI-EY Report on India’sMedia and Entertainment Sector, 2024
[19] Directorate General of GST Intelligence v Games kraft Technologies Pvt Ltd, SLP (C) Nos 19366–19369 of2023 (SC, reserved for judgment)
[20] Cigarettes and Other Tobacco Products Act, 2003; Lotteries (Regulation) Act, 1998
[21] Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023.
[22] Gambling Act 2005 (UK);Unlawful Internet Gambling Enforcement Act 2006 (US)