Understanding The Online Gaming Regulation Bill, 2025

A. India's Online Gaming Regulation Bill, 2025: Towards a Uniform Framework for a Contentious Sector

I. Why the Online Gaming Regulation Bill, 2025 matters?

The Online Gaming Regulation Bill, 2025 ("Bill") marks the first structured legislative initiative in India aimed at resolving the persistent ambiguity surrounding the online gaming sector. Placed before Parliament in August 2025, the Bill seeks to tackle widespread concerns over gambling-related risks, player addiction, financial fraud, and the potential use of gaming platforms for unlawful monetary transactions.

Meanwhile, India's online gaming industry has transformed into a vast commercial ecosystem, valued at close to ₹2 trillion, drawing participation from nearly 450 million users and providing employment opportunities across multiple layers of the digital economy. Against this backdrop, the Bill emerges at a decisive juncture one where the government is tasked with weighing economic potential against the imperatives of public welfare and consumer safety.

At present, the industry generates revenue through four primary channels: entry fees paid by players, in-app purchases, digital advertising, and games involving real money. Among these, real-money games have historically accounted for the highest share of revenues, while also being the largest attractor of international investment.

The Bill, however, takes a firm stance by prohibiting all formats of online games where financial stakes are involved. The stated rationale lies in the need to mitigate risks of excessive play, indebtedness, and misuse for gambling or laundering activities. In contrast, casual gaming and e-sports, where no wagering element exists, are regarded as lower-risk activities and are proposed to be permitted under a structured regulatory regime.

II. The legal grey zone

The regulation of gaming in India has historically been anchored in the legal distinction between games of skill and games of chance. The Public Gambling Act, 1867, as the earliest central legislation, expressly excluded games of skill from its scope, thereby restricting its application to gambling activities premised on chance. Judicial pronouncements consistently upheld this principle, recognising 'Rummy', fantasy sports, and similar formats as skill-predominant activities outside the ambit of gambling.

The Supreme Court went further to affirm that enterprises engaged in offering such games even when played for stakes are engaged in legitimate trade protected under Article 19(1)(g) of the Constitution.

Yet, India's federal structure left regulation fractured:

1. States like Nagaland and Sikkim experimented with licensing.
2. Others like Tamil Nadu and Karnataka imposed broad bans, later invalidated by courts.
3. At the Union level, the government resorted to delegated legislation through the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, later amended in 2023. These Rules imposed due diligence obligations, including Know Your Customer (KYC) verification, on intermediaries. However, being subordinate legislation under the IT Act, they lacked the force and comprehensiveness of a dedicated statute.

This created pervasive uncertainty in the sector. Investors remained cautious in committing capital given the fluidity of regulation. Operators faced compliance challenges arising from inconsistent state-level approaches. The absence of a unified statutory framework ensured that the judiciary, rather than the legislature, remained the principal forum for resolving disputes in the gaming sector.

III. Pre & post Bill landscape:

Before the Bill, online gaming operated in a grey area:

1. The Public Gambling Act, 1867 provided exemptions for skill games.
2. Judicial recognition allowed platforms like Dream11 to flourish.
3. States imposed inconsistent rules, some liberal, some restrictive.
4. The central government tried to regulate via subordinate legislation (IT Rules), but these lacked statutory backing.

Taxation further complicated matters:

1. Until 2023, GST applied at 18% on Gross Gaming Revenue (GGR).
2. The 51st GST Council meeting changed this to 28% GST on the total bet value, sparking retrospective tax demands exceeding ₹1.1 lakh crore.
3. The Supreme Court stayed these demands in January 2025, but uncertainty lingered.

Notwithstanding legal ambiguity, the industry grew rapidly until 2025:

1. Valuation: nearly ₹2 trillion (~$23 billion).
2. Annual revenues: over ₹31,000 crore.
3. Tax contribution: approx. ₹20,000 crore annually.
4. User base: 450 million players.
5. Growth rate: ~28% CAGR, with potential doubling by 2028.

Smartphone penetration, UPI payments, and a youthful demographic were key enablers. Start-ups like Dream11, MPL, and Rummy Circle became unicorns, though their models now face existential threats.

The Bill seeks to replace fragmented state laws with a national regime by:

1. Prohibiting all money-staked online games.
2. Creating a central authority to register and oversee e-sports and casual games.
3. Setting penalties for non-compliance.

While the Bill promises clarity, it does so by shutting down the most profitable segment of the industry, a move that could reshape employment, investment, and taxation patterns.

The Bill marks a significant shift by discarding the skill-versus-chance distinction. All real-money online games are uniformly prohibited, irrespective of whether they involve judgment, knowledge, or luck.

This provides consistency but also raises constitutional questions. Courts had previously recognized skill-based real-money games as legitimate businesses. A blanket ban could therefore be challenged as disproportionate under Article 19(1)(g).

IV. Impact of the ban

The Bill's prohibition of money games is expected to reduce government revenue, since these platforms were the largest GST contributors within gaming. However, policymakers view this as a trade-off: lower fiscal inflows in exchange for public interest safeguards against addiction, fraud, and crime.

