[This article has been authored by S.V. Ghopesh, a third-year B.A., LL.B. (Hons.) student at Tamil Nadu National Law University. It examines the unintended regulatory overreach embedded in India’s Promotion and Regulation of Online Gaming Act, 2025, particularly the Act’s rigid three-part classification of e-sports, social games, and online money games. The article argues that this water-tight compartmentalisation, reinforced by the Draft Rules, overlooks the complex ways in which microtransactions and gameplay mechanics overlap across genres, thereby creating interpretive ambiguity. These statutory gaps risk misclassifying legitimate social or skill-based games as prohibited money games, ultimately undermining the Act’s stated objective of fostering innovation while curbing harm.]
INTRODUCTION
The Promotion and Regulation of Online Gaming Act, 2025 is the Parliament’s attempt to promote and regulate the rapidly evolving and fast-growing online gaming sector. The Act’s approach could be best described as a split regulatory approach that promotes “e-sports” and “online social games” on one hand and prohibits “online money games” on the other.
The rationale for this approach is that, on one hand, money games cause harm to the general public by encouraging compulsive playing that leads to issues such as addiction, massive financial ruin and further mental health issues. On the other hand, e-sports and social games offer immense economic potential and need a legal regulatory mechanism due to the complete lacunae in laws. The Act rigidly defines and categorises online gaming into three mutually exclusive forms, assuming no possibility of overlap in their features, which have been reinforced by the recently released Draft Rules.
This article aims to critique the water-tight compartmentalisation of online games as embraced by the Act, as well as to locate the gaps in the Act and Rules which lead to ambiguities with regard to interpretation. The compartmentalisation, together with the statutory ambiguities, fails to recognise the complex nature and depth in which microtransactions are woven into modern online games. Such failure leads to the possibility of legitimate social games being at risk of being categorised as online money games, thus inviting the hammer of prohibition onto them, contrary to the intention of the Act.
RIGID COMPARTMENTALISATION BY EXPECTATION: THE ACT’S DEFINITIONS
The compartmentalisation is achieved in the Act through definitions of the three forms of games and the rules further this categorisation, through something this article refers to as the ‘expectation rule’. Before proceeding further, it is imperative to understand some vital definitions.
Online Money Games: Money games are defined under S. 2(1)(g) as online games that are played by paying fees or depositing money or “other stakes”, with the expectation of winning either money or “other stakes” back, immaterial of the games being based on skill, chance or a combination of both. Popular games such as Dream 11, Mobile Premier League, as well as various card games such as poker, rummy, and Zupee, as examples that fall under this category.
The expectation of monetary winnings by a prior payment or deposit either through money or other stakes, forms the crux of the definition of money games, which will hereafter be referred to as the ‘expectation rule’. The expectation rule, as will be seen, forms the basis for the threefold compartmentalisation.
“Other Stakes” are defined as those recognised as either equivalent or convertible to money, purchasable in the game and include coins, credit, tokens and other similar items. It is important to note that the use of the word “equivalent” suggests other stakes to include within its ambit, even those stakes which can be purchased for money but cannot be converted into real world-money.
Such an interpretation is not without precedence, as suggested by a two-judge judgment in Play Games 24 x 7 Pvt. Ltd., which recognised purchasable but non-convertible “virtual goods” like chips or diamonds. In that case, though these were considered not to be a reward (which is an essential under gambling jurisprudence), the same is immaterial to the discussion at hand, as other stakes in the Act are concerned neither with rewards nor gambling. Moreover, in that case, the State Respondents pressed charges against the petitioners even though the Respondents failed to provide any demonstration of rewards present in the game. In the absence of a reward as a statutory requirement, interpreting other stakes in the Act to include non-convertible yet purchasable tokens coins, tokens, etc. is all the more plausible.
Online social games: These are games offered for entertainment, recreation or skill-development purposes that are neither an online money game nor an e-sport, as defined under S. 2(1)(i). Most games known to people such as Candy Crush Saga, BGMI, Grand Theft Auto Online, Clash of Clans, EA FC, Kahoot! etc. that can be played online would fall under this category.
The hallmark feature of an online social game, differentiating it from the other two, is the absence of any stakes or participation with the expectation of monetary winnings, either money or “other stakes”. Nonetheless, access to the game through a subscription fee or one-time access fee is permissible provided that the same is not a stake or a wager.
It is apt to point out that the operation of the expectation rule in social games refers to an overall non-involvement of stakes throughout the game. As such, “participation with the expectation of monetary winnings” should be interpreted exhaustively through the entirety of the game. As such, the Act understands social games to not contain any element of participating in it with the expectation of gaining rewards. This conception of social games, as will be seen, is misplaced.
COMPARTMENTALISATION IN THE RULES : ELIMINATORY APPROACH
Under the Rules, the Authority determines whether a game is a social game or an esports game and registers it while games determined to be in the nature of money games are prohibited. Rule 13 provides five parameters for the determination of an online game, and the Authority is to determine whether a game is a money game or not on these parameters. The rule in essence adopts an eliminatory approach, whereby games are first screened for whether they are money games or not, and only then are factors to ascertain the true nature of the game made relevant. The five parameters all centred on the expectation rule are provided under Rule 13(1), and it is stressed that the authority is to determine the nature of a game on any or all of the parameters:
- The involvement of any element of money or other stakes, in the nature of a wager or stake, during game play.
- The use of fees or deposits as consideration for participation, or as a stake/wager or as a consideration for winning.
- Prior deposit of money or stakes acting as consideration or precondition for participation in an online game.
- The deposit of fees or deposits, made by users, provides money or any enrichment that can be encashed as money at any point.
- Other factors as deemed necessary by the Authority.
