The Promotion And Regulation Of Online Gaming Act, 2025: A Comprehensive Review And Analysis

This article is written by the iPleaders team.

Introduction

Today, online gaming in India is a sector that is growing continuously, so the policies, regulatory and social concerns have increased significantly to cope with the challenges. On 21 August 2025, the Parliament of India passed the Promotion and Regulation of Online Gaming Act, 2025 (hereafter “the Act”), attempting an organised legal framework for online gaming. Let’s have a look at the act’s underlying purposes, frameworks, enforcement dynamics, business and social implications and remaining gaps or ambiguities.

The scale and growth of online gaming in India

Before starting the discussion on provisions, let’s do a quick check of the market size of the online gaming sector.

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  • As per the report of the government-linked portal of the Invest India / Indian Brand Equity Foundation (IBEF), there are approximately 591 million gamers in India, which is almost about 20% of the global gamer population, with around 11.2 billion mobile game downloads annually. The sector is projected to unlock investor value of up to US $63 billion by 2029. 
  • A joint report from the Interactive Entertainment & Innovation Council (IEIC) and gaming platform WinZO Games shows that India’s online gaming market size at US $3.7 billion in 2024, with a projected rise to US $9.1 billion by 2029. 
  • Further, the Lumikai “Interactive Media & Gaming Research FY 24” survey reports that India’s gaming market exceeded US $3.8 billion in FY24 and expects to cross US $9.2 billion by FY29. 

This constant growth, particularly in gaming that involves money (RMG) like fantasy sports, online rummy/poker, wagering games, BGMI, has gained investor interest and close examination by the government. The regulatory challenges are handled by states through different approaches such as ban, limitation of use, age restriction and time limit for use in a day, resulting in disconnected parts, lack of consistency and effectiveness.

From a legal perspective, we can say that the fast growth of the sector created an economic impact like industry development, job creation, and innovation and regulatory challenges such as consumer protection, addiction risk, money laundering and cross-border operations. And the main focus of the act is to address all these issues under a legal framework.

Constitutional framework: freedom of trade and legislative competence

All the national legislation that deals with online gaming must tackle two very important constitutional issues: 

  1. The right to practise a trade or business under Article 19(1)(g) of the Constitution of India, and 
  2. The legislative competence of Parliament versus States under the Seventh Schedule. 

Freedom of trade, Article 19(1)(g)

Article 19(1)(g) guarantees the right of every citizen to practice any profession or to carry on any occupation, trade or business. However, this right is not absolute. Article 19(6) permits Parliament to impose reasonable restrictions. The Supreme Court has held in multiple suits that to be a valid legislative restriction, it must satisfy these three things: legitimate aim, reasonable necessity and proportionality.

Online gaming operators like fantasy sports platforms, poker apps, BGMI and other skill-based gaming argue that their businesses come within Article 19 (1)(g). 

In the landmark judgement of K.R. Lakshman v. State of Tamil Nadu (1996 2 SCC 226), the court held that games that require skills cannot be counted as gambling, and the state cannot prohibit them on that basis.

Legislative competence

Entry 34 of the state List states that the states have the power to legislate on betting and gambling. Entry 42 of the Union List gives power to the parliament over incorporation, regulation, and winding up of trading corporations and, indirectly, commercial regulation. The drawback is that the internet and digital domain involve interstate or international aspects. So, it gets difficult to regulate it as per the existing legal framework in the state list.

Judicial landscape and pre-legislative fragmentation

The previous legal provisions for online gaming were state-centric. Here are some decisions made by courts that clearly show uncertainty.

The core aim of this act is to balance the landscape and to bring uniformity in regulations for online gaming. For now, it is quite scattered; there are different rules for each state, different tax regimes and different judicial systems that make the business governance uncertain and complicate the whole system for the consumers.

Key features of the Act

Types of games covered

The Act classifies online games into three broad categories:

  1. Online Money Games

Games where the players can stake money or other digital assets, and there are chances to win money or valuable returns in winning.

  1. E-sports

Competitive, skill-based digital games without wagering, which may have registration fees or prize money.

  1. Online Social Games

These are recreational games which do not involve financial stakes or reward in monetary form.

These three types of online gaming classification help to ensure clarity. Online money games are the primary target for prohibition and strict regulation. While e-sports and online social games are designed and considered for promotion.

Prohibition of online money games

This Act provides a significant and very much needed feature, which is the blanket ban on offering, operating, promoting or facilitating online money games.

  • A person shall not offer, aid, abet, induce, or otherwise enable online money games.
  • No bank, payment system, or other entity may process payments for money-game activity.
  • Advertising of online money games is totally prohibited.

