Online Gaming Law in India, A Practitioner's Guide

The Promotion and Regulation of Online Gaming Act, 2025 is the most consequential legislative intervention in India's online gaming sector to date. It draws a sharp legal line: online money gaming is prohibited; e-sports and social games are encouraged.

Historical background

For most of the post-Independence period, gaming and betting were treated as State subjects under Entry 34 of the State List of the Seventh Schedule to the Constitution. The Public Gambling Act, 1867 was the colonial-era template; most States enacted their own versions with localised variations. The judicially developed distinction between games of skill (constitutionally protected as a legitimate business under Article 19(1)(g), and not "gambling") and games of chance (regulated or prohibited as gambling) was the controlling doctrine for over six decades.

The Supreme Court's decisions in State of Andhra Pradesh v. K. Satyanarayana (rummy), State of Bombay v. R.M.D. Chamarbaugwala (prize competitions) and the high court decisions in Varun Gumber v. UT of Chandigarh (fantasy sports) developed the skill-versus-chance line through the 2010s. By 2022, fantasy sports operators, online rummy and online poker had each secured judicial recognition as games of skill in one or more high courts.

That settled position was disrupted, first by State-level bans (Tamil Nadu, Telangana, Andhra Pradesh, Karnataka), then by the 6 April 2023 amendments to the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, which contemplated Self-Regulatory Bodies (SRBs) to verify online real-money games as "permissible." Critically, no SRB was ever formally notified by MeitY, and the framework never became operational. The Government has since pointed to this non-operationalisation as evidence that the self-regulatory approach was unworkable and that a statutory prohibition was warranted.

The GST Council's October 2023 decision to tax online real-money gaming at 28% on the full face value of deposits added a further fiscal blow. By mid-2025 the sector was in considerable regulatory turmoil. The Promotion and Regulation of Online Gaming Act, 2025 resolved that turmoil by prohibition.

The Promotion and Regulation of Online Gaming Act, 2025

The Bill was introduced in Lok Sabha on 20 August 2025, passed by both Houses by voice vote within two days, and received Presidential assent on 22 August 2025 as Act No. 32 of 2025. The Promotion and Regulation of Online Gaming Rules, 2026 were notified by MeitY under Section 19 of the Act on 22 April 2026, with effect from 1 May 2026.

The Act, comprising nineteen sections across six chapters, is structured around three pillars:

• Prohibition of online money gaming under Section 5 (offering), Section 6 (advertising) and Section 7 (facilitation of financial transactions).
• Promotion of e-sports and educational games, including formal recognition under Section 3 and a registration mechanism.
• Regulation of online social games under Section 4, to ensure they remain free of wager-based monetisation.

Section 1(2) gives the Act extraterritorial reach: it applies to online money gaming services offered within India and to those operated from outside India that are accessible to users in India. Offshore operators historically argued that they sat outside Indian regulatory reach. That argument is foreclosed.

Section 8 provides for the establishment of an Authority on Online Gaming. The Central Government may either constitute a new body or designate an existing one to perform the Authority's functions, which include determining whether a particular online game qualifies as an online money game, recognising and registering games, issuing operating guidelines, and grievance redressal. Section 14 empowers the Central Government to block access to online money gaming information under Section 69A of the Information Technology Act, 2000.

Sections 15 and 16 grant authorised officers extensive powers of investigation. Section 16 permits officers to enter any place, physical or digital, including premises, vehicles, computer resources and virtual digital spaces, and to search and arrest without warrant any person reasonably suspected of committing an offence under the Act. These powers operate notwithstanding Section 69A of the IT Act and the Bharatiya Nagarik Suraksha Sanhita, 2023.

Skill versus chance under the new Act

The 2025 Act addresses the skill-versus-chance question by sweeping aside the distinction for money-gaming purposes. Section 2(1)(g) defines an online money game as an online game played for monetary or other stakes in expectation of monetary or other enrichment, irrespective of whether the game is based on skill, chance or both. Credits, coins or tokens equivalent or convertible to money are within scope.

