The new law has caused ripples across the $3.7-billion Indian online gaming industry, which relies heavily on real money games. Opposition has been swift, with cases filed in the Karnataka, Delhi, and Madhya Pradesh High Courts. This led the Centre to file transfer petitions before the Supreme Court to consolidate all cases, which the Court allowed on September 8.[1]

Article 246 deals with the allocation of legislative powers between the Centre and States, as categorised into three lists under the Seventh Schedule. States alone can legislate on matters pertaining to sports, betting and gambling under Entries 33 and 34 of List II of the Seventh Schedule. While certain states have adopted the Public Gambling Act of 1867, enacted by the erstwhile British rulers, others have developed their own gambling legislation.[2] Certain states like Telangana, the first in India to impose a ban, have outlawed online real-money gaming, while others, such as Tamil Nadu and Sikkim, have chosen to regulate it.

This fragmented regulatory landscape arguably strengthened the case for a uniform national framework. Still, opposition-ruled states, including Karnataka and Tamil Nadu, are preparing to challenge the Act in the Apex Court, citing encroachment on state powers.

This raises difficult questions:

• Did Parliament have the competence to enact the 2025 law?
• Can entries in the Union List, such as forms of communication including wireless, telecom and broadcasting (Entry 31) or inter-state trade and commerce (Entry 42), legitimately support it?
• Does the Act contradict judicial precedent affirming a fundamental right to trade in games of skill?
• If online money games are banned, why propose a GST hike?
• Even if courts strike down the ban, what survival prospects does the industry have under a 40% tax regime?

These questions are only the tip of the iceberg. In this piece, we focus on the timeline of key developments, the core features of the new Act, and the regulatory dilemmas it creates.

Timeline of Key Events

• May 2022: Ministry of Electronics and Information Technology (MeitY) sets up an Inter-Ministerial Task Force (IMTF) for online gaming regulation.[3]
• September 2022: The IMTF report, inter alia, suggests a central-level law for online gaming, the creation of a dedicated regulatory body to determine whether a game qualifies as a game of skill or of chance, and the setting up of a three-tier dispute resolution mechanism.
• December 2022: MeitY designated as the nodal ministry for online gaming.
• April 2023: Meity notifies the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2023, requiring online gaming intermediaries to follow due diligence requirements and host only permissible online games (see detailed analysis here and here).
• April 2024: Telecom Regulatory Authority of India’s (TRAI) consultation paper on inputs for formulation of the National Broadcasting Policy, 2024, seeks stakeholder views on online gaming regulation, local game developer support, and safeguards against harms.
• April 2025: Proposal being finalised to denote online real-money gaming companies as “reporting entities” under the Prevention of Money Laundering Act, 2002.
• August 2025: The Promotion and Regulation of Online Gaming Act, 2025, receives presidential assent (August 22).

Highlights of the New Law

The key elements of the Act are as follows:

• Applicability: It extends to the whole of India and also asserts extraterritorial jurisdiction, applying to services offered from outside India if they target Indian users. This provision is critical in a globalised digital economy, where gaming platforms often operate across borders and enforcement challenges are compounded by jurisdictional gaps.

• Enforcement Date: The Act will come into force on the date the central government may appoint by notification in the Official Gazette.

• Recognition of E-sports and Online Social Games: Section 3 requires the central government to take steps to recognise and register e-sports as a legitimate competitive sport with the designated Authority/agency and to promote the ecosystem via standards, training academies, research centres, incentives, and coordination with states and sports bodies. Under Section 4, the government is mandated to undertake the development of online social games via registration mechanisms, distribution support, age-appropriate access, awareness programs, and state/institutional coordination. Social games may charge access or subscription fees. Still, they cannot involve staking money or “other stakes,” nor be treated as online money games or e-sports, preserving a non-gambling, non-wagering category the government can actively promote.

• Prohibition and Penalties: The Act introduces strict prohibitions with corresponding penalties:

• Online Money Games: Offering, aiding, abetting, inducing, or otherwise engaging in the offering of online money games or online money gaming services is prohibited under Section 5. Any person who offers online gaming service in contravention of this provision will be punished with imprisonment of up to three years, or a fine of up to Rs 1 crore, or both.

• Advertisement: Section 6 imposes a categorical ban on any form of advertisement which directly or indirectly promotes or induces participation in online money games. This prohibition extends across all media, including digital platforms, television, print, and influencer-led campaigns. Any person who makes or causes to make an advertisement in any media, in contravention of this Section, will face imprisonment for a term which may extend to two years or a fine which may extend to Rs 50 lakh or both.

