INTRODUCTION
The online gaming industry in India has seen a remarkable growth in recent years, driven by smartphone penetration, the gamification of entertainment, and the rise of esports and fantasy gaming. An EY analysis states that the gaming business in India has expanded at a CAGR of 28%, reaching 16248 crores in FY23 and projected to reach approximately 34000 crores by 2028. It can increase job openings and foreign direct investment in several industries. The country possesses a gaming community of 42.5 crore gamers, only behind China.
The recently passed Promotion and Regulation of Online Gaming Act, 2025, has shaken the gaming industry due to concerns about addiction, money laundering, and unlawful data transfers among gaming platforms. The Act prohibits the making of advertisements or the transfer of funds that directly or indirectly promote online gambling. While the Act is a significant industry reform, it also presents legal challenges and regulatory inconsistencies. This article examines the challenges faced by the online gaming industry, the implications of the Act, and the need for comprehensive legislation.
CLASSIFICATION OF ONLINE GAMES
The Act under Section 2(1)(c) defines esports as any online game which – (i) is played as part of a multi-sports event, recognized under the National Sports Governance Act, 2025, and registered under the Gaming Authority. The outcome is determined solely by skill factors such as mental agility, strategic thinking, etc.1 Section 2(1)(g) of the Act defines online money games as ‘any game based on skill, chance, or both, played by paying fees, money, or other stakes in expectation of winning monetary and other enrichment, excluding any e-sports’.2
On one side, the Act encourages the growth of skill-based segments of the industry, recognizing their potential for innovation and employment. Whereas, on the other side, it prohibits online gambling, which can both pose a danger to public health and ruin the player’s financial position. This two-sided approach of prohibition and promotion indicates the Act’s aim to safeguard citizens from the threat of online gambling and to encourage other types of legitimate online games. It tends to prevent addiction, social unrest, and financial devastation.
SEVERAL KEY ISSUES THAT THE ACT FACES
Game of Skill vs Game of Chance
Although the bill seeks to define what qualifies as an online money game clearly, it cannot distinguish between games based on skill and chance. Section 2(1)(g) of the Act defines “online money game” as any money game which is played for stakes, irrespective of whether the game is based on skill, chance, or both.3
The Supreme Court, in Dr. KR Lakshmanan v. State of Tamil Nadu,4 held that gambling consists of consideration, an element of chance, and a reward. It concluded that gambling is simply a fee in exchange for the opportunity to win a prize. In State of Bombay v. R.M.D. Chamarbaugwala,5 the Supreme Court held that a game of skill is a legitimate business activity, even when played for stakes. Legislatures cannot prohibit it outright. It excluded gambling, a game of chance, from this protection.
Similarly, in the past, the High Court of Karnataka struck down provisions criminalizing online gaming, including the risk of money on games of skill. It held that such provisions could apply only to games of chance and that such a restriction violates the right to freedom of expression.
For instance, Dream 11, a sports fantasy game, has been banned because it involves money, even though it clearly falls within the threshold of a game of skill.
The Act should clearly define online money games played for stakes into categories, such as skill-based and chance-based games. This clear distinction would not put legitimate and fair games under strict regulatory frameworks, like a ban. By classifying skill-based games as gambling, the law undermines both individual rights and business activity.
Legislative Competence
The Legislature does not hold competence under the Constitution to introduce gambling-related laws. Under the Seventh Schedule, the Constitution divides law-making powers between the Union and the States. Entry 31 of the Union List enacts this Act, which authorizes media of communication such as wireless and internet, not the data transmitted over it. Gambling and Betting are subjects that fall under entry 34 of the State List, entertainment, and even trade and commerce.
State governments have historically enacted laws relating to gambling and betting because the Constitution allows them to do so. For example, Assam has an independent statute regulating online gaming, the Assam Game and Betting Act, 1970.6
The Legislature cannot pass a law that exclusively regulates online gaming, specifically in areas such as Gambling and Betting, which are subjects covered under the state list, and only state governments have the power to enact laws regulating them. By doing this, the Union unnecessarily intrudes into the state’s field. The power to pass gambling-related laws should be exclusively vested in states.
