Imagine a 22-year-old student, sitting in his room at 3 AM, frantically borrowing from friends and family to place ‘just one more bet’ on an online gaming platform. Within months, he’s drowning in a debt that would take decades to repay. Now, multiply this story across thousands of households, and you would only begin to grasp the crisis that prompted legislative intervention.

India’s gaming industry stands at a crossroads after the Promotion and Regulation of Online Gaming Act, 2025 (“Act”), which aims to reduce financial harm, curb addiction and prevent misuse of gaming platforms. India’s gaming market touched $3.7 billion in 2024 and is projected to grow sharply, driven by over 50 crore smartphone gamers. But this growth came at a cost—rising addiction, fraud and financial distress, which triggered the current legislation.

In this article, we’ll explore why India desperately needed this legislation, how it balances promotion with regulation and what it means for the country.

Why did India need this Act?

The pandemic did not just accelerate the adoption of gaming; it fundamentally transformed it. Confined to their homes, millions discovered online gaming for entertainment, social connections, or, in some cases, as a potential income source. The country’s demographics are unmissable. The gaming industry thrives due to its population. India has 600 million individuals under the age of 35, accounting for 45% of the population. This population is also tech-savvy, creating a gaming explosion. However, the absence of a regulation created conditions of exploitation. Data suggests that Indians are losing nearly ₹15,000 crore every year due to Real Money Games (RMG). WHO links RMGs to compulsive behaviour and financial harm. 32 cases of suicide related to online gaming addiction have been reported in Karnataka in the past 31 months.

A Parliamentary Panel Report (2023) stated that online gaming websites have become a medium for funding terror activities. Various investigations uncovered large-scale tax evasion and fraud through gaming platforms, including the Chinese-operated FIEWIN, as detailed here and here. In response to multiple issues posed by real-money games, several state governments, such as Telangana’s pioneering initiative to ban all forms of online gaming, including skill-based games, have compelled the central government to enact a central legislature.

The Promotion and Regulation of Online Gaming Act, 2025

The Parliament passed the Act on August 21, 2025, and it received Presidential assent on August 22, 2025. The Act marks a policy shift by recognising e-sports and social gaming as legitimate sectors. It empowers the government to issue guidelines and promote gaming innovation.

While it imposes a ban on online money games (OMGs), Section 5 prohibits offering, aiding, abetting, inducing or engaging in any online money service. Section 6 bans advertisements related to OMGs. Further, Section 7 prohibits the transfer of funds for the purpose of online money games, and Section 8 establishes the Online Gaming Authority responsible for recognising, categorising and registering online games and issuing licenses to such platforms. The Authority also receives broad enforcement powers, including warrantless searches.

Criticism

These sweeping powers raise concerns about privacy and surveillance. The DPDP Act, 2023, already includes broad exemptions for government agencies for access to personal data. This, coupled with legislation such as this Act, raises the question of how far we can allow state surveillance to go and where to draw the line.

The Act also raises various constitutional concerns. Under Entry 34 of the State List, Seventh Schedule of the Indian Constitution, the State governments have legislative competence over betting and gambling. Critics argue that this act by the Parliament clearly exceeds constitutional boundaries. The act also fails the ‘skill vs. chance’ distinction made and upheld through numerous precedents such as the All India Gaming Federation v Karnataka (WP 18703/2021), DM Gaming v. State of Uttar Pradesh, and Junglee Games India Pvt. Ltd. v. State of Tamil Nadu.

In these cases, the courts have held that Poker and Rummy are games of skill. The Act’s disregard for games of skill also violates Article 19(1)(g) of the Indian Constitution. The High Court of Madras in the Junglee Games case held that games of skill are a legitimate business under Article 19(1)(g), and a blanket prohibition on such games would be an unreasonable restriction.

It has also been argued that the government’s prohibition has missed a fiscal opportunity. By elevating the GST to 40%, the government could have boosted its revenue collections in this rapidly growing sector. However, a blanket ban negates this potential and possibly moves users to offshore accounts and regulated platforms.

The Future?

India’s gaming sector is now pivoting towards a regulated industry under the Act. The enforcement of the Act has led to the downfall of approximately 400 companies and unemployment for the entire workforce. An outcome would be that users migrate to offshore platforms that operate beyond India’s regulatory reach via VPN. Offshore platforms offer no consumer protection and increase risks. The Act can also face challenges on its constitutional validity, and such lengthy legal disputes would freeze investments and create uncertainty. Yet opportunities exist.

The Act’s promotional provisions could transform India’s e-sports ecosystem. However, the critical question remains: in light of the boom India is likely to experience in the sector, would it perhaps be better to adopt practices like those of countries like the UK, which prefer licensing and regulation rather than absolute bans? Incorporating strict KYC, advertising rules, spending limits, and age barriers would lead to responsible growth, as industry stakeholders have advocated. Since the Act imposes a ban on all RMGs, including those of skill, it would be beneficial to make a clear distinction between games of skill and chance by setting up a committee to provide what constitutes ‘skill’. The choice between controlled regulation and uncontrolled chaos will define India’s gaming future.

Conclusion

While the initiative is well-intentioned, a regulated high-tax model with spending limits and age checks may have worked better, and a clear distinction between games of skill and chance would have served the economy better. In the current framework, an important step would be to ensure that the powers granted under the Act do not lead to arbitrary action and that proper checks and balances are in place. The Promotion and Regulation of Online Gaming Act, 2025, represents a well-intended yet constitutionally questionable legislation in response to a genuine crisis. India’s gaming landscape has been permanently altered and will require recalibration.