India has recently overhauled its online gaming regulations, with a clear stance against real-money gaming while opening doors for esports and online social games. The new framework, however, does not provide a comprehensive rulebook for operators, resulting in various uncertainties regarding compliance obligations and definitions.
The Promotion and Regulation of Online Gaming Act, 2025 (PROG Act) and the Online Gaming Rules 2026 took effect on May 1, 2026, following a Supreme Court ban on real-money gaming imposed in August 2025. This new legislation delineates three categories in the online gaming landscape: online money games, esports, and online social games.
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 in the PROG is intentionally broad. He explains that it encompasses various forms of stakes, including credits and tokens, thus any game combining paid entry with a potential monetary reward falls into this category. Consequently, the long-standing skill-versus-chance debate loses its significance for these products.
Online real-money games are classified as those where players wager money or other valuables with the expectation of a financial return, irrespective of skill or chance involvement. Esports are characterized as competitive multiplayer events that necessitate registration under the National Sports Governance Act, 2025 and do not involve any betting or wagering. In contrast, online social games are purely for recreational purposes, disallowing monetary stakes while allowing revenue through subscriptions, advertisements, and in-game purchases.
Prior to the PROG Act, the distinction between skill and chance significantly impacted the legal landscape of online gaming in India. The Supreme Court had historically upheld that games requiring substantial skill could be considered business activities under the Constitution, offering them legal protections not afforded to gambling. The PROG Act marks a significant shift, classifying any game with a monetary stake as online money gaming, regardless of the skill involved.
Additionally, the law not only prohibits operators from offering real-money games but also criminalizes the advertisement and facilitation of payments associated with these games, with penalties potentially reaching up to INR 1 crore (around $106,000) and imprisonment for repeat offenses. This extends to offshore operators targeting Indian users, allowing regulators to mandate banks and payment processors to cease related transactions, reinforcing compliance obligations.
While real-money gaming faces severe restrictions, there remains a viable segment within online social games, as noted by Kamath. These games retain the potential to be monetized through subscriptions and advertising, provided they do not resemble wagering activities. Some of the most prominent operators, like Dream11 and MPL, quickly transitioned to advertising-supported models and ceased cash-based games following the Act's passage.
The legal framework establishes two main processes: determination and registration. Determination is the procedure for classifying games, while registration pertains to formal recognition required for certain gaming formats. Notably, ambiguities exist concerning who carries regulatory compliance burdens and the criteria for esports game recognition, which could pose challenges for tournament organizers.
Uncertainties persist within the legislation, particularly regarding definitions and compliance responsibilities, prompting concerns about inadvertent breaches among operators and service providers. The Act broadly defines who constitutes an online game service provider, sparking debate on the exact compliance obligations.
Moving forward, substantial scrutiny is anticipated as the line between social and real-money games blurs. The Act does not restrict virtual currencies or in-game items but treats these as stakes if linked to wagering conditions. Kamath warns that regulatory approvals are temporary snapshots rather than permanent assurances, advising operators to continually assess their monetization strategies against evolving regulations.
Ultimately, the new regime may favor larger, well-resourced companies as they are better equipped to meet rigorous compliance demands. Meanwhile, foreign entities may struggle with local regulations and data management. Consolidation among operators could occur as companies adapt to the changing landscape, but the potential for growth remains significant. India’s recognition of online social games and an increasing gaming audience promise an attractive market, contingent on clearer regulatory guidance in critical areas.
