[This article is authored by Ananya Sonakiya and Anisha Tripathi, IV Year B.A. LL.B. (Hons.) students at the National Law University Odisha. It critically examines the Promotion and Regulation of Online Gaming Act, 2025, highlighting its constitutional infirmities, disproportionate restrictions, and economic drawbacks, and argues that the blanket prohibition is legally unsustainable while proposing a calibrated, risk-tiered regulatory framework.]
Introduction
The recently enacted Promotion and Regulation of Online Gaming Act, 2025 (“the Act”) seeks to impose a blanket ban on “online money gaming”, interchangeably referred to as Real Money Gaming (“RMG”). An online money game, as described under the Act, includes any game, whether of skill, chance, or a mix of both, where players pay a fee or stake something of value in the expectation of monetary or material rewards, except for e-sports. In light of this blanket prohibition on RMG, the article contends that such a ban is constitutionally questionable, legally overbroad, and economically harmful, and that a calibrated regulatory framework would better protect consumers while supporting the sector.
Constitutional and Legal Concerns
The constitutional infirmities of the Act can be examined on multiple grounds, including:
Legislative Competence
The Act, insofar as it imposes an absolute ban on RMG, squarely trespasses into the exclusive domain of State legislatures. Under Entry 34 of the State List, Seventh Schedule of the Constitution, “betting and gambling” fall within the sole competence of States. Accordingly, most States have either extended the Public Gaming Act, 1867, or enacted their own statutes to regulate gambling and gaming, including online gaming activities. By attempting to regulate and prohibit RMG through a central law, Parliament directly encroaches upon this State subject. Even if the Union seeks to anchor the legislation under Entries 31 (communication), 36 (currency), 41–42 (inter-State/foreign trade), or 52 (industries) of the Union List, the doctrine of pith and substance applies. Courts examine the true character of the law, and here, the true pith is the prohibition of betting and gambling, which is constitutionally allocated to the States.
Violation of Proportionality
The Act fails the proportionality test under Puttaswamy, which requires that (i) the measure pursues a legitimate aim, (ii) it be rationally connected to that aim, (iii) it be the least restrictive means, and (iv) the impact on rights not be disproportionate to the benefit achieved. Even if consumer protection is a legitimate aim, an outright ban lacks direct linkage, as evidence shows it displaces users to offshore, unregulated markets, increasing money laundering and tax risks. The Act also fails the least restrictive means test, as less intrusive regulatory tools, such as self-exclusion mechanisms, monetary caps, parental controls, and Anti-Money Laundering (“AML”) compliance, were available and already developing in India. Disproportionality is further compounded by Section 16 of the Act, which empowers authorised officers to arrest without a warrant, even on suspicion of being “about to commit” an offence, thereby overriding safeguards in the Bharatiya Nyaya Sanhita, 2023. Such sweeping powers seem to be disproportionate in a commercial context and risk privacy intrusions, procedural circumvention, and arbitrary enforcement under the Constitution.
Arbitrariness & Overbreadth
The blanket prohibition also underscores its arbitrariness. By denying individuals the choice of lawful recreational activity, it imposes a burden on rights that is disproportionate. The Act compounds this by treating fundamentally different operators, i.e. offshore platforms and domestic RMG providers alike. Offshore platforms, operating cross-border, heighten money laundering risks and offer no consumer protection, while domestic operators have voluntarily adopted codes on fairness, transparency, and AML. Equating the two ignores this distinction and drives users toward unregulated and unsafe platforms. The ban on online skill games, while offline skill games remain lawful, further creates an unreasonable distinction, violating Article 14 of the Constitution.
Blanket Ban on Skill-based Games
The Act under Section 5 imposes a sweeping ban on all online money games, whether of skill or chance, directly contradicting India’s statutory and constitutional framework. The Public Gambling Act 1867 specifically exempts skill-based activities from gambling prohibitions by recognising them as legitimate business and recreational activities. This exception has also been consistently upheld by courts, most notably in R.M.D. Chamarbaugwalla v. Union of India, wherein offering of games of skill was recognised as a legitimate trade or business protected under Article 19(1)(g) of the Constitution. Similarly, rummy, though often played as RMG, has been judicially recognised as a game of skill, since its outcome depends largely on memory, strategy, and judgment rather than chance. Arguably, the right under Article 19(1)(g) is not absolute and may be subject to restrictions such as public order, health, or morality. Even then, such restrictions must be proportionate to the harm sought to be addressed. The ban disregards this judicial recognition and fails the proportionality test.