This is the most consequential single feature of the Act. The historical judicial protection for games of skill, built up over decades of case law from State of Bombay v. R.M.D. Chamarbaugwala, K. Satyanarayana and Dr. K.R. Lakshmanan v. State of Tamil Nadu down to Varun Gumber v. UT of Chandigarh and the various fantasy sports rulings, no longer shields real-money operators of fantasy sports, rummy, poker and similar formats. The skill-versus-chance distinction continues to matter for non-money formats (which fall outside the prohibition entirely) and for the constitutional challenges discussed below, but it has lost its operational protection for money gaming.

E-sports, educational games and social games

The Act expressly recognises three categories that remain lawful:

• E-sports (Section 2(1)(c)), defined as an online game that is played as part of multi-sports events, is recognised under the National Sports Governance Act, 2025, is governed by pre-defined rules in organised competitive multiplayer formats, and has its outcome determined solely by factors such as physical dexterity, mental agility or strategic thinking. Registration fees and performance-linked prize money are permitted, but no betting, wagering or staking is allowed.
• Educational games, included in the long title of the Act and supported under Section 4, covering games offered for educational, cultural or skill-development purposes.
• Online social games (Section 2(1)(i)), defined as online games offered solely for recreation, entertainment or skill development. Subscription or one-time access fees are permitted, but no stakes or monetary gain in return of stakes is allowed.

The line between e-sports or social games and online money gaming is fact-specific. Operators developing adjacent formats, pay-to-enter tournaments with skin rewards, NFT-based competitive games, social-casino mechanics, "free coin" tournaments with cash-equivalent prizes, should obtain advice before launch. Under Section 8, the Authority may suo motu or on application determine whether a particular game qualifies as an online money game.

Advertising prohibition

Section 6 of the 2025 Act extends the prohibition beyond operators to advertisers, endorsers and platforms. No person shall advertise or promote any online money gaming service, directly or indirectly. Section 6 carries imprisonment of up to two years, a fine of up to INR 50 lakh, or both. The Ministry of Information and Broadcasting and the Advertising Standards Council of India have issued supplementary guidance on the application of the prohibition, including treatment of:

• Surrogate advertising (advertising of a parent brand or non-gaming product where the recall is for a real-money gaming service).
• Celebrity and influencer endorsements.
• Sponsorship of sporting events and broadcast advertising.
• Search engine and social media advertising targeting users in India.

The advertising prohibition is operationally significant for media houses, sporting bodies, influencers and digital platforms. Pre-existing contracts with real-money gaming operators have unwound, and forward bookings have been refused.

Payment-flow obligations

Section 7 creates a positive obligation: no bank, financial institution or any other person facilitating financial transactions shall engage in, permit, aid, abet, induce or otherwise facilitate any transaction or authorisation of funds towards payment for any online money gaming service. Section 7 carries imprisonment of up to three years, a fine of up to INR 1 crore, or both, and is cognizable and non-bailable. The Reserve Bank of India and the Ministry of Finance have supplemented the statute with directions requiring:

• Identification and closure of merchant accounts of online money gaming operators.
• Monitoring and reporting of transactions associated with prohibited services.
• Specific compliance arrangements for cross-border transactions linked to offshore gaming operators.

Banks and payment aggregators that continue to process payments for prohibited operators face penalties under Section 7 and supervisory action by the RBI. Holding user-deposit balances of erstwhile real-money operators raises further questions, including the unresolved issue of how to lawfully refund those balances to users.

PMLA scope

The October 2023 notification under the Prevention of Money Laundering Act, 2002 had already brought online real-money gaming operators within the AML reporting perimeter, requiring them to register as Reporting Entities with the Financial Intelligence Unit-India and to comply with KYC, transaction monitoring and STR obligations.