These features of the Act will help with issues like gambling addiction, financial harm, and illicit flow. And I think this was really necessary for public interest, consumer protection and financial integrity. 

Regulatory authority and licensing framework

The Act empowers the central government to establish a regulatory authority (for example, a National Online Gaming Commission). This body will work in:

  • Granting licences for permissible gaming activities, primarily e-sports and social games.
  • Regulating platforms, monitoring compliance, issuing guidelines
  • Defining what constitutes a money game means they will determine whether a game is predominantly of chance or skill, or a hybrid.)
  • Overseeing age and identity verification, self-exclusion, deposit limits and other responsible-gaming safeguards

The Act aims to provide a uniform pan-India framework by vesting licensing power at the central level and allowing states to create supervisory wings under the Commission.

Penalties and enforcement mechanisms

The Act includes strong enforcement provisions:

  • Operating a banned money game shall result in imprisonment up to three years and/or a fine up to ₹1 crore (or higher for repeated offences).
  • Promoting or advertising banned money games also has penal consequences.
  • Authorities may conduct searches, seizure of equipment, blocking of access (servers/websites), investigation of payments, and cooperation with financial regulators and law enforcement agencies in case a breach of law is suspected.
  • Corporate accountability: company directors or senior management may be held personally liable unless they demonstrate due diligence and compliance measures.

Business promotion & industry development

Crucially, the Act not only regulate or prohibits online gaming, but it also promotes the industry:

  • It recognises e-sports and social-gaming as priority sectors which are eligible for incentives such as tax breaks, R&D support, and skill-development schemes.
  • It mandates the regulatory authority to encourage innovation, sandboxing of new game formats, industry-academia linkages, and employment generation.

Thus, the Act shows a dual approach: prohibition of risky segments, regulation and encouragement of healthy segments.

Legal & policy analysis: strengths and tensions

Strengths

  • Regulatory clarity

The Act attempted to fix the divergence in state laws by breaking online games into three categories and providing a central licensing authority. 

  • Consumer protection

The imposed ban by the Act on money games, enforcement provisions, and responsible gaming safeguards will help in preventing addiction and financial losses. 

  • Innovation encouragement

Policies that support e-sports and skill gaming will help boost the growth of the gaming sector. 

  • Inter-agency coordination

The Act promises cooperation with banking or payment regulators and cyber-authorities, which is very necessary in this digital age. 

Constitutional and practical tensions

  1. Trade freedom vs prohibition

The blanket ban on online money games raised questions among people; now the confusion is whether prohibition can be accepted as a reasonable restriction, or the lawmaker could have taken other measures rather than a total ban.

  1. Skill vs chance distinction

The Act appears to have turned down the traditional distinction (games of skill vs games of chance). It may face constitutional changes due to the collapse of the traditional distinction method.

  1. Legislative competence

While Parliament may invoke its power over the internet, cross-border platforms and payments, states retain regulation of gambling under Entry 34 of Schedule VII. The pith and substance of the Act will be scrutinised in courts: does it truly regulate inter-state/foreign platforms, or does it intrude into state subjects?

  1. Enforcement complexity

The Act’s goal faces unavoidable difficulties because people use offshore platforms, Virtual Private Networks, crypto-assets, foreign servers and payment systems that might not fall under Indian jurisdiction.

  1. Innovation risk

The Act promotes e-sports and social games, but the provisions of heavy compliance pressure, licensing cost and high penalty risk may create barriers for small start-ups in market entry, making it favourable for large players.

  1. Transition and legacy platforms

The blanket ban under the Act may cause financial loss to existing users, especially those who have deposits and price balance in the user wallets and if that specific platform does not have clear transitional guidelines.

Business & investment implications

The Act offers both opportunities and warnings to investors and the industry. On the one hand, regulatory certainty provided by a single national law is advantageous for institutional investors and big platforms. However, the prohibition on real-money gaming has a big impact on the business plans of major Indian players. For instance, according to sources, some foreign operators are closing down Indian real-money offerings, and major platforms like Dream11 are negotiating sponsorship deals with major sporting bodies following the law’s passage.

Startups might feel more limited. New entrants may be deterred by licensing fees, compliance requirements, high taxes (many gaming services are still subject to the 28% GST rate), and the risk of personal liability for directors. 

Social, public-health and consumer-protection dimensions

The primary focus of the Act is addiction, financial harm, underage participation and unregulated offshore platforms. Research says:

The Act complies with international best practices for gambling regulation by outlawing or strictly regulating money games and encouraging responsible gaming measures (age verification, time limits, deposit caps, and self-exclusion).

