
New Delhi, Aug. 26 -- The recent passage of the Promotion and Regulation of Online Gaming Act, 2025 in India marks a watershed moment for the country's digital entertainment landscape. Yet, the broad strokes of this law raise serious questions about its necessity, proportionality, and potential to undermine the very innovation it claims to safeguard. If it is eventually implemented and enforced as-is, it will be a tectonic shift that can disrupt the entire ecosystem.
A sharp turn off the cliff?
For several years, India's online gaming sector enjoyed constructive dialogue among industry stakeholders, policy makers, courts, and civil society. This was exemplified by the regulatory amendments in 2023 ('Gaming Amendments') to the Intermediary Guidelines under the Information Technology Act (IT Act). While these Gaming Amendments were not fully operationalized, it highlighted the Ministry of Electronics and IT's openness toward industry input and its calibrated approach to regulating the sunrise sector.
The new law, however, is a sharp departure-not only in substance but in the collaborative spirit witnessed so far. The sweeping ban on "online money games," including those with actual skill elements, has surprised many, most notably the industry bodies who have consistently engaged in regulatory discourse with the government.
Good intentions but disproportionate and misplaced means
There is no denying the well-intentioned motivations behind the Act. Protecting consumers from financial harm, addiction, and unlawful activities are perfectly legitimate goals. However, the new law's approach is deeply flawed. An outright ban, imposing prison sentences, and multi-crore penalties for both providers and celebrity endorsers of money-based games sweeps away countless legitimate platforms.
While deterrence may be the objective here it completely ignores several measures under the Gaming Amendments that were introduced not long ago in 2023 through the Intermediary Rules 2021 under the Information Technology Act 2000. Moreover, less draconian, more targeted regulatory options not only exist, but have often been proposed in the regular dialogue between industry, civil society and government.
Instead of shutting the door on innovation, several measures at play include stricter KYC compliance, advertising curbs, financial transaction monitoring, and robust player protection protocols. These would effectively target bad actors while letting ethical businesses thrive. Blanket prohibitions, on the other hand, risk pushing users to unregulated, offshore platforms, exacerbating the very issues the law is meant to address. This caution has been reiterated by several Members of Parliament and industry associations.
Ignoring the distinction: Skill versus Chance
India's jurisprudence has, for decades, carefully differentiated between "games of skill" and "games of chance." Courts, including the Supreme Court, have consistently held that games requiring substantial skill like rummy, bridge, chess, or even certain fantasy sports do not constitute gambling and are protected business activities. This foundational principle recognizes the cognitive, strategic, and social value of gaming, and has underpinned the regulatory and economic expansion of the sector.
This Act, however, makes no meaningful attempt to preserve these distinctions. It bluntly lumps skill and chance together, banning any game involving "stakes" or monetary reward, regardless of its skill component. This is a significant regression that disregards years of thoughtful legal precedent and could set a dangerous, interventionist standard for other digital industries.
Furthermore, when states like Karnataka and Tamil Nadu enacted blanket bans without distinguishing between skill-based and chance-based games, their laws were swiftly struck down by constitutional courts. Both the Karnataka and Madras High Courts affirmed that games of skill such as rummy or poker cannot be equated with gambling merely because they are played online. While the Madras High Court upheld the right of the state government to legislate on grounds of 'public health' it emphasized that such indiscriminate bans violate fundamental rights and established jurisprudence of the constitutional framework in India.
Given these legal precedents, the new legislation is likely to be challenged in court. It remains to be seen whether the judiciary will provide respite to the industry in form of interim relief, even as many companies in the sector prepare for compliance.
The regulatory authority: An inefficient and troubling prospect
Perhaps most concerning is the proposal for a centralized Online Gaming Authority that will review, classify, and approve every title for compliance with the law. While a central registry for e-sports and social games appears innocuous, the broader implication is chilling: a government body acting as the final arbiter for which digital games Indians are allowed to play. This is not only administratively unfeasible given the sheer volume and dynamism of the gaming world but also raises civil liberties concerns.
At best, such intervention will bury startups and small studios in endless bureaucracy. At worst, if ever made efficient, it would be a colossal misallocation of state resources, wasting taxpayer money on a task the market and existing legal processes can handle far more deftly.
India can and must do better
India's online gaming sector is a powerhouse of creativity, tech entrepreneurship, and cultural export. The government's misstep on banning "online money games" undercuts the sector's growth prospects and global competitiveness. The real challenges such as addiction, financial fraud, and money laundering are not isolated to this sector, nor can they be ignored. However, solutions towards such challenges must be proportional, evidence-based, and respect both constitutional standards and technological realities.
A far more measured and rights-respecting approach would be to double down on effective enforcement, co-regulatory tools and continual refinement of these existing legal mechanisms and jurisprudence. Ignoring the constructive stakeholder dialogues and engagement in favor of a disproportionate ban that jeopardizes legal clarity, user safety, and industry innovation. Only then can India genuinely claim to balance public welfare with the immense potential of its gaming industry.
Vaibhav Kakkar is Senior Partner and Gangesh Varma is Principal Associate at law firm Saraf and Partners. Views expressed are personal.
Published by HT Digital Content Services with permission from VC Circle.