Following the 2025 Act, the AML lens has shifted. Where the underlying activity is itself prohibited, the question is no longer simply compliance, it is whether continued operation, fund-holding, or facilitation amounts to a predicate offence with money-laundering consequences. Banks holding deposits from prohibited operators, and intermediaries facilitating their offshore migration, face heightened risk.

The GST position

The October 2023 GST Council decision imposed 28% GST on the full face value of deposits made into online real-money gaming platforms, effective from 1 October 2023, under Rule 31A of the Central Goods and Services Tax Rules, 2017. Show-cause notices aggregating over INR 1.5 lakh crore were issued to twenty-seven plus operators for the period 2017 to 2023 on the theory that the activity was always taxable as betting and gambling.

The lead matter is the appeal in Directorate General of GST Intelligence v. Gameskraft Technologies, where the Karnataka High Court in 2022 had quashed a Rs. 21,000 crore notice; the Supreme Court stayed that ruling in September 2023. The Supreme Court has consolidated petitions from multiple High Courts and is hearing the consolidated GST challenge, focused on whether Rule 31A applies retrospectively to games of skill. With the 2025 Act now prohibiting the activity itself, the GST question has shifted from "how much" to "for what period", the residual issue being the recovery of GST in respect of pre-prohibition operations. The Supreme Court's eventual decision will have substantial fiscal implications.

Constitutional challenges

The first writ petition under the 2025 Act was filed by Head Digital Works Pvt. Ltd. (operator of A23 Rummy, A23 Poker and Adda52) in the Karnataka High Court at the end of August 2025. Notice was issued to the Government on 30 August 2025. Similar petitions have since been filed in the Delhi and Madhya Pradesh High Courts. The Union of India has filed a transfer petition before the Supreme Court seeking consolidation of all challenges before a single bench.

The principal grounds include:

• Legislative competence, whether gaming and betting fall within Entry 34 of the State List of the Seventh Schedule to the Constitution (a State subject), or within Union competence under Entry 31 of the Union List (broadcasting and communication) or the residuary power. If the activity is held to fall exclusively within State competence, the Union's legislative basis may be vulnerable.
• Proportionality and Article 19(1)(g), whether the prohibition is a reasonable restriction on the right to carry on a business or profession, particularly as applied to games of skill that the Supreme Court has previously recognised as legitimate businesses in Lakshmanan, Satyanarayana and Chamarbaugwala.
• Article 14, whether the differential treatment of e-sports, educational and social games on the one hand and online money gaming on the other rests on an intelligible differentia with a rational nexus to the legislative object.
• Articles 20, 21 and 22, whether the search-and-arrest-without-warrant powers under Sections 15 and 16 are compatible with personal liberty and due-process protections.

The Karnataka High Court declined to grant an interim stay on the operation of the prohibition in the early hearings. The Karnataka, Delhi and Madhya Pradesh High Courts have each declined interim injunctions sought by the industry. Operators with existing investments should continue to monitor the consolidated proceedings while planning around the Act in its current form.

Practical implications for operators

For operators with existing or planned exposure to the Indian market, the post-2025 reality requires immediate attention to:

1. Product audit, Identifying which products fall within "online money gaming" and which do not. Adjacent formats need careful structural analysis.
2. User-balance treatment, Determining how to lawfully refund or otherwise handle outstanding user balances.
3. Marketing wind-down, Cancellation of advertising commitments, influencer agreements and sponsorship contracts.
4. Cross-border operations, Reviewing offshore subsidiaries, IP holding structures and tax residency given the prohibition's extraterritorial reach.
5. Employment, Restructuring decisions for India-based teams whose work is now linked to prohibited activity.
6. E-sports and social games pivot, Where commercially viable, restructuring product offerings to fall within the permitted categories.
7. Litigation strategy, Whether to participate in the pending constitutional challenges or to plan around the Act in its current form.