The gaming regulatory landscape in India has been evolving over the years. Early on, the Public Gambling Act, 1867 (the “Gambling Act”) prohibited gambling while explicitly exempting “games of skill." Over subsequent decades, the judiciary reaffirmed this distinction, holding that games that involved a ‘preponderance of skill’ could not be classified as gambling.

A fragmented and often inconsistent regulatory environment emerged from this jurisprudence, with some States prohibiting online real-money-games altogether [Andhra Pradesh, Telangana, Assam, Orissa, and Arunachal Pradesh], some introducing licensing regimes for online games of skill [Nagaland, Sikkim, and Tamil Nadu], and some remaining silent on the matter.

In this backdrop, the Union government has now proposed a significant departure from the established trajectory. The Promotion and Regulation of Online Gaming Act, 2025 (the “Act”) seeks simultaneously to promote e-sports and online social games, while imposing a comprehensive prohibition on all online money games (“OMGs”), whether such games are based predominantly on skill or chance.

Interestingly, while offering OMGs within India is prohibited, the Act does not prohibit online money gaming service providers from offering OMGs outside India, even if their operations and game development were to be carried out within India. Whether this could offer some interim opportunities while they seek to pivot or change their operational methodology remains to be seen.

“Online money games” are defined expansively in the Act, as follows: “an online game, irrespective of whether such game is based on skill, chance, or both, played by a user by paying fees, depositing money or other stakes in expectation of winning which entails monetary and other enrichment in return of money or other stakes; but shall not include any e-sports”.

The three (3) elements of OMGs are:

(i) participation by a user through payment of money or “other stakes”;

(ii) an expectation of winning that entails monetary gain or “other enrichment” in return for money or other stakes; and

(iii) the said game not being an “e-sport”.

Section 5 of the Act places a complete prohibition on offering OMGs and online money gaming services in India. As a result, even games such as chess and rummy, when offered by platforms to players in India as OMGs, fall within the ambit of the ban.

The prohibition under Section 5 extends to all entities involved in providing or facilitating OMGs. Section 6 of the Act prohibits advertisements that are aimed at promoting OMGs or inducing a person to play such a game, while Section 7 of the Act precludes banks, financial institutions, and payment service providers from enabling transactions relating to such services.

The expression “other stakes” has been defined in wide terms to mean “anything recognised as equivalent or convertible to money and includes credits, coins, token or objects or any other similar thing, by whatever name called and whether it is real or virtual, which is purchased by paying money directly or by indirect means or as part of, or in relation to, an online game."

The critical elements here are:

(i) whether the game is accessed or played by paying money or ‘other stakes’; and

(ii) whether gameplay creates an expectation of winning, entailing monetary or other enrichment.

While not all monetisation mechanisms are automatically implicated under the Act, the absence of explicit carve-outs leaves some uncertainty. The expansive drafting risks pulling otherwise mainstream game mechanics into the ambit of prohibition. We examine some of these below.

• In-game currency: The use of purchased virtual tokens or credits, even where required to play the game, would likely not attract prohibition under the Act. The decisive factor would be whether the game in which the currency is spent offers monetary or equivalent rewards. If gameplay using such currency can yield withdrawal, conversion, or resale value, then such a game and the associated in-game currency would likely be implicated under the Act.

• Loot boxes/ Gacha Mechanics/ Randomised Prize Generators: Where loot boxes or randomised reward mechanics allow the possibility of obtaining any “other stake” convertible to real money or equivalent value, they may be deemed prohibited, subject to them being acquired or accessed through money or “other stake” in the first place. Conversely, if the rewards are limited to cosmetic or non-tradable functional enhancements, such mechanics should remain permissible.

• In-game marketplaces: Platforms such as Steam, which allow users to trade items earned as rewards from gameplay, may not in themselves be affected, since these items represent legitimate in-game achievements. However, if the marketplace incorporates elements of randomisation or an expectation of winning “other stakes” through purchased participation, such models could potentially fall within the scope of prohibition under the Act.

• Cosmetic and functional assets (non-tradable): In-game purchases such as cosmetic skins, outfits, or functional boosters that are permanently tied to a player’s gaming account, and cannot be traded or converted into monetary value, appear unlikely to be affected by the Act.

One of the more significant ambiguities in the Act concerns the treatment of user balances. At present, millions of players maintain wallets with online gaming platforms. Upon commencement of the prohibition, the Act does not provide a framework for the settlement or withdrawal of such funds.

Section 7 prohibits payments to online money gaming service providers but does not explicitly address withdrawals from such accounts. This creates uncertainty regarding the refund of users’ existing balances. In the absence of transitional provisions, platforms may find themselves exposed to litigation, while users may face the risk of losing access to deposited funds.

The Act carves out an exemption for “e-sports”, with provisions for its promotion and development. The definition of e-sports under the Act is narrow and conjunctive, requiring an e-sports game to:

(i) be played as a part of a multi-sport event;

(ii) be an organised competitive event governed by predefined rules;

(iii) be duly recognised and registered under the National Sports Governance Act, 2025; and

(iv) not involve any stakes, bets, or wagers (though registration fees and prize money are allowed).

Independent tournaments or hybrid formats may therefore remain outside the exemption, notwithstanding their skill-based and competitive nature.

The creation of a Central Authority on online gaming, with the power to “recognise, categorise, and register online games”, is noteworthily ambitious. Read with the extremely wide definition of “online games” under the Act, the registration requirement could cover every single mobile game, PC title, or console release accessible in India, even purely recreational ones that contain no monetary component. The task of registering and categorising each game, then, would be impracticable and Herculean. The Authority risks being overwhelmed, creating regulatory bottlenecks that may hinder innovation and investment in the gaming sector.

The penal provisions of the Act are deliberately severe, signalling an unequivocal policy of zero tolerance towards OMGs. Offering OMGs or facilitating transactions in relation to OMGs can attract imprisonment of up to three (3) years or fines up to Rupees One Crore Only (INR 1,00,00,000/-), while advertising them may lead to imprisonment of up to two (2) years or fines up to Rupees Fifty Lakh Only (INR 50,00,000/-). Repeat offences invite mandatory minimum sentences and substantially higher fines.

These offences are further categorised as cognizable and non-bailable, demonstrating conscious legislative intent for deterrence through punitive sanction.

The Act marks a decisive shift in India’s approach to online gaming, replacing the long-standing skill–chance distinction with an outright prohibition on all OMGs.

However, the broad drafting and the apparent attempt to address every scenario similar to gambling render it likely that the legislation may sweep up several gameplay mechanics and practices that non-OMGs adopt, as well.

It is therefore advisable for all gaming service providers to review the Act carefully and assess their practices in light of the Act, even if they do not fall under the erstwhile classification of online real-money-games.

About the authors: Siddhartha George is a Partner and Practice Head, Harini Sudersan is a Partner and Satyajit Nair is an Associate at Poovayya & Co.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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