Gaming in Transition: Understanding the Online Gaming Act, Its Impact, Strategic Outlook and Litigations

by Anushree Rauta (Partner), Umang Sheth (Senior Associate) and Raashi Vaishya (Senior Associate)

Both Houses of Parliament have officially passed the Promotion and Regulation of Online Gaming Bill, 2025¹ (“Bill”), and on 22^nd August 2025, the Bill received the assent of the President, marking its transition into an act which is called The Promotion and Regulation of Online Gaming Act, 2025² (“Act”). Clause 1(3) of the Act states that it shall come into force on such date as the Central Government may appoint by notification in the official gazette.

The legislation enacts a sweeping ban on online games involving real money, citing concerns over inter alia addiction, fraud, mental health, suicides, financial and psychological harm (particularly to youth), money-laundering and threat to national security. As per the statement of objects and reasons of the Act, the intent is to designed to curb addiction, financial ruin and social distress caused by real money gaming platforms, while guiding the digital economy towards safe and constructive growth in the form of esports and online social games. The Act establishes a framework to promote esports and social gaming as safe, regulated alternatives, with broad support from the Prime Minister emphasizing India’s ambition to become a global hub for gaming innovation and creativity.

Key Highlights of the Act:

Scope and Applicability:The Act covers all of India, including offshore platforms accessible within the country. It accordingly applies to any entity offering or facilitating online gaming services, whether based domestically or overseas.
Important Definitions (summarized):
- Esports: any online game that is inter alia recognised under the National Sports Governance Act, 2025; or recognized by the Authority (mentioned below) established under the Act; and excludes betting/wagering, but may include entry/participation fees and prize money.
- Online Money Games: Any online game(s) (whether based on skill or chance) involving fees, deposits, or other stakes with the expectation of monetary or equivalent rewards. Esports are not categorised as Online Money Games.
- Online Social Games: Any entertainment, recreation or skill-development based online game(s) without staking of real money or other stakes for participation with expectation of winnings, and which may allow subscription or one-time access fees. Esports and Online Money Games are excluded from the scope of Online Social Games.
- Online Money Gaming Service: Any service offered by a person for entering or playing the Online Money Game(s).
- Other stakes: 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.
Complete Prohibition on Online Money Games and Online Money Game Service:The Act prohibits any person from aiding, abetting, inducing or engaging in the offering of Online Money Game(s) and Online Money Gaming Service(s), as well as imposes a complete ban on advertising Online Money Games, regardless of whether they are skill-based or chance-based. Further, banks, payment gateways, and other such financial institutions are barred from inter alia facilitating any transactions or authorisation of funds towards payment for any Online Money Gaming Service.
Establishment of Authority on Online Gaming: A central authority will be established (or an existing body shall be re-designated) to inter alia (i) certify whether an Online Game is an “Online Money Game” (pursuant to an application from a person or on a suo motu basis); (ii) recognise, categorise and register Online Games in the prescribed manner; and (iii) handle complaints relating to Online Games and enforce compliance with the orders, guidelines or codes of practice issued by itself or the Central Government.
Establishment of Authority on Online Gaming:A central authority will be established (or an existing body shall be re-designated) to inter alia (i) certify whether an Online Game is an “Online Money Game” (pursuant to an application from a person or on a suo motu basis); (ii) recognise, categorise and register Online Games in the prescribed manner; and (iii) handle complaints relating to Online Games and enforce compliance with the orders, guidelines or codes of practice issued by itself or the Central Government.
Penalties and Enforcement:
- Offering online money gaming services: imprisonment of up to 3 (three) years or fine of up to INR 1 (one) crore, or with both.
- Violation of prohibitions pertaining to advertising:imprisonment for up to 2 (two) years or fine of up to INR 50 (fifty) lakh, or with both.
- Engaging in any transaction, authorisation or facilitation of funds for Online Money Gaming Service: imprisonment for up to 3 (three) years or fine of up to INR 1 (one) crore, or with both
- Failure to follow directions issued by the Central Government or the Authority: penalties of up to INR 10 (ten) lakh, suspension or cancellation of registration, and potential prohibition on offering the concerned Online Games.
- Repeated violations are subject to enhanced penalties as prescribed under the Act.
Blocking of Violative Services: Non-compliance with Sections 5, 6 and 7 (which provisions inter alia cover what is listed in Point 3 above) may result in blocking of any information generated, transmitted, received or hosted in any computer resource in relation to Online Money Gaming Service from public access, notwithstanding the provisions of the Information Technology Act, 2000.
Power to Investigate Offences:The Central Government may authorise central, state, or regulatory officers to investigate offences under the Act, including powers to inspect premises and arrest without warrant in cases of suspected violations in the manner as prescribed in the Act.
Act not in derogation of any other law: The provisions of the Act are in addition to, and not in derogation of the provisions of any other law and in case of any inconsistency of this Act with any other Act, the provisions of the Act shall, to the extent of such inconsistency, have overriding effect over any such act.
Power of Central Government to make rules: The Central Government may, by notification, make rules to carry out the provisions of this Act. Such rules may inter alia provide for
- such other measures as may be necessary to promote the sector relating to e-sports.
- such other measures as may be necessary to promote the sector relating to online social gaming.
- the manner of recognising, categorising and registering online games.

