Introduction
In recent years, India’s online gaming sector has undergone a dramatic transformation. What began as a niche form of entertainment has evolved into a sprawling digital economy, encompassing e-sports, casual social games, and real money gaming (RMG) platforms. Companies like Dream11 and MPL have become common names, attracting millions of users and crores in investment. However, this rapid growth has also triggered concerns around addiction, financial exploitation, and deceptive algorithms.

In response, the Indian Parliament enacted the Promotion and Regulation of Online Gaming Act, 2025 (“the Act”), which introduces a blanket ban on online money games and establishes a centralized regulatory authority. While the Act aims to protect vulnerable users and curb illicit activities, it raises serious constitutional and policy questions. Moreover, it fails to make a distinction between games based on skill and games based on chance while banning it. This article critically examines the Act’s structure, implications, and enforceability, and proposes a more proportionate regulatory alternative.

Legislative Framework and Classification of Online Games
Section 2(1)(f)¹ of the Act defines “online game” as any game played on an electronic or digital device, managed through software and facilitated via the internet or other electronic communication technologies. It classifies online games into three categories:

1. E-Sports: Section 2(1)(c)² of the Act defines it as games played as part of multisport events, recognized under the National Sports Governance Act, 2025. These are skill-based and do not involve monetary stakes.
2. Online Social Games: Section 2(1)(i)³ of Act defines it as non-monetary games played for recreation, education, or skill development.
3. Online Money Games: Section 2(1)(g)⁴ of Act defines it games involving stakes, fees, or deposits with the expectation of monetary returns. These may involve elements of both skill and chance but are excluded from the definition of e-sports.

The Act imposes a complete ban on online money games, prohibits advertisements promoting such games, and bars financial institutions from processing related transactions. It also establishes a Central Authority under Section 8 of the Act to classify games, enforce compliance, and determine whether a game qualifies as an online money game.

Salient Features and Enforcement Mechanism

1. Prohibition and Penalties
   The Act criminalizes the offering, facilitation, and advertisement of online money games. Key penalties in the Act include the following:
   1. Any person who offers an online money gaming service in contravention of Section 5⁵ of the Act shall be punishable under Section 9(1)⁶ with imprisonment for a term that may extend up to three years, or with a fine that may extend up to one crore rupees, or with both.
   2. Any person who, in violation of Section 6⁷ of the Act makes or causes to make an advertisement in any form of media promoting online money games shall be punishable with imprisonment for a term that may extend up to two years, or with a fine that may extend up to fifty lakh rupees, or with both.
   3. Any person who engages in or authorizes any financial transaction in violation of Section 7⁸ of the Act shall be punishable with imprisonment for a term that may extend up to three years, or with a fine that may extend up to one crore rupees, or with both.
   4. Any person who, having been convicted under sub-section (1) or sub-section (3) of Section 9 of the Act is subsequently convicted again under the same provision shall face enhanced penalties as per sub-section (4) of Section 9. For the second and every subsequent offence, such individual shall be punished with imprisonment for a term not less than three years, which may extend up to five years, and shall also be liable to a fine not less than one crore rupees, which may extend up to two crore rupees.
   
   Under the Act all offences are classified as cognizable and non-bailable under the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, thereby enabling law enforcement authorities to make arrests without a warrant.
    
2. Enforcement Powers
   The proposed Authority under the Act is granted sweeping powers, including:
   1. Blocking access to online platforms hosting money games.
   2. Conducting warrantless searches of digital and physical premises.
   3. Overriding access codes and passwords to seize evidence.
   These provisions raise concerns about privacy, due process, and the potential for unregulated surveillance.

Constitutional Challenges and Federalism Concerns

1. Legislative Competence
   Under Entry 34⁹ of the State List in the Seventh Schedule to the Constitution, the State Governments have exclusive legislative competence over betting and gambling. In exercise of this power, most States have either extended the application of the Public Gaming Act, 1867¹¹ or enacted their own statutes to regulate gambling and gaming activities, including online gaming. Given that betting and gambling fall squarely within the domain of State legislatures, any attempt by Parliament to impose a blanket prohibition through central legislation arguably exceeds constitutional boundaries.
    
   This is so because several States have enacted their own laws to prohibit and regulate online games and platforms. For instance, Tamil Nadu enacted the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022¹¹ to regulate online games. Similarly, States like Nagaland and Sikkim¹² have enacted their own legislations to regulate online games.
   
   Furthermore, judicial pronouncements have affirmed this position, recognizing the authority of State governments to regulate online games. Moreover, in response to State-level bans such as those enacted in Tamil Nadu and Karnataka, courts have consistently held that blanket prohibitions on games of skill are unconstitutional. Instead, States are required to adopt regulatory frameworks that address potential harms without infringing on lawful skill-based gaming.
   
   The central Act, by prohibiting online money gaming, including games of skill creates a direct conflict with existing State-level gaming enactments. This overlap raises serious concerns about legislative competence and federal harmony in the regulation of online gaming.
    