Chilling Effect on Free Expression
The prohibition also encroaches upon the freedom of speech and expression, as online games are not only commercial but also an expression of individuals and their decision-making. The Karnataka High Court, while striking down the provisions of the State Police (Amendment) Act, 2021, held that imposing an absolute embargo on games of skill extinguishes one’s right to free speech. Alternatively, it emphasised that adopting responsible gaming practices and technical safeguards would better balance out individuals’ rights and the State’s legitimate interest.
Enforcement Ambiguities in the Act
Section 7 of the Act takes an unduly expansive approach by penalising “any person conducting or facilitating financial transactions” connected to online money gaming. The wide scope of this language risks extending liability not only to operators but also to players using UPI or digital wallets, advertisers or sponsors who channel funds, and even financial institutions that process such payments without knowledge of their purpose. By classifying the violations as cognizable and non-bailable, the provision may end up punishing individuals with no real culpability, instead of focusing on intermediaries who act with knowledge and intent.
Moreover, Section 14 of the Act empowers authorities to block “any information generated, transmitted, received or hosted” in relation to online money gaming, notwithstanding the limited grounds available u/s 69A of the IT Act. Although the Act borrows the procedural framework of the IT Act, it remains uncertain whether the safeguards under the Blocking Rules 2009 would apply or whether a separate mechanism would be prescribed. Further ambiguity arises from the absence of clarity on whether blocking orders would be issued by MeitY or the proposed Gaming Authority, leaving the provision vulnerable to arbitrary enforcement.
Economic and Policy Implications
Despite a steep 28% GST on deposits, India’s RMG segment remains the backbone of the online gaming economy, contributing nearly 85.7% of its revenues. Valued at $3.2 billion in FY2024, the sector is projected to more than double to $7.3 billion by FY2029. It employs over 200,000 skilled professionals, supports an ecosystem of more than 400 start-ups and has already attracted over $2.8 billion in FDI, placing India among the world’s most promising online gaming markets.
Against this backdrop, the Act’s blanket prohibition undermines India’s Digital India and startup agenda. While government white papers and budget speeches hail online gaming as a driver of employment and a key part of the Animation, VFX, Gaming, and Comics sector, the Act criminalises its most monetizable segment without licensing or harm-mitigation pathways. This inconsistency signals policy instability, whereby a sunrise sector today could be labelled a social ill tomorrow, undermining India’s digital economy and deterring venture capital investment.
Towards a Regulatory Alternative
If the constitutional and practical flaws are so ingrained in the blanket prohibition, the question becomes, what can be a better alternative? The answer lies in adopting calibrated regulation instead of an outright ban.
A useful starting point can be the Tamil Nadu Real Money Games Regulation Act, 2025, which adopts a harm-mitigation model rather than an exclusionary one. The legislation requires enforcing spending limits to curb financial harm, mandating age verifications, and prohibits late-night gaming for children to combat addiction. It mandates Aadhaar-based KYC to prevent minors from accessing harmful games, enables users to set usage limits, and requires repeated warnings such as “Online Gaming is Addictive in Nature.” These protections ensure legal and licensed activities continue while maintaining a check on addiction, financial impact, and underage participation. Similar to this, Australia’s Interactive Gambling Act, 2001, and UK Gambling Act, 2005, which govern online and remote gambling through strict licensing, stake limitations, restrictions on game design, deposit controls, and transparency standards, may also be used as useful references.
To successfully implement these lessons, India can consider adopting a risk-tiered licensing system, an idea already reflected by the Law Commission of India in its 2018 report on gambling regulation. The Commission recommends differentiating “proper gambling” (high-stakes) from “small gambling” (low-stakes), a logic extendable to RMG. Under this framework, games could be classified as:
- Tier A (Low-risk) – casual, non-monetary games could be subject to light-touch safeguards such as privacy protections for minors and advertising restrictions;
- Tier B (Moderate-risk) – real-money formats like fantasy sports, rummy, and poker with low-intensity mechanics could be licensed with obligations for KYC, self-exclusion tools, spending caps, and fair-play disclosures;
- Tier C (High-risk) – high-frequency RMG, such as slots or RMG-based games, could face enhanced licensing obligations, including affordability checks, cooling-off periods, and stringent AML compliance.
Such a balanced approach will maintain the financial and creative possibilities of India’s online gaming sector while enabling consumer protection duties to grow with risk. Therefore, instead of criminalising the entire sector, it would be more appropriate to have a law that places protection to the players, guarantees the investor community, and aligns with India’s ambition of building a responsible, globally competitive digital economy.