For sponsors and advertisers, this translates into a fundamental shift in compliance obligations. Celebrity endorsements, branded content, and promotional tie-ups with gaming platforms offering money-based formats are now legally impermissible. The language of the provision is broad enough to capture not only explicit advertisements but also subtle forms of brand association and affiliate marketing.

This has significant implications for marketing agencies, OTT platforms, and sports franchises that have previously relied on sponsorship revenue from gaming companies. The Act effectively severs the commercial link between regulated media and monetised gaming, forcing advertisers to recalibrate their strategies and seek partnerships within the permissible segments, namely e-sports and social games.

In the long term, this could lead to a cleaner advertising environment. However, in the short term, it causes uncertainty and revenue disruption for stakeholders who have built business models around the visibility and virality of online money gaming platforms.

• Transfer of Funds: Section 7 targets banks, financial institutions, or “any other person” facilitating transactions towards payment for any online money gaming service.” This means that any agencies acting as payment facilitators, wallets, or processors also risk exposure if they route funds to such services. Any person who engages in any transaction or authorisation of funds in contravention of this Section will face imprisonment for a term which may extend to three years or a fine which may extend to Rs 1 crore or both.

Subsequent offences carry enhanced penalties.

• Online Gaming Authority: According to Section 8, the central government may, by notification, constitute an Authority or designate any existing Authority or Authorities or any agency which may be vested with powers to categorise games, determine whether a game qualifies as an online money game, and issue binding directions to platforms and service providers. The Authority also serves as a grievance redressal body, capable of responding to complaints and initiating inquiries.

• Blocking: Section 14 allows the government to block access to offending platforms under the Information Technology Act, 2000, ensuring technical enforcement against offshore and anonymous operators.

• Search and Seizure: Officers authorised under Section 15 are empowered to conduct searches and seizures, including in virtual digital spaces, and to arrest individuals without a warrant. These powers are comparable to those found in legislation dealing with cybercrime and financial fraud, underscoring the seriousness with which the government views online money gaming.

Challenges Ahead

Some of the challenges that arise are as follows:

• Definitional Rigidity in E-Sports Classification
• Absence of Criteria to Determine Whether a Game Qualifies as an Online Money Game
• Jurisdictional and Extraterritorial Enforcement
• Financial Compliance and Payment Gateways
• Privacy and Search Powers under Section 16
• Ambiguity Around One-Time Access Fee

Now, let us delve into these in detail:

• Definitional Rigidity in E-Sports Classification

The definition of “e-sport” under Section 2(1)(c) is highly prescriptive and may inadvertently exclude several popular competitive games from qualifying under the Act. The requirement that the online game must be:

• • part of a multi-sports event,
  • recognised under the National Sports Governance Act, 2025,
  • registered with the designated Authority under Section 3, and
  • determined solely by physical dexterity, mental agility, or strategic thinking,

creates a cumulative threshold that many mainstream titles, especially emerging or indie games, may not meet. This could lead to regulatory exclusion of games that are otherwise widely accepted as e-sports globally. This would also discourage development of esports competition circuits from the grassroots level for new and developing games, where smaller tournament organisers only cover one esports, let alone for other esports.

Mandatory registration with the Authority/agency under Section 3 would further add to the problems for international game developers who hold tournaments across the world or indie developers from abroad who may have fringe audiences in India having to separately register their game with the Authority/agency in India to receive protection under this Act instead of having an automatically opted in scope of recognition for their game based on the inherent characteristics of the esports element within the game itself.

Moreover, the exclusion of any game involving betting, wagering, or other stakes, even if such features are external to the core gameplay, may disqualify platforms that host legitimate tournaments but also offer ancillary monetised features. The lack of flexibility in recognising evolving formats of competitive gaming may hinder innovation and limit India’s ability to align with international e-sports standards.

• Absence of Criteria to Determine Whether a Game Qualifies as an Online Money Game

The Act empowers the Authority under Section 8 to decide whether a game qualifies as an online money game, either on application or suo motu. However, the criteria for such classification are not fully detailed in the Act and are to be set by future regulations. This leads to uncertainty for platforms offering hybrid formats or games with optional monetisation features. Without clear procedural safeguards or definitional thresholds, the classification process may be prone to inconsistent or discretionary enforcement.

Additionally, the Authority is empowered to issue binding directions and handle complaints, but the Act does not specify timelines, appeal mechanisms, or procedural transparency for these determinations. This could lead to operational unpredictability for developers and service providers.