Extraterritorial Jurisdiction
The Act has extraterritorial jurisdiction over gambling services maintained by transnational developers that target Indian customers, which makes its enforcement against foreign corporations difficult. Section 14 of the Act allows the government to block or take down online money gaming services under Section 69A of the Information Technology Act 2000.7
The power of government to block or take down these services may be feasible, but it is reactive and not responsive. Lack of legal frameworks and jurisdictional limitations restricts the imposition of financial penalties or criminal liabilities against these foreign entities. Most foreign platforms escape accountability and court jurisdiction without international cooperation or financial control measures. The absence of regulations for foreign entities could hamper the position of both gamers and organizations.
Uncertainty about One-Time Access Fee
Section 2(i) of the Act describes an online game that may allow access through the payment of a subscription fee or a one-time access fee, provided that such payment is not a wager or stake.8 However, there is no clarity on whether this fee is fiscal or regulatory. This leads to confusion among gaming operators about their compliance and financial position. The lack of clear guidelines for determining the fee amount gives the gaming authority unlimited discretion. It results in discrimination against gaming operators, which is counter to the basic structure of Article 14. This may obstruct investment and innovation in the online gaming sector.
Mandatory Registration with the Authority
The mandate for game developers to register with the relevant authority complicates the country’s esports landscape, as international entities would have to undergo lengthy processes to conduct esports operations. Section 3 of the Act mandates international game developers to register with the competent authority or agency as a legitimate form of competitive sport in India.9
The Gaming Authority can be lenient in classifying skill-based games, such as fantasy sports, as online social games. It can permit registered games to add new formats or variations without requiring special permission. It would hamper innovation in the gaming industry and delay the release of new improvements if each variation of a registered game had to be approved. The game should be automatically recognized if its innate features indicate it as an esports title. The need for a separate registration for international game developers to receive protection under the Act adds to the problems game developers face when organizing e-sports tournaments in the country.
Unreasonable Search Powers
The Act gives the government powers to search and arrest anyone, which is unreasonable and unjustified. Section 16 of the Act states that authorized officers have the power to search and enter any place, and to arrest individuals without a warrant, if suspected of committing an offence under the Act.10 It also allows authorities to bypass access controls and security codes to obtain access to digital systems and devices. The Supreme Court, in Justice K.S. Puttaswamy v. Union of India,11 held that the Right to Privacy is a fundamental right protected under Article 21 of the Constitution.
While these powers are intended to enforce the Act effectively, they have raised several significant privacy concerns, including a lack of proper data protection protocols for seized digital content and the absence of prior authorization or judicial oversight. The absence of a binding privacy framework in the Act infringes on user privacy when personal devices and cloud storage are involved. It also invades the gamer’s right to privacy.
CONCLUSION
The Promotion and Regulation of Online Gaming Act 2025 fails to distinguish between skill-based and chance-based games, thereby obstructing the innovation that international game developers bring to the country’s competitive scene. It should introduce a more comprehensive framework to distinguish skill-based games, which are fair, from gambling, which is not, including clear definitions and regulatory criteria. A compliance system, backed by KYC procedures, financial transparency, and measures to reduce addiction, would balance consumer safety and economic growth in place of extensive restrictions.
While the Act should immediately recognize esports without unnecessary registration barriers, fintech legislation and international cooperation can improve cross-border law enforcement. The Act must put in place conventional safeguards to prevent the abuse of search powers and uphold the constitutional right to privacy. India should recognize the gaming industry’s capacity to generate jobs and investment, and to enhance global competitiveness. It should adopt a more nuanced classification of online games, appreciate legitimate and fair games, and restrict those that engage in illegal or illegitimate services.
*****
Footnotes
1. Promotion and Regulation of Online Gaming Act, 2025, § 2(1)(c) (India).
2. Promotion and Regulation of Online Gaming Act, 2025, § 2(1)(g) (India).
3. Promotion and Regulation of Online Gaming Act, 2025, § 2(1)(g) (India).
4. Dr. K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226 (India).
5. State of Bombay v. R.M.D. Chamarbaugwala, (1957) 1 SCC 699 (India).
6. Assam Game and Betting Act, 1970 (India).
7. Promotion and Regulation of Online Gaming Act, 2025, § 14 (India).
8. Promotion and Regulation of Online Gaming Act, 2025, § 2(1)(i) (India).
9. Promotion and Regulation of Online Gaming Act, 2025, § 3 (India).
10. Promotion and Regulation of Online Gaming Act, 2025, § 16 (India).
11. Justice K.S. Puttaswamy v. Union of India, (2017) 1 SCC 10 (India).