Regulation of Online Gaming and Betting in India

India’s online gaming industry has experienced rapid expansion in recent years, propelled by increased mobile connectivity and a robust digital payments infrastructure. However, this growth has also revealed significant regulatory shortcomings, especially in relation to ‘real money games’ (RMGs) and betting platforms. The government’s concerns around gaming addiction, financial harm, misleading promotions, and potential money-laundering risks underscored the need for a comprehensive regulatory overhaul. Thus, the recent enactment of the Promotion and Regulation of Online Gaming Act, 2025 (hereinafter “the Act”)marks a watershed moment for practitioners, operators and users alike. The Act has broad territorial reach, extending across India and also applies to ‘online money gaming service’ offered within the territory of India or operated from outside the territory of India. The framework of the Act serves a dual purpose of promoting e-sports, social and educational games while simultaneously regulating and prohibiting ‘online money games’.

Key features of the Act:

1. The Act has been enacted to inter alia promote and regulate the online gaming sector including e-sports, educational games and social gaming, protect users from the adverse social, economic, psychological and privacy-related impacts of such games, ensure responsible gaming, prevent illegal betting and gambling, and to provide for matters connected therewith or incidental thereto.
2. It aims to create a uniform national legal framework for online gaming and establish a national level authority to categorise games, register platforms and handle consumer grievances.
3. One pivotal definition in the Act is that of “online money game” which is defined to mean “any game, which is played on an electronic or a digital device and is managed and operated as a software through the internet or any other kind of technology facilitating electronic communication (“online game”), irrespective of whether such game is based on skill, chance, or both, played by a user by paying fees, depositing money or other stakes in expectation of winning which entails monetary and other enrichment in return of money or other stakes; but shall not include any e-sports.” Thus, the Act effectively does away with the traditional skill vs chance dichotomy for online games when money is involved i.e. if there is monetary stake and prize it is prohibited, even if ‘skill’ is involved. Critically, it seeks to prohibit online games with money stakes, regardless of whether they are based on skill or chance and covers fantasy sports, poker and other cash-prize contests. Advertising, promotion or financial transactions related to such prohibited games are likewise targeted under the Act.
4. The Act categorises games into three broad buckets: (a) e-sports; (b) online social games; and (c) online money games and signals support for and aims to recognize, promote and develop-sports, skill-based social games and casual gaming and prohibit online money games, online money gaming service, advertisement related to online money games and transfer of funds towards payment for any online money gaming service, thereby attempting to draw a clear distinction between harmful betting activities and legitimate digital recreation.
5. The Act further imposes a strict restriction on all banks, financial institutions, or intermediaries involved in processing or authorising financial transactions, preventing them from engaging in, allowing, assisting, encouraging, or otherwise enabling any transfer or authorisation of funds related to payments for online money gaming services.

Legal implications for operators and users

In light of the new framework, game operators must re-evaluate their business models, as any game involving user deposits or stakes (as defined) with the expectation of monetary returns is likely to be classified as prohibited under the Act and the financial intermediaries viz. the payment aggregators and banks must proceed with caution, since facilitating or processing transactions linked to prohibited games could expose them to legal liability. The Act primarily targets operators, however, the lawyers advising users must highlight potential risks associated with illegal or unregulated platforms, including the possibility of financial losses and the absence of effective legal recourse and also clearly specify that on the taxation front, the government has construed that net winnings from such online games is akin to betting/gambling and therefore subject to a flat 30% tax under Section 115BBJ of the Income Tax Act, 1961.

Challenges and open issues

The distinction between ‘games of skill’ (which are lawful) and ‘games of chance’ (which may be construed as gambling) has been a longstanding point of contention in Indian jurisprudence. The new Act effectively blurs that divide by shifting the focus on the presence of stakes (as defined) or expectation of monetary return as the determining factors for legality rather than whether the game is based on skill or chance.

Further, gambling and betting have fallen within the State List under the Constitution, granting states the authority to regulate such activities and states may have differing statutes and enforcement mechanisms (e.g., some states already ban RMGs outright). With the Act establishing a central regulatory framework, questions may arise regarding its constitutional validity and the balance of legislative powers between the Union and the States and this might make the enforcement of the Act uneven across jurisdictions.

In conclusion, the Act represents a comprehensive regulatory overhaul for India’s online gaming landscape. It seeks to promote the gaming sector particularly e-sports and social or educational games while parallelly imposing strict restrictions on any form of ‘online money games,’ irrespective of whether it is skill based or chance based. It also establishes a national regulatory authority, mandates licensing and registration for permitted games, imposes stringent penalties for prohibited games and activities, and vests the government with robust enforcement powers. For Indian legal practitioners, this new framework signifies a fundamental shift in the regulation of online gaming and betting and calls for a proactive approach involving the reassessment of business models, guidance on compliance, navigation through layered regulations, and attention to consumer protection issues.