ONLINE GAMING REGULATION: CHALLENGES AND WAY FORWARD

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Picture Courtesy:  HINDUSTAN TIMES

Context

The Lok Sabha passed The Promotion and Regulation of Online Gaming Bill 2025 to prohibit the offering, operation, facilitation, advertisement, promotion and participation in online money games.

What is online gaming and real-money gaming (RMG)?

Online gaming refers to games played over the internet, including free-to-play games, e-sports, and skill-based games.

Real-money gaming (RMG) involves players betting real cash for cash or cash-equivalent rewards. Examples include fantasy sports (Dream11), rummy, poker, and sports-betting apps.

How does the Indian legal framework treat online gaming?

Betting/gambling is a State subject: Under the Constitution (Entry 34, State List) each state can make laws on gambling and betting. Many states ban games of chance but exempt games of skill.

• Public Gambling Act (1867), a central law, prohibits “chance” games but excludes “mere skill” games.
• Courts apply a “predominance test”: if skill predominates, the game is treated as skill-based (legal trade). For example, the Madras HC (2023) held that prohibition apply only to games of chance and not to games of skill such as rummy and poker.

Centre’s role: Centre uses its authority over interstate commerce and information technology to regulate games played across states or internationally.

• It has passed IT laws, GST rules, and Anti-Money Laundering (AML)/Foreign Exchange Management Act (FEMA) rules that impact gaming.
• The MEITY says online games involving cash stakes across states fall under Union jurisdiction.
• The Bharatiya Nyaya Sanhita 2023) criminalise unauthorized betting (up to 7 years jail).  

Thus, India’s online Gaming framework is split: states legislate gaming within borders, while the Centre uses GST/IT/financial laws on cross-border aspects.

Judicial Intervention: Courts have protected skill games under Article 19(1)(g) (trade) and struck down blanket bans that include them. Key rulings:

• R.M.D. Chamarbaugwala vs Union of India (1957) held that predominant skill games (even if involving stakes) are legal and protected as a fundamental right to carry on trade or business under Article 19(1)(g).
• Punjab-Haryana HC in Varun Gumber vs Chandigarh (2017) found fantasy sports (Dream11) to be skill games, and thus the Public Gambling Act, 1867 does not apply.
• Courts treat state bans on skill games (like TN’s ban on online rummy/poker) as unconstitutional.

What are the socio-economic impacts of online gaming in India?

Industry size & growth: Online gaming industry generated about $3.8 B in FY24 and is projected to reach over $9 B by 2029.  

• Online skill gaming is a sunrise sector with valuation of over Rs 2 lakh crores, generating Rs 31,000 crores in annual revenue and contributing more than Rs 20,000 crores in taxes.
• India's online gamers grew from 36 crores in 2020 to more than 50 crores in 2024.
• Foreign direct investment in the sector crossed Rs 25,000 crores till June 2022.

Jobs: Gaming supports over 2 lakh direct and indirect jobs (engineering, animation, content).

Player losses: Government estimates over 45 crore Indians play RMG and collectively lose nearly ₹20,000 crore annually. These losses fall on individuals and families.

• There are also concerns about money laundering: officials report that many offshore gaming firms take deposits or pay out winnings in crypto, evading KYC and taxes.

Health & social costs: Gaming leads to addiction, mental health issues, and financial stress, especially among young users. Minors access these games despite age restrictions.

• These public health concerns – including gambling addiction and debt – add to the socio-economic cost.

What is the current regulatory framework for online gaming?

IT Act and Rules: Online gaming platforms are treated as “intermediaries” under the IT Act 2000.

• The 2021 IT (Intermediary Guidelines) Rules require gaming apps to conduct due diligence: appoint grievance officers, ensure content moderation, age gating, and (voluntarily) KYC for high-risk users.
• Platforms must block illegal content and cooperate with law enforcement. Non-compliance (e.g. hosting prohibited content) can lead to losing intermediary exemption.

Self-Regulation: Government has encouraged Self-Regulatory Organizations (SROs) in gaming.

• The industry (All India Gaming Federation, etc.) formed SROs that issue codes of conduct (age checks, fair play).
• Any gaming company can choose an approved SRO and agree to its code (including anti-addiction measures).

Taxation (GST): Since October 2023, online gaming firms must pay 28% GST on the “entire stake” (face value of bets). From FY24-25 onward, there is also a 30% tax on net winnings.

• Tax authorities treat skill and chance games alike for GST.  

Blocking & Enforcement: Under IT rules (Section 69A), the government can order Internet Service Providers (ISPs) to block access to sites or apps involved in unlicensed gaming or gambling.

• As of mid-2025, around 1,500+ illegal gambling websites/apps have been blocked in India.
• Banks and payment gateways have also been instructed to bar real-money gaming transactions.

Advertising codes: The Advertising Standards Council of India (ASCI) and the Consumer Protection Authority have guidelines for gaming ads. Advertisements must be legal, decent, honest and truthful.

What does the new Online Gaming Bill (2025) propose?

Blanket Ban on RMG: The draft Promotion and Regulation of Online Gaming Bill, 2025 prohibits “online money gaming” – offering, operating, facilitating, or advertising any real-money game.

• Prohibits advertising or promoting these games across all media forms, including endorsements.
• Banks and payment systems are barred from processing payments related to these games.
• Online money games that are already active in the country would be blocked under the Information Technology Act, 2000.