But execution will be crucial. The policy might not accomplish its protective goal in the absence of strict enforcement, which includes tracing payments, blocking unregistered platforms, and working with banks and ISPs. Infrastructure for rehabilitation and public education is also crucial. Although these are mentioned in the Act, the real mechanisms will be important.

Implementation and operational challenges

The legislative structure is quite on point, but there are still some implementation issues: 

  • Offshore operators

There are many platforms that are operated by global companies; Indian gamers use those platforms by using a VPN. To ban all these platforms, the Act need international cooperation and technical enforcement. 

  • Payment flows

To prohibit payment processing for money games, the Act requires the banks, fintech, wallets and payment gateways to monitor and block transactions.

  • State-centred coordination

Although the Act is central, cooperation from the state is highly required.

  • Transitional arrangements

Clear instructions on how to reimburse users, switch to legal formats, or shut down operations must be provided to platforms that have legacy wallets and prize balances. Uncertainty and user risk may result from the time lag between the date of law enactment and the operationalisation of licensing regulations. Companies are already addressing wallet withdrawals, according to media reports.

  • Regulatory capacity

Establishing a new regulatory authority, setting up infrastructure, hiring specialised staff, drafting rules and guidelines, takes time. So, there is a chance of delay in the enforcement of the act.

  • Innovation vs compliance burden

Start-ups and smaller platforms may struggle with licensing costs and compliance overhead. Unless the law incorporates some easy and divided in phases systems for new start-ups and small-sized platforms.

Future directions and policy recommendations

In the future, the following practical and policy components will need to be taken into consideration for the Act to be implemented successfully:

Phased implementation and sandboxing 

Before licensing, the regulator should permit a less stringent compliance regime for start-ups and small platforms to protect and safeguard innovations.

Clearly defined transitional roadmap 

Users and operators should have a clear roadmap of the use of wallet funds, prize balance and legacy deposits, and there should be a clear and smooth withdrawal method.

A strong consumer-redressal system 

I would suggest that the government establish an Ombudsman or tribunal that will have authority like civil courts so that consumers can file complaints, request reimbursements, and participate in arbitration.

Multi-agency coordination 

The banks, fintechs, telecom or internet service providers, CERT-In, state police, financial regulators, and the online gaming regulator should cooperate with the government to implement the provisions, and to manage and monitor activities like Data sharing, reporting suspicious activity, and limiting offshore access.

Public health infrastructure and awareness 

The Law should add structured programs for compulsive gamers’ rehabilitation, age verification procedures, time and deposit limits, self-exclusion choices, and school awareness campaigns.

International enforcement and cross-border collaboration 

India should engage in bilateral agreements, mutual legal assistance treaties (MLATs), Interpol frameworks, and the networks of global gaming regulators because many gaming platforms operate offshore. An agreement or treaties will help in solving these issues effectively.

Tax- and investment-friendly regime 

The government may take steps to provide tax breaks, reduced compliance requirements for smaller businesses, clarification on the GST’s applicability, and the preservation of start-up entrepreneurship. Rather than concentrating only on major players, it will give small companies and start-ups a chance to grow.

Conclusion

One major development in India’s regulation of online gaming is the Promotion and Regulation of Online Gaming Act, 2025. It outlines a huge change from a state-centred, less codified system to a centralised one. The Act prohibits online money games to save people from addiction and financial loss, while on the other hand, the Act promotes social gaming and e-sports as respectable online industries. It mainly focuses on consumer protection, regulatory clarity and understanding of the gaming industries and their economic potential.

The Act’s success is highly dependent on its practical implementation and balanced compliance structure that encourages innovation and prohibits betting and gambling. The technical challenge of this Act is that it needs international coordination for full implementation of the provisions. 

Frequently asked questions (FAQs)

  1. What is the main purpose of the Act?

The Act mandates that platforms with licenses establish transparent complaint procedures and promptly address user concerns. A proposed Gaming Ombudsman will resolve conflicts while maintaining accountability and fairness.

  1. Does the Act change how online gaming is taxed?

Indeed. A 28% tax on the entire wager or entry amount has been imposed by the GST Council on online gaming, casinos, and horse racing. Although the goal is to standardise taxes, I think that for this new change in tax policy, the small operators will be impacted.

  1. How does the law address data privacy?

Platforms are required to protect user data at any cost and enforce the age verification process in accordance with the Digital Personal Data Protection Act of 2023.  If any user or platform violates these rules, it will lead to fines or licence suspension.

References

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