India has enacted a new online gaming framework that marks a significant change in its regulatory landscape. With the implementation of the Promotion and Regulation of Online Gaming Act, 2025 (PROG Act) on May 1, 2026, alongside the Online Gaming Rules 2026, the country has established a clear prohibition on real-money gaming. This shift follows a Supreme Court ruling in August 2025, which cemented the ban by differentiating between skill-based games and those involving chance.
The PROG Act categorizes digital gaming into three segments: online money games, esports, and online social games, a distinction noted by Aaron Kamath, co-head of the Tech, Digital and Commercial Law Practice at Nishith Desai Associates. He emphasizes that the definition of online money games is intentionally broad, encompassing various forms of stakes, including virtual currencies that could invite regulatory scrutiny.
An online money game is defined as any activity where participants pay, stake, or deposit money with the expectation of a financial return, regardless of skill or chance. Esports are characterized by organized, competitive events requiring physical skill and strategic thinking, while online social games focus on recreation without monetary stakes.
Historically, the legal framework in India made a clear distinction between skill and chance. Supreme Court rulings established that games requiring substantial skill could enjoy constitutional protections under Article 19(1)(g). This distinction, however, has become less relevant with the introduction of the PROG Act. The new law asserts that if users stake any money or valuables expecting returns, it falls under the category of online money games, extending the prohibition to advertising and payments related to these activities.
Offenses associated with online money games can lead to severe penalties, including imprisonment of up to three years and fines reaching INR 1 crore (about $106,000) for repeat offenders. Notably, this regulation extends to international companies offering such games to Indian users.
Despite these restrictions, there exist potential revenue avenues within the new framework. Online social games can still be monetized through subscriptions, advertising, and in-game purchases that do not involve monetary stakes. Recognized esports may charge entry fees and provide performance-based rewards, as long as they do not engage in betting or wagering.
Many businesses had begun preemptive adjustments to their models even before the regulation took full effect, with real-money operators like Dream11 and PokerBaazi transitioning to free-to-play models directed by advertising.
Kamath underscores that the regulatory landscape remains uncertain in several areas, particularly regarding compliance responsibilities and the classification of online games. The broad definition of an online game service provider could apply to app stores and platforms as well, raising questions about who bears the compliance burden.
Additional confusion arises around the criteria required for esports recognition under the National Sports Governance Act, 2025, which lacks clear guidelines as of the PROG Act’s implementation. Furthermore, routine payment changes might unexpectedly fall under mandated announcements to the Authority, complicating compliance efforts.
As businesses adapt to these new requirements, the boundary between social and real-money gaming will likely face rigorous regulatory examination. While virtual currencies and in-game items are not outright banned, their usage could be scrutinized if linked to wagering.
In the evolving market, larger firms with better resources may prove more resilient to these compliance burdens, while foreign operators might encounter additional challenges related to local regulations. The passage of the PROG Act has set the stage for a new chapter in online gaming in India, with businesses needing to carefully navigate the implications of this regulatory overhaul and ensure they do not inadvertently cross legal boundaries.