• Jurisdictional and Extraterritorial Enforcement

While the Act asserts extraterritorial jurisdiction over services targeting Indian users, enforcement against offshore platforms remains a practical challenge. Blocking access under Section 14 (via the IT Act) may be technically feasible, but pursuing criminal liability or financial penalties against foreign entities is likely to be constrained by jurisdictional limitations and a lack of mutual legal assistance frameworks.

• Financial Compliance and Payment Gateways

Section 7 prohibits banks, financial institutions, and “any other person” from facilitating transactions toward online money gaming services. While this provision is aimed at cutting off financial flows to prohibited platforms, it places a significant compliance burden on payment gateways, wallets, and intermediaries.

The lack of clarity on what constitutes “facilitation” or “authorisation” of funds may expose legitimate fintech operators to liability, especially in cases where transactions are routed through third-party APIs or bundled services. Without detailed guidance or safe harbour provisions, financial service providers may adopt overly cautious approaches, potentially affecting unrelated gaming or entertainment transactions.

• Privacy and Search Powers under Section 16

Section 16 of the Act grants sweeping powers to authorised officers to enter and search “any place,” including digital environments, and arrest individuals without a warrant if they are reasonably suspected of committing or about to commit an offence under the Act. The term “any place” is expansively defined to include:

“…any premises, building, vehicle, computer resource, virtual digital space, electronic records or electronic storage device…”

Moreover, officers are permitted to override access controls and security codes to gain entry into digital systems and devices.

While these powers are intended to facilitate enforcement against online money gaming services, they raise significant privacy concerns. The provision lacks:

• • Clear procedural safeguards;
  • Judicial oversight or prior authorisation;
  • Limitations on scope or duration of access; and
  • Data protection protocols for seized digital content.

In the absence of a dedicated data protection law or binding privacy framework, such broad powers risk infringing on user privacy, especially where personal devices, cloud storage, or encrypted communications are involved. The potential for overreach is heightened by the lack of specific thresholds for what constitutes “reasonable suspicion”.

It is obvious that most online games are almost certainly played on the player’s personal devices, and the risk of unwanted examination of personal devices creates grave data privacy concerns. This may invite constitutional scrutiny under Article 21 (right to privacy) and could conflict with principles laid down in Justice K.S. Puttaswamy (Retd) v. Union of India,[4] particularly regarding proportionality and necessity in state surveillance.

• Ambiguity Around One-Time Access Fee

The Act permits online social games to charge a “one-time access fee” or subscription fee under Section 2(i), provided such payments are not in the nature of stakes or wagers. However, the term “one-time access fee” is not defined in the Act. It is also unclear whether this fee can be charged repeatedly for re-entry or re-access, or whether it must be a single, non-recurring payment per user per game.

This ambiguity could lead to compliance risks for platforms offering paid downloads or episodic content, including app stores like Google Play or Apple App Store. If interpreted broadly, even standard paid games may fall within the scope of registration and regulation under the Act. Without clarification in the Rules, platforms may face uncertainty about whether repeated payments for access violate the prohibition on staking or wagering.

The lack of guidance also risks inconsistent enforcement and may deter developers from offering premium content or educational games with gamified access models. A clear definition or FAQ from the Authority will be essential to avoid overreach and ensure legitimate monetisation models are not inadvertently penalised.

Concluding Thoughts

The Promotion and Regulation of Online Gaming Act, 2025, marks a significant milestone in India’s approach to the online gaming sector. For the first time, the law directly addresses the fractured regulatory landscape and establishes a national framework over a domain that has so far operated within legal grey areas. By recognising e-sports and social games while simultaneously banning money-based formats, the Act aims to draw a clear boundary between innovation in gaming and the dangers of gambling-like play.

At its heart lies a categorical prohibition on real-money games, accompanied by strict penalties and a complete ban on their advertising and financial facilitation. This effectively severs the commercial lifeline of an industry that has until now been built and funded overwhelmingly by real-money games, including various games such as rummy and poker that were traditionally considered games of skill and were hence legal.

The Act’s promise of clarity and transparency also comes with new uncertainties. Its rigid classifications, broad enforcement powers, and unresolved gaps leave critical questions for industry players, financial intermediaries, and even regulators themselves. Offshore platforms will remain a persistent enforcement headache, while advertisers, sponsors, and fintech operators will need to recalibrate their models and policies to remain compliant.

Ultimately, the Act reflects the central government’s determination to bring order to the rapidly expanding online gaming sector. Still, its long-term success will depend less on the text of the statute and more on how its provisions are operationalised in practice. Clear rules, proportional enforcement, and continued dialogue with industry will be essential to ensure that India strikes the right balance between protecting consumers and fostering growth in its digital gaming economy.