India's new regulations for online gaming have significantly reshaped the landscape, particularly by drawing a decisive line against real-money gaming. This framework moves away from the long-debated distinction between skill and chance, opening regulated pathways for esports and online social gaming while prohibiting real-money stakes.
Taking effect on May 1, 2026, the Promotion and Regulation of Online Gaming Act, 2025 (PROG Act), alongside the Online Gaming Rules of 2026, enforces a clear ban on online money games that followed a Supreme Court ruling from August 2025. This new legal landscape establishes three specific categories of online gaming: 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 is intentionally broad, encompassing a range of things from credits to tokens acquired with real money. As such, nearly any format that combines paid entry with a chance of monetary rewards is now classified as an online money game. Kamath notes that this new definition diminishes the relevance of the skill-versus-chance argument that has long characterized Indian gaming law.
An online money game includes any game where users stake money or its equivalent with expectations of monetary gain, regardless of whether it relies on skill or chance. In contrast, esports are defined as organized competitive multiplayer events requiring physical skill and strategic thinking, without betting or staking, and must be registered under the National Sports Governance Act of 2025.
Online social games focus primarily on recreation and entertainment, prohibiting any monetary stakes or financial risks, although they can generate revenue through subscriptions, advertising, and in-game purchases.
Previously, India’s gaming framework distinguished between skill and chance-based games, a critical view supported by landmark Supreme Court decisions in 1957. These rulings recognized that skill-based competitions could fall under business activities protected by Article 19(1)(g) of the Constitution, while gambling was not similarly protected. Prior interpretations favored formats like fantasy sports, with courts ruling that some designs, such as those by Dream11, were predominantly skill-based rather than gambling.
The PROG Act fundamentally alters the interpretation for real-money gaming, categorizing it as an online money game wherein users stake money irrespective of the skill component. This prohibition extends to the promotion of such games, where penalties for violations include imprisonment for up to three years and fines reaching INR 1 crore (approximately $106,000). This further encompasses offshore operators targeting Indian users, allowing regulatory authorities to direct banks and payment providers to block relevant transactions and sites.
Yet, Kamath suggests a shift in market viability under these stringent regulations might still leave opportunities for monetization. Online social games can thrive with a model based on subscriptions and in-game purchases, so long as any fees do not serve as stakes. Registered esports can also charge fees, with performance-driven prizes, provided there is no involvement with betting.
Before the new regulations were enacted, notable operators like Dream11, MPL, and PokerBaazi had begun adjusting their models to comply, moving towards free-to-play formats funded by advertising and sponsorships. Recently, the Supreme Court upheld a 28% Goods and Services Tax (GST) on deposits made on real-money gaming platforms, further emphasizing the stringent nature of the new legal framework.
Ongoing legal challenges against the Act are pending in the Supreme Court, but for now, businesses must operate under its guidelines. Kamath identifies remaining ambiguities within the law, particularly regarding who bears compliance obligations. The definition of an online game service provider could extend unexpectedly to include app stores, although responsibilities should ideally rest with the business directly offering the game.
The registration route for esports is also under scrutiny, particularly as the criteria for recognizing esports under the National Sports Governance Act had not been finalized when the PROG Act was implemented. Furthermore, the final rules impose strict notification procedures regarding changes in payment facilitation, potentially complicating operations for gaming companies.
The new landscape is complex, with business operators advised to exercise caution in areas such as classification, monetization, and payments, as the regulatory framework evolves. Kamath emphasizes that while current provisions may allow for some flexibility, they do come with increased scrutiny and the need for greater operational clarity from regulators.
As the gaming sector in India continues to evolve, it remains to be seen how the distinctions between social and real-money games will be handled, especially with respect to virtual currencies and in-game purchases. Regulatory approvals should also be viewed as temporary checkpoints rather than permanent endorsements of compliance, prompting game operators to incorporate robust regulatory considerations into their financial models.
In the immediate future, compliance could favor larger, well-capitalized firms better able to absorb the complexities of user safety and data retention regulations, while international operators may face extra costs relating to local compliance in India. The possibility of mergers and restructuring among former real-money operators is also expected as they adapt to new models better aligned with regulatory requirements. However, the potential for investment remains substantial given the continued interest in India's expanding market for online gaming, hinging on clearer guidance from authorities.
