India's online gaming landscape has undergone significant changes with the implementation of a new regulatory framework that strictly separates real-money gaming from other forms of digital entertainment. This shift, marked by 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 ruling in August 2025 that banned online money gaming.
The framework establishes clear definitions within the gaming sector, categorizing activities into online money games, esports, and online social games. Notably, a broad interpretation of what constitutes an online money game could potentially encompass a wide array of formats that involve paying to play for monetary rewards. Aaron Kamath, co-head of the Tech, Digital and Commercial Law Practice at Nishith Desai Associates, observes that this expansive definition means that the previous debate over skill versus chance is now largely irrelevant for these games.
An online money game entails any format where users stake money or its equivalent with the expectation of a financial return, regardless of the balance between skill and chance involved. Esports is defined as organized, competitive events that require physical skill and mental strategy, provided they comply with the National Sports Governance Act, 2025 and do not include betting or wagering.
Online social games are on the other hand not allowed to involve monetary stakes or risks; they are primarily geared towards recreation, skill development, or entertainment. Still, they can generate revenue through methods such as subscriptions and advertising.
Previously, the distinctions between skill and chance were pivotal in determining the legality of various gaming formats in India. The Supreme Court's landmark rulings back in 1957 emphasized that games requiring substantial skill fell under constitutional protections for business activities, whereas gambling did not enjoy such safeguards. Key judicial decisions, such as those by the Punjab & Haryana High Court and Bombay High Court, previously upheld certain fantasy sports like those offered by Dream11 as games of skill. However, the PROG Act alters this landscape for real-money gaming, posing severe implications for game providers.
Under the current law, any activity that allows users to stake money with the potential for a monetary outcome can be defined as an online money game, irrespective of whether skill is involved. This also extends penalties to advertising online money games and facilitating payments for such activities, which can lead to imprisonment for up to three years and fines up to INR 1 crore (roughly $106,000).
While the stringent regulations raise questions about the viability of the online gaming market, opportunities remain for operators willing to adapt. Online social games can still monetize through subscriptions or in-game purchases, provided they do not resemble betting. Registered esports tournaments may also charge fees and offer prizes based on performance, provided they remain free of any wagering.
Before the law’s introduction, operators such as Dream11 and MPL preemptively shifted to free-to-play models amid uncertainties. The Supreme Court's ruling on May 27, reinforcing a 28% GST on deposits at real-money platforms, also complicates the regulatory environment, emphasizing that the skill element no longer protects against taxation obligations.
Kamath warns, however, that numerous ambiguities in the PROG Act could lead to unintentional violations. Questions linger about who exactly bears compliance responsibilities, as the law's definition of an online service provider might extend beyond developers to include app stores and platforms. The criteria for esports recognition are still awaited, adding to the confusion.
Operationally, providers now must notify the Authority of any payment changes, a requirement that could inadvertently encompass even minimal operational adjustments. While extensive regulatory powers allow authorities to dictate compliance measures, this may foster unpredictability, particularly for foreign providers.
The implications of the PROG Act suggest a need for businesses to strategize carefully regarding the classification of their games, monetization practices, and compliance with payment rules as the regulatory framework solidifies. The evolving nature of gaming and the regulatory oversight may lead to increased scrutiny over the boundaries between social and real-money games.
Looking to the future, Kamath suggests that regulatory clarity and continued investment into the esports and gaming sectors could drive interest, provided businesses remain compliant. The pending constitutional challenge could also shape the ongoing interpretation of the law, yet the framework currently mandates careful navigation as its implications unfold across the industry.
