Changes in India’s Online Gaming Sector: Decoding the Law

Lira Goswami (lira@ala-india.com) and Archita Bhuyan, Associated Law Advisers

On May 1, 2026, India’s federally administered statutory framework prohibiting online money gaming and regulating e-sports and online social games came into force through the implementation of the Promotion and Regulation of Online Gaming Act, 2025 (the “Act”), and the Promotion and Regulation of Online Gaming Rules, 2026 (the “Rules”).

The Act and the Rules represent the most consequential restructuring of India’s online gaming sector, which has seen exponential growth driven by mass penetration of smart phones, affordable 5G data and ease of online payments, combined with rising concerns over the social, psychological and financial ‘harms’ of online money gaming (particularly on the young and economically vulnerable individuals) and the systemic risks associated with unregulated online gaming services.

The Three-Category Framework & Prohibition of Online Money Game & Online Money Gaming Services

To address these concerns, the Act categorizes the online gaming ecosystem into three categories.

online money game, where users pays a fee, deposit or stake with the expectation of monetary winnings and other enrichment in any online game, irrespective of skill, chance or both. This is prohibited.
e-sports, played as part of multi-sports events between individuals or teams, with pre-defined rules where the outcome is determined solely by factors such as physical dexterity, mental agility, strategic thinking or other similar skills without monetary stake or financial risk to the user. These are promoted and regulated. Registration is compulsory subject to prior recognition under the National Sports Governance Act, 2025; While registration fees or performance-based prize money is permitted, bets, wagers or ‘other stakes’ (including credits, coins, tokens or objects, real or virtual, purchased directly or indirectly) are excluded.
online social games, which are offered primarily for recreation, entertainment or skill-development, without monetary stakes or financial risk to the user (save where a one-time registration or subscription fee is permitted solely as an access consideration). These are exempt from mandatory registration (unless otherwise notified by the Central Government having regard to the risks posed to users).

The prohibition on online money game is absolute, irrespective of whether the underlying game is one of skill, chance or both. This is a significant departure from the long-standing distinction between skill and chance, which has been central to the Indian gaming jurisprudence since 1957 when the Supreme Court held that games of skill are protected commercial activity and distinct from gambling (The State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699). Successive courts have relied on this distinction to protect fantasy sports, card and other games (including rummy and poker) emphasizing that a game of skill does not “metamorphose” into a game of chance merely because it is played online, all else being equal. The Act has obliterated this distinction for any online game requiring the user to pay fees or deposit money or other stakes (including credits, coins, tokens etc) in the expectation of winning.

The prohibition extends to online money gaming service (including those operating outside India but targeted at users in India) and advertisements (across all media) that “directly or indirectly” aid, abet, induce or promote participation in any activity related to online money game activity, covering publishers, broadcasters, advertising agencies, influencer-marketing platforms and celebrity endorsers. Banks, financial institutions (or other payment enablers) are also prohibited from facilitating transfer of funds for prohibited online money games. Contravention entails criminal penalties and prosecutions including 3 years imprisonment or a fine up to INR 10 million (or both) for offering any prohibited online money gaming service or facilitating financial transactions. Advertising contraventions attract imprisonment of up to 2 years or a fine of up to INR 5 million (or both). Additionally, the Act authorizes the blocking of access to any information generated, transmitted, received or hosted in any computer resource in relation to such services. Where contravention is committed by a company, its directors, officers and other persons in charge can become liable (unless proven that the offence was committed without their knowledge or despite exercise of due diligence). An exception is made for independent directors and non-executive directors not involved in actual decision-making.

Centralised Regulatory Body

The Act provides for the establishment of the Online Gaming Authority of India (“OGAI”), vested with regulatory functions including determination of online games (on its own motion or on receipt of an application from an e-sport service provider or where Federal Government notifies any category of social games for its determination); registration of e-sports and other notified games; and grievance redressal (in respect of complaints unresolved at the service-provider level), with an appellate mechanism lying with the Secretary, Ministry of Electronics and Information Technology. OGAI is to be chaired by the Additional Secretary, Ministry of Electronics and Information Technology and 5 ex officio Members (at Joint Secretary level) drawn from different Ministries. Significantly, there are no independent expert members, industry representatives or civil society nominees. Although the Chairperson may invite experts to assist OGAI, such experts have no decision-making capacity.

Legal Challenge and other Implications

The constitutional validity of the Act is currently under challenge before the Supreme Court of India, including on the ground that it violates the fundamental right to practice any trade or business and the Federal Government lacks legislative competence (since ‘betting and gambling’ are State subjects, with various States enacting legislation prohibiting or regulating online games). However, as the operation of the Act has not been suspended, effective May 1, 2026, there is a time-sensitive compliance obligation across multiple stakeholder groups.

For service providers, one of the main priorities would be to cease any India-facing platforms offering online money gaming services. It will also be prudent to re-assess the entire product portfolio and incorporate appropriate operational designs and user-safety features (such as age verification, fair-play and integrity monitoring tools etc.) in compliance with the law. In particular, given the blanket prohibition on online money gaming, companies will need to pay close attention to hybrid or gamified features that may partially intersect with elements of monetary stake or expectation of winnings, thereby bringing them under the scrutiny of the law. Advertising intermediaries, media platforms, and agencies may need to conduct an audit of existing advertising contracts and celebrity-influencer agreements to remove dealing with any content that directly or indirectly promotes online money games. The inclusion of indirect promotion in advertisement raises particular compliance concerns for companies with diverse gaming portfolios, as their general brand-marketing campaigns may come under scrutiny if it inadvertently intersects and benefits prohibited activities. Advertising agreements would also need to include representations and warranties regarding compliance with the Act, alongside indemnity clauses and clear protocols for the expeditious takedown of prohibited content to mitigate the risk of criminal penalties.

To conclude, while the Act and the Rules aim to provide a measure of regulatory clarity to service providers and provide a basis for them to restructure business models, design products and plan their entry into India’s online gaming market, it remains to be seen if the constitutional validity of the Act (in its totality) will be ultimately upheld by the Supreme Court.

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