Key Impacts of the Act:

Discontinuation of real money gaming apps: In compliance of the law of the land and to remain completely committed with the Act, many real money gaming companies like Dream11, Zupee, Rummy Passion, etc. have officially announced and discontinued real money games on their platforms. Some of the real money platforms have decided to continue and/or switch to a free-to-play games.
Applicability of the Act on offshore entities: As the Act not only applies to India, and the Company located in India but also applies to offshore platforms running operations within the country. The Act applies to any entity offering or facilitating online gaming services, whether based domestically or overseas. Although the applicability of the Act is well-defined to cover off-shore entities, the execution and enforcement of the same will be challenging.
Gaming influencers will not be able to carry on those activities: In addition to the gaming companies and operators, the players and gaming influencers playing, streaming and earning from real money games streaming will not able to continue playing such real money games.
Sponsorships of real money gaming companies and brand deals of celebrities / influencers will be impacted: Many real money gaming companies are sponsors for various sports leagues, which sponsorship and other agreements will now be either required to be revised/terminated depending on the company, its other verticals etc. on case-to-case basis. Further, as advertisements of real money gaming is not permitted, the celebrities and influencers will no more be permitted to endorse /promote real money brands and the existing deals with either have to be amended / terminated on case-to-case basis.
Growth of esports and online social gaming: With restrictions on real money gaming, the spotlight is shifting towards esports and online social gaming as the next growth frontier. Unlike wagering-based models, these formats emphasize skill, competition, and community engagement, making them more palatable from both a legal and policy standpoint. India has already witnessed a surge in e-sports tournaments, streaming platforms, and brand sponsorships, positioning the sector as a legitimate part of the entertainment and sports economy. Similarly, online social games are attracting a wide user base, particularly among younger demographics seeking immersive, interactive experiences.
Business and investors will re-strategize: Business owners and investors in the real money gaming industry will re-think and strategize new business models to comply with the new laws, such as subscriptions models, ad-revenues, brand collaborations, registration fees, sponsorships Investors, both domestic and global, will exercise greater caution, with funding decisions increasingly contingent upon regulatory clarity and compliance readiness. Businesses will also consider diversification into adjacent sectors such as gamification of education, sports-tech, or Web3/metaverse gaming, to mitigate risk and preserve market share.
Other Stakes:
- A key element under the definition of ‘online money games’, is whether the user is required to play the game (as a pre-requisite) by paying ‘other stakes’ in expectations of monetary or other enrichments in return of such other stakes.
- The regulatory treatment of in-app or in-game purchases (e.g., coins, tokens, currency, skins, objects) would therefore depend on whether such purchases fall within the ambit of ‘other stakes’ and whether the same is used as a prerequisite for participating in a game in expectation of winnings.
- If any kind of ‘other stakes’ e.g., coins, tokens, currency etc., which is acquired or purchased in a game or is received as ‘winnings’ from a game, which can be used to redeem any real money, or convertible into tangible or monetary benefits or traded for any other things, then the same could fall within the ambit of other stakes and accordingly not permissible.
Position on in-app or in-game purchases
- Items that are merely cosmetic, optional, or ancillary in nature, that do not influence the outcome of the game, such as skins or character enhancements that are purely aesthetic in nature, may arguably not constitute ‘stakes’ as they neither impact gameplay nor create a direct path to winnings.
- Items that are merely cosmetic, optional, or ancillary in nature, that do not influence the outcome of the game, such as skins or character enhancements that are purely aesthetic in nature, may arguably not constitute ‘stakes’ as they neither impact gameplay nor create a direct path to winnings.
- Given the diversity of game mechanics and purchase models, the applicability of this test will necessarily be fact-specific. Each case would require an examination of the nature of the purchase, its role in gameplay, its impact on outcomes, and the manner in which the returns, if any, are structured.

