India has established a fresh online gaming regulatory framework that categorically prohibits real-money gaming, moving beyond the previous skill-versus-chance distinction. This new approach paves the way for regulated esports and online social games, yet leaves certain aspects of its implementation unclear for businesses involved.
The Promotion and Regulation of Online Gaming Act, 2025 (PROG Act), which took effect on May 1, 2026, fundamentally alters India's digital gaming landscape. Following a Supreme Court ban on such activities in August 2025, the PROG Act and accompanying Online Gaming Rules 2026 outline that any game where players pay or stake money in expectation of financial gain falls under the definition of an online money game, encompassing real or virtual currencies.
According to Aaron Kamath, co-head of the Tech, Digital and Commercial Law Practice at Nishith Desai Associates, the definition of an online money game is quite broad. The law distinguishes three categories of games: online money games, esports, and online social games. Esports are defined as organized multiplayer events devoid of any betting, whereas online social games cannot involve monetary stakes. They can instead monetize through methods like subscriptions and in-game purchases, provided no payments serve as stakes.
Prior to the PROG Act, India's gaming laws held a significant distinction between skill and chance games. Legal precedents, notably a 1957 Supreme Court ruling, recognized skill-based competitions as business activities protected under the Constitution, while gambling did not enjoy similar protections. This principle impacted earlier cases about fantasy sports, including Dream11, which argued that their format was predominantly skill-based. However, the PROG Act discards this differentiation for real-money gaming.
The Act prohibits advertising and payment facilitation for online money games, imposing severe penalties including up to three years’ imprisonment and fines up to INR 1 crore (about $106,000). These rules extend to foreign operators that target Indian users, allowing regulators to police banking and transaction processing activities related to non-compliant gaming.
Despite these restrictions, there remains a viable market segment. Kamath notes that online social games could still be monetized effectively without stakes, and legitimate esports can charge fees based on performance instead of betting. Many real-money gaming operators, including Dream11, effectively transitioned to free-to-play models before the law’s enactment.
The nuances of the PROG Act and its regulations also introduce ambiguity regarding compliance obligations. For example, the law's open definitions on what constitutes a game and who is considered a service provider create uncertainty within the industry. Similar ambiguities surround registration requirements, particularly for games wanting to classify as esports.
Kamath emphasizes that the scope for compliant gaming strategies is tightly constrained and urges operators to eliminate any element that resembles gambling stakes. Future compliance burdens may disproportionately affect smaller operators, while larger companies may navigate the regulatory landscape more easily due to their resources.
As legislation evolves, the division between social and real-money gaming will likely attract heightened regulatory scrutiny. Although regulatory approval does not provide permanent assurance against future changes, the compelling investment landscape and a vast gaming audience continue to encourage interest in India’s burgeoning gaming market. Clear operational guidance from the authority will be crucial for unlocking further investment and growth in the sector.