B. Principal features and policy framework

I. Context and rationale

The Bill represents the Union Government's attempt to replace the fragmented patchwork of state-level restrictions with a uniform national law. The Bill is a direct response to three key drivers: (i) escalating concerns over fraud and addiction, (ii) the proliferation of offshore operators exploiting jurisdictional gaps, and (iii) the linkage of online gaming platforms with money laundering and national security risks. By codifying rules at the central level, the Bill seeks to provide clarity while simultaneously asserting regulatory control over the sector.

The Bill introduces a threefold classification of online games, coupled with differentiated regulatory treatment:

1. E-Sports (Competitive skill-based games)

1. Defined as organised, skill-intensive competitions such as virtual sports, racing, or shooting.
2. Participation typically involves payment of registration fees, with results determined substantially by player ability.
3. Rewards, prize pools, and recognition are linked directly to performance, aligning e-sports with conventional sporting disciplines.
4. Treatment under the Bill: Under the Bill, e-sports are formally recognised as a legitimate sporting discipline. Registration with the Central Regulatory Authority is mandated, enabling the government to prescribe quality standards, promote the establishment of digital sports academies, and integrate e-sports into broader national sports development initiatives.

2. Online recreational/social games

1. Comprises games offered on a subscription or one-time access fee basis, without monetary stakes or the prospect of financial gain.
2. Illustrative examples include simulation or community-oriented formats such as Roller Coaster Tycoon and Construction Simulator.
3. These games primarily serve recreational, entertainment, and community-building purposes.
4. Treatment under the Bill: These games are also brought within the fold of mandatory registration. The Bill envisages proactive government support for this category through incentive programmes, digital literacy drives, and public outreach initiatives aimed at encouraging safe and responsible participation.

3. Online money games (stakes-based games)

1. Involves staking of real money or assets with an expectation of monetary returns.
2. Includes formats such as fantasy sports, rummy, poker, and online casinos.
3. Treatment under the Bill: In sharp contrast, the Bill imposes a complete prohibition on games involving monetary stakes, regardless of whether they are skill-based or chance-driven. This prohibition effectively overturns earlier judicial recognition of "skill games" under Article 19(1)(g) and extends equally to domestic operators as well as offshore platforms targeting Indian users.

II. Establishment of a Central Regulatory Authority

The Bill contemplates the creation of a dedicated statutory authority with powers to:

1. Categorise and register permissible online games.
2. Frame codes of practice for operators.
3. Enforce consumer protection and grievance redressal mechanisms.
4. Impose penalties for non-compliance, including monetary fines up to ₹10 lakh, suspension or cancellation of registration, and prohibition of non-compliant games.

III. Prohibited conduct and penal consequences

The Bill criminalises not only the operation of prohibited money games but also all ancillary activities associated with them. It expressly prohibits offering or facilitating online money games, advertising or promoting such formats, and enabling related financial transactions through banks, payment gateways, or digital wallets. Violations attract stringent sanctions: advertising offences may lead to fines of up to ₹50 lakh and imprisonment of up to two years, while offering or facilitating games can result in penalties of up to ₹1 crore and imprisonment of up to three years. Repeat offenders face enhanced liability, with fines of up to ₹2 crore and imprisonment extending to five years. Importantly, all offences under the Bill are classified as cognisable and non-bailable.

IV. Concerns emerging

1. It provides no clarity on the treatment of funds already deposited in user accounts or gaming wallets at the time the prohibition takes effect, leaving open questions of withdrawal and refund.
2. The requirement of compulsory registration extends even to e-sports and recreational games that do not involve monetary stakes, thereby imposing additional compliance obligations, administrative delays, and potential costs on operators.
3. The Bill departs from international practice, where most jurisdictions have adopted licensing-based regulation, and instead imposes a blanket prohibition on money games.

This approach positions India among the most restrictive regimes globally, with the risk of stifling innovation and discouraging foreign as well as domestic investment in the sector.

V. Suggested alternatives

A complete prohibition of money games is likely to drive players toward unregulated offshore platforms, undermining consumer protection and revenue objectives. A calibrated licensing framework with strict compliance safeguards would better balance these interests. On taxation, a shift from levies on face value to a Gross Gaming Revenue (GGR) model would bring India in line with global practice, ensuring fiscal sustainability without crippling the industry.

The prevailing regulatory approach has been shaped by a public narrative that equates online gaming with "digital addiction." This perception underscores the need for industry-led responsible gaming measures and targeted awareness campaigns to reshape discourse. At the same time, the Bill's blanket ban on skill-based games contrary to established Supreme Court jurisprudence is likely to be subjected to constitutional scrutiny. Policymakers may therefore require fallback options, such as licensing for skill-based games with deposit or spending caps to mitigate potential harm.

Finally, in the sphere of e-sports, streamlined registration and targeted government support are critical to prevent regulatory bottlenecks from curbing growth and to position India as a global hub for digital sports innovation.

Forward-looking assessment

The Bill marks a decisive pivot in India's regulatory philosophy: from fragmented state-level oversight and judicially protected carve-outs, to punitive taxation, and now towards a blanket central prohibition of money games. While the immediate impact is expected to be contraction of the sector manifesting in investor pullback, job losses, and reduced innovation the framework is far from final. Judicial review, evolving industry practices, and policy recalibration may still reshape the regulatory trajectory.

Ultimately, a sustainable regime must balance consumer protection, national security, tax revenues, and industry growth. Until such equilibrium is achieved, India's online gaming landscape will remain a critical case study in the intersection of law, technology, and economic policy in a digital society.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.