Way Forward:

Revamp real money gaming Models: With the new Act, businesses operating in the online gaming sector will need to reassess and recalibrate their models to ensure compliance with the Act. A primary step will be to revamp existing real money gaming structures by removing monetary stakes, any redeemable elements and real money winnings and further repositioning games around pure skill, entertainment, and community engagement.
New business Models: Companies must look to develop alternative business models that do not fall within the prohibited category. Options include adopting free-to-play formats, esports tournaments, subscription-based access, and hybrid models supported through advertising revenues, brand collaborations, sponsorships, registration fees etc. Virtual goods and in-game enhancements that carry no real-world convertibility can continue to serve as strong revenue drivers.
Disburse user payments: Operators will be required to clear and settle existing user accounts, ensuring that wallet balances and credits carrying monetary value are refunded to players. This is essential not only for compliance but also to maintain user trust and reduce the risk of litigations.
Amend contracts and advertisement strategies: Companies must update/ amend the contracts, terms of service, and advertising strategies to align with the provisions of the Act. Sponsorship agreements, user contracts, and marketing campaigns should be carefully reviewed to avoid misrepresentation and ensure compliance with advertising codes and regulatory standards.
New Investment strategies: Investors must reassess their portfolios in light of regulatory risks and redirect capital toward growth areas such as esports ecosystems, gaming content production, metaverse assets, and ad-tech driven platforms.
Player/User awareness: For players / users, awareness of different types of games is necessary. Users must only engage in legal and authorised games such as free-to-play games, esports, social games etc. and do not engage in real money games, or any sort of betting and gambling activities.
Gaming Influencer: Gaming influencers should recalibrate their content strategy to focus on esports commentary, streaming, reviews, and responsible gaming advocacy. By aligning with brands and platforms that comply with the Act, influencers can continue to monetize their following while building long-term trust and avoiding regulatory scrutiny.
Celebrity Endorsements: For celebrities endorsing or collaborating with gaming platforms, due diligence must be carried out. Endorsements should shift towards esports, casual gaming, and brand-backed gaming initiatives that comply with advertising standards. Associating with responsible gaming campaigns and compliance-first platforms will not only mitigate liability but also enhance credibility with fans. Endorsing with games which are banned under the Act, or betting and gambling, shall attract heavy penalties on the celebrity.

Recent updates and litigations filed against the Act:

Karnataka High Court: A23 (Head digital work), a real money rummy game operator, has challenged the Act before Karnataka High Court, which has reportedly³ directed the Union government to submit its response ahead of the next hearing on 8^th September 2025. No interim relief has been granted at this stage. The Karnataka High Court has previously struck down provisions of the Karnataka Police (Amendment) Act, 2021, which had prohibited online skill-based games such as rummy and poker stating that a blanket ban was unconstitutional and that the state legislature lacked competence to regulate online skill gaming.⁴ News reports⁵ also suggest that the Union government has filed legal caveats in nine High Courts nationwide to pre-emptively defend the Act, ahead of anticipated litigation. This underscores the Union government’s proactive strategy amid mounting challenges to the ban on real-money online gaming.
Delhi High Court: Bagheera Carrom (OPC) Private Limited, an online carrom game platform, has moved the Delhi High Court challenging the recently introduced the Promotion and Regulation of Online Gaming Act, 2025 which bans online real money games⁶.The contentions raised by Bagheera inter alia are that the Act was brought without due stakeholder consultation, leading to a violation of fundamental rights and has further the “betting and gambling” being subjects matters under State List, the central government has trespassed into the domain of State legislatures. Bagheera prays for the Act to be struck down as ultra vires, unconstitutional, and violative of Articles 14, 19 and 21 of the Constitution. Chief Justice Upadhyaya noted that the Centre is yet to constitute an authority to oversee the implementation of the gaming law and until then it cannot act upon the new law, to which Solicitor General Tushar Mehta stated that the centre is in the process of making rules and constituting the authority. The Court will hear the matter next after eight weeks.⁷
Madhya Pradesh High Court: Clubboom 11 Sports and Entertainment, a fantasy sports company has filed a petition in the Madhya Pradesh High Court and the Division Bench of Chief Justice Sanjeev Sachdeva and Justice Vinay Saraf heard a petition which questioned the constitutional validity of the new legislation banning online real-money games. The petitioners argued that fantasy sports enjoy legal recognition and cannot be prohibited outright and instead of outright ban the government should regulate the sector. In response, the solicitor general representing the centre stated that the government is actively considering filing a transfer petition in the Supreme Court to consolidate all cases relating to the Online Gaming Act, which would prevent the possibility of conflicting judgments from multiple High Courts on the same legislation. The High Court has now issued notices, allowing the centre and the petitioner to file their responses and the case is slated for further hearing on October 28.⁸
GST Council: The Goods and Services Tax (GST) Council has approved a steep increase in the tax rate on lotteries, casinos, race clubs, betting, and online money gaming. The earlier GST rate, was 28 % with input tax credit, which is now revised to 40% with input tax credit. The move places these activities firmly within the newly created sin-goods category under the GST framework. The category of casino includes separate 40% GST on admission and services and separate 40% GST on purchase of casino chips. Online money games which are prohibited as per the Act (defined above), also falls into the 40% tax category. With many litigations being filed by the gaming companies against the Act, these companies may or may not survive due to such heavy tax rates, assuming they receive favourable order against the said Act. Interesting, as the Act supports esports and social gaming, the GST rate on playing cards, chess boards, carom boards, and other board games has been reduced from 12% to 5%.⁹

The information contained herein is intended for general and educational purposes. Views expressed are personal in nature and shall not be treated as legal advice in any manner. Readers are advised to seek professional legal advice tailored to their particular circumstances before taking any action based on the materials contained herein.

Footnotes

[1] https://prsindia.org/files/bills_acts/bills_parliament/2025/Bill_Text-Online_Gaming_Bill_2025.pdf
[2] https://www.meity.gov.in/static/uploads/2025/08/4f673438a686e3fa81dd2d277b445f42.pdf
[3] https://g2g.news/online-gaming-laws/karnataka-hc-hears-a23-challenge-to-online-money-gaming-ban-act-directs-union-govt-to-file-reply-on-interim-prayer-to-be-heard-on-september-8/
[4] https://g2g.news/online-gaming-laws/a23-challenges-unions-money-gaming-ban-law-before-karnataka-hc/
[5] https://g2g.news/online-gaming-laws/karnataka-hc-hears-a23-challenge-to-online-money-gaming-ban-act-directs-union-govt-to-file-reply-on-interim-prayer-to-be-heard-on-september-8/
[6] https://www.barandbench.com/news/promotion-and-regulation-of-online-gaming-act-challenged-in-delhi-high-court
[7] https://www.barandbench.com/news/promotion-and-regulation-of-online-gaming-act-challenged-in-delhi-high-court
[8] https://www.storyboard18.com/gaming-news/govt-mulls-sc-transfer-as-mp-hc-hears-fantasy-sport-firms-challenge-to-online-gaming-law-80186.htm
[9] https://g2g.news/gst-on-online-gaming/gst-council-hikes-tax-on-casinos-and-online-gaming-to-40-cuts-physical-cards-board-games-to-5/

Gaming in Transition: Understanding the Online Gaming Act, Its Impact, Strategic Outlook and Litigations