Promotion and recognition of esports: Formally recognizes esports as a legitimate competitive sport in India. 

• Union Ministry of Sports will develop guidelines and standards for conducting esports events, establish training academies, research centers, and technology platforms.
• Integrating esports into broader sports policy to promote its growth and recognize its potential for creating professional careers.

Promotion of social and educational games: Empowers the government to "recognise, categorise, and register" online social games.

• Create of platforms for developing and distributing safe, age-appropriate social and educational games.
• Emphasizes cultural and educational games aligned with Indian values, to promote positive engagement and skill development through gaming.

 Central Gaming Authority: Establish a national regulator (an Authority or Agency) with powers to classify games and oversee the sector.

• The Authority to register skill games and social games, advise on organizing tournaments, and handle disputes. However, its structure and rules are yet to be defined.
• Initial setup cost for this authority is estimated at ₹50 crores, with an annual running cost of ₹20 crores from the Consolidated Fund of India. 

Offences & penalties: Imprisonment for up to three years and/or a fine of up to ₹1 crore for entities involved in or facilitating online money gaming.

• Advertising games attracts a penalty of ₹50 lakh or up to two years of imprisonment.
• Any financial transaction related to money games results in imprisonment of up to three years and/or a fine of up to ₹1 crore.
• A repeat offense attracts enhanced penalties, including jail for 3-5 years and a fine of up to ₹2 crore.
• Certain offenses under the Bill are classified as cognizable and non-bailable.
• Authorized officials the power to enter any place, whether physical or digital, and search and arrest without a warrant if there is a reasonable suspicion of an offense under the Act.  

What criticisms and challenges have been raised about the new bill?

Skill vs Chance: Critics say banning all RMG ignores the legal distinction between skill games and gambling.

• For decades courts have treated skill-based games as protected business (Art.19(1)(g)). By banning fantasy sports, rummy, poker, etc., the bill may violate constitutional rights (Article 14 and 19).

Economic fallout: The ban threatens a large legitimate industry.

• Industry bodies (AIGF) said that a blanket ban would destroy over 2 lakh jobs, shut down 400 companies, and weaken India's position as a digital innovator
• India to lose both tax revenue and foreign investments. 

Federalism & Ambiguity: Some experts say the law overlaps with state powers (gaming is in the State List).

• Although the Centre claims jurisdiction for cross-border games, states like Tamil Nadu, Andhra and Karnataka have their own laws. The new bill may prompt clashes between state and central rules.
• Terms like “online money game” may be legally ambiguous, leading to confusion. Critics raised concern that operators won’t know if a game violates the law.

Enforcement issues: Many illegal platforms are offshore; authorities say most of are using cryptocurrency (which evades Indian KYC). Unless crypto rails are strictly regulated, users may herd to unregistered operators abroad.

• Critics note that enforcing KYC and age checks (to ensure minors don’t play) will require collecting user data, raising data-protection concerns.

Policy Instability: Shift from a “tax-and-regulate” approach (GST on gaming, anti-fraud rules) to a pure ban.

• Some expert suggests a progressive regulatory framework (with licensing and safeguards) would better balance innovation and safety.  

Way forward to regulate Online Gaming in India

Harmonize laws: Adopt a cooperative federal approach; a model national framework that clearly defines “skill” and “chance”, leaving room for states to adapt but avoiding conflicts.

Strengthen SROs and tech tools: Empower self-regulatory bodies for gaming; making them mandatory (as per IT rules) could improve management.

• SROs can enforce limits on play time, mandatory breaks, deposit caps and KYC for real-money games.
• Regulators could also use technology (AI, analytics) to detect irregular patterns or minors.

Consumer safeguards: Instead of a total ban, focus on harm reduction, banning credit or loans for gaming, and funding addiction counselling programs.

• Mandatory age-gating (via Aadhaar) and interface warnings can protect minors.
• Public awareness campaigns can educate users about the risks of gambling.

AML/KYC enforcement: Bring online gaming under the Prevention of Money Laundering Act and strict KYC norms, any real-money game must collect verified ID, report suspicious transactions, and freeze suspicious accounts.

• Better synergy with Financial Action Task Force (FATF) guidelines would also help block crypto flows into gambling.

Economic measures: Legalizing some forms of skill gaming under license (like a lottery or regulated betting market) could increase taxes and reduce underground play.

Balanced regulation, not blanket ban: Strict rules for high-risk games, but allow regulated skill contests under license. For example, fantasy sports could be licensed with consumer protections (like RBI does for casinos abroad).

• This approach aims to keep innovation alive while safeguarding users.

What India can Learn from Other Countries

UK enforces licensing, audits, and penalties. Its GAMSTOP scheme enables players to self-exclude from all UK-regulated platforms with a single request. India can adopt a similar central regulator with mandatory self-exclusion tools to address addiction concerns effectively.

Singapore's Gambling Regulatory Authority (GRA) utilizes a central model to enforce age limits, spending caps, and self-exclusion. India can adopt similar social safeguards across states.

Australia's federal law bans harmful online gambling, however states regulate lotteries and sports betting. India could employ a similar layered approach, with a national law restricting specific games and states managing local licenses.

Conclusion

Online gaming in India sits at a crossroads. The sector promises innovation, jobs and entertainment, but also poses risks of addiction and fraud. The new law takes a hardline approach—prioritizing safety and financial security by banning. 

Source: THE HINDU