Not only do the Rules make ascertaining the true nature of the game a secondary concern, but together with the Act, it compartmentalises the three forms of online games as mutually exclusive, with money games and social games in particular separated by boundaries centred on the expectation rule. In the next section of this article, it is brought forth why such compartmentalisation ignores the design as well as the economic realities of legitimate modern social games.
TOKEN WAGERING AND CONTESTS : THE FAILURE OF THE COMPARTMENTALISATION APPROACH
David Zendle, a behavioural data scientist who has researched gambling-like practices in video games, describes token wagering as a phenomenon in online games in which players, instead of wagering real-world money on their gaming efforts, wager in-game currencies or tokens. Zendle presents DOTA 2 as an example of a game with token wagering and in that game, players have the option to wager tokens before a match, and either gain more tokens or lose the wagered tokens depending on whether they win or not, respectively.
As can be seen, this element of token wagering in Dota 2 partially fulfils the expectation rule as one necessarily bets their tokens for the purpose and expectation of more tokens. Dota 2 does not fully fulfil the expectation rule as these tokens can neither be purchased nor can they be converted into real-world money. Thus, DOTA 2 does not contain other stakes as defined under the Act and thus would not fall under the definition of a money game. However, other games incorporate elements of token wagering in more complex ways into certain in-game events or modes that do contain in-game purchasable currencies that are equivalent to money, which are in the nature of other stakes.
For instance, the popular game EA FC/FIFA, has a “draft” mode of gameplay, whereby players pay certain tokens to enter a tournament, and upon winning a certain number of games against other players online, gain rewards including tokens or coins. League of Legends has an in-game event “clash” that operates similarly, where users pay tokens for entry into tournaments to get rewards, including token rewards. The tokens in both of these games are purchasable, thus making them money equivalent. Such modes/ events that incorporate token wagering in them would hereinafter be referred to as contests.
It is argued that for four reasons, such legitimate social games can be determined to be money games.
- Firstly, contests contravene the total non-involvement of other stakes seemingly envisioned by the Act.
- Secondly, these games fulfil the first parameter imbibed in Rule 13(1)(a) by containing purchasable other stakes such as coins, tokens, etc.
- Thirdly, Rule 13(1)(c) does not expressly confine its scope to the entry stage of the game and suggests broader application when read with the Act’s definition of social games, which prohibits any involvement of stakes for participation throughout the game. The Rule can thus be interpreted to extend to in-game events such as contests.
- Fourthly, the eliminatory approach of Rule 13(1) means that the above three factors take precedence over other elements of a social game.
Thus, social games with such in-game modes run the risk of getting classified as money games and in the next section of this article, it is argued how this goes against the legislative intent of the Act.
THE CONSEQUENCES OF THE COMPARTMENTALISATION’S FAILURE
The above leads to the absurdity of legitimate social games being at risk of prohibitive regulations, against the legislative intent. These games are markedly distinct from games like Dream 11 or other similar money games to which the prohibitive approach is intended to apply in two significant ways that also undermine the legislative intent.
Firstly, players in such social games don’t play the game with the primary aim of gaining any rewards, be it monetary or otherwise. These games are first and foremost for recreational and entertainment purposes, which are legitimate uses as recognised by the Act’s definition of social games. In-game events and winnings through it are merely tangential to the primary aim, in furtherance of entertainment purposes.
Furthermore, the in-game events are just one way of playing the game. For instance, in the EA FC / FIFA games, the “draft mode” is the only in-game event that acts as a contest, and there are online modes in the game which do not have any element of a contest or the expectation rule. Prohibiting an entire game for the presence of a singular contest in it seems to be at odds with the Act’s overall goal of promoting social games.
Secondly, the other stakes in these games, though purchasable in-game, thereby being equivalent to money, are not at all convertible to money. This is crucial to note as whatever rewards can be earned in-game events stay within that game, meant to be used purely in-game and cannot be transposed to the real world either in monetary terms or otherwise. This is clearly distinct from games like Dream 11, which clearly induce players to play and make purchases with the expectation of real-world monetary gains. In the aforementioned Play 24 x 7 case, this argument regarding non-transposability of tokens was accepted by the Court to conclude that the game in that case did not have any rewards.
The legislature was concerned with massive financial ruin from games where real money is won and lost. Catching a game with a self-contained, non-convertible token system with the use of the same net is an unintended yet absurd consequence. While games like EA FC might technically satisfy parameters (a) and (c), they lack the substance and harm caused by money games, as the stakes are non-convertible and the primary intent is entertainment, not monetary winnings.
CONCLUSION AND WAY FORWARD
Online social games do contain predatory mechanisms likened to gambling activities, which lead to issues such as mental health disorders, including gambling disorders, financial over-expenditure, etc, all through the use of microtransactions. However, the intention of the Act is neither to regulate nor prohibit such microtransactions and their various uses, such as those used in contests. The Act and the Rules enable the unintended possibility of venturing into regulating and prohibiting legitimate social games. This possibility can be curbed in two ways:
Firstly, the definition of other stakes needs to be either amended or clarified to clear any ambiguity with relation to the word “equivalent” as used in the Act. Such action should clearly demarcate the position of non-convertible, purchasable in-game coins, tokens, chips or by whatever name they may be called in the Act.
Secondly, the eliminatory approach of the Rules, which undermines the true nature of a game, should not be followed. For this, the parameters in Rule 13(1) need to be amended to not be centred purely on the expectation rule, and should instead give weightage to the true nature of a game, i.e. focusing on the entertainment or recreational aspect of the game.
Incorporating such changes clears statutory interpretive ambiguities, considers the true nature of a game, and takes into account the complex nature of microtransactions and how they are incorporated into online games.