2. The Skill v. Chance Distinction
   Through numerous judgments, courts have consistently upheld the distinction between games of skill and games of chance. In All India Gaming Federation v. State of Karnataka¹³ the court held certain provisions of the Karnataka Police (Amendment) Act, 2021¹⁴ which banned online games played for stakes to be ultra vires the Constitution and accordingly struck them down. In doing so, it examined the legal distinction between a game of skill and a game of chance, and concluded that online gaming, wherein users exercise skill through superior knowledge, judgment, and attention, cannot be classified as a game of chance. Furthermore, the Hon’ble Allahabad High Court re-affirmed the distinction in M/S Dm Gaming Pvt Ltd v. State of Uttar Pradesh and Ors¹⁵ and held that Poker and Rummy are absolutely a game of skill and not gambling.
   
   However, the Act disregards this distinction by broadly defining “online money games” to include all games played for stakes, irrespective of their skill component. By imposing a blanket prohibition without evaluating the nature of the game or the degree of skill involved, the Act effectively collapses the distinction and enforces an indiscriminate ban.
    
3. Denial of Livelihood for Professional Players: Article 19(1)(g)
   The blanket ban on online money games (skill based) also amounts to a denial of the constitutional right to livelihood for thousands of professional players who earn a living through skill-based platforms. By banning all online games without a distinction between skill and chance, the Act arbitrarily extinguishes a legitimate source of livelihood, violating Article 21 of the Constitution which guarantees the right to life and personal liberty, including the right to pursue a profession.
   
   Such a right is also recognised by various judicial pronouncements, which have held that banning online skill-based games violates Article 19(1)(g) of the Constitution. In Junglee Games India Private Limited v. State of Tamil Nadu Through Chief Secretary and Others,¹⁶ the Madras High Court held that when a game is demonstrably based on skill rather than chance, the activity qualifies as a legitimate business protected under Article 19(1)(g). The Court emphasized that competitions involving games of skill must be regarded as business activities, and any blanket prohibition on such games would amount to an unconstitutional restriction on the right to trade and profession.
   
   By failing to distinguish between skill and chance, the Act collapses this significant distinction and imposes a sweeping ban that directly infringes upon the rights of professional gamers. It not only disregards settled jurisprudence but also undermines the livelihoods of thousands of professional players.

Missed Fiscal Opportunity: The Cost of Prohibition
The GST Council’s decision to raise the tax rate on online real-money gaming (RMG) from 28% to 40% reflected a clear intent to treat the sector as a high-revenue category. This elevated slab could have significantly boosted government’s revenue collections from a rapidly growing digital economy. However, the blanket ban imposed under the Act may effectively nullify this potential.

Instead of leveraging regulation and taxation to harness revenue, the government’s prohibition risks driving users toward offshore and unregulated platforms that operate outside India’s tax net. This not only erodes tax collections but also undermines broader economic activity linked to the gaming ecosystem. The 40% GST, if paired with a robust licensing framework, could have transformed RMG into one of India’s most lucrative and accountable digital sectors. The current approach, however, sacrifices long-term fiscal gains.

Policy Alternatives and Recommendations

1. Proportionate Regulation
   A blanket ban on online money games, while aimed at curbing addiction and financial exploitation, risks dismantling a thriving digital economy. A more balanced alternative would be a licensing and regulatory regime that distinguishes between games of skill and games of chance, allowing legitimate platforms to operate under strict compliance standards. The Key components may include:
   • Independent technical audits to detect deceptive algorithms.
   • Mandatory age and identity verification.
   • Spending limits
   • Clear distinction between skill and chance based games.
   
   Such a model would preserve and enable innovation and address public concerns without dismantling the entire ecosystem.
    
2. Transparent Enforcement Mechanisms
   To ensure that the enforcement of the Act, 2025 does not violate individual rights, it is essential to place limits on how authorities exercise their powers especially when it comes to conducting searches and seizures. Without proper checks and balances, such powers could lead to arbitrary action, undermining the constitutional guarantees of privacy, and due process.
   
   Additionally, the Act should provide clear and accessible grievance redressal mechanisms for users and gaming platforms who may be unfairly targeted or affected by enforcement measures. This would allow individuals and companies to challenge wrongful actions, seek remedies, and hold authorities accountable. In essence, these safeguards are not just procedural formalities, they are vital to maintaining trust in the regulatory system and ensuring that enforcement is fair, transparent, and constitutionally sound.
    

Conclusion
The Act represents a bold attempt to tackle legitimate concerns around addiction, fraud, and illicit financial flows. However, India’s online gaming sector is a complex landscape rich with economic potential, legal nuance, and technological innovation. While the Act aims to protect users, its blanket ban risks undermining a thriving industry that generates substantial public revenue. A more balanced and thoughtful regulatory approach, one that clearly distinguishes between games of skill and chance, enforces consumer safeguards, and promotes responsible innovation, can help India build a safe, vibrant, and economically rewarding gaming ecosystem.

By - C.George Thomas & Gurkaranbir Singh