India’s new online gaming regime has drawn a clear line against real-money gaming, closing the door on the longstanding skill-versus-chance distinction while creating regulated pathways for esports and online social games.
But for businesses navigating what comes next, the framework is not yet a finished rulebook. Analysts see “a number of areas of uncertainty”, from the boundaries of what constitutes a game and who bears compliance obligations, to esports recognition, payment arrangements and evolving monetisation models.
Further regulatory guidance is expected to give operators greater clarity and reduce the risk of inadvertent non-compliance.
On 1 May, India’s new federal framework governing online gaming came into force, fundamentally reshaping the country’s digital gaming landscape. The Promotion and Regulation of Online Gaming Act, 2025 (PROG Act), together with the Online Gaming Rules 2026, prohibit online money gaming, following a Supreme Court ban in August 2025.
Distinguishing between esports, social and real-money gaming
Under Section 2 of the PROG Act, the law establishes three distinct categories in the digital gaming sphere: online money games, esports and online social games.
But Aaron Kamath, co-head of the Tech, Digital and Commercial Law Practice at Nishith Desai Associates, believes the definition of an online money game within PROG is deliberately broad. “‘Other stakes’ is itself wide and covers credits, coins, tokens and similar items, real or virtual, bought directly or indirectly with money,” he says.
“In practical terms, almost any format that combines a paid entry with a monetary or money-equivalent reward is now caught,” Kamath adds, “which is why the long-running skill-versus-chance debate has lost its relevance for these products.”
An online real-money game is defined as a game in which users pay, deposit or stake money or other value with the expectation of monetary return or other enrichment, “irrespective of skill, chance or both”.
Esports comes under organised, competitive multiplayer events involving physical dexterity, mental agility and strategic thinking. Games must be recognised under the National Sports Governance Act, 2025, involve no betting, wagering or staking, and are subject to registration requirements under the 2026 Rules.
Online social games, meanwhile, are primarily offered for recreation, entertainment or skill development and cannot involve monetary stakes or financial risk to users, although permitted access fees, subscriptions, advertising and in-game purchases can provide alternative revenue models.
A sweeping ban on skill & chance games
Before the PROG Act, India’s legal framework largely distinguished between games of skill and games of chance. In landmark rulings in 1957, the Supreme Court upheld that competitions involving substantial skill could constitute business activities protected under Article 19(1)(g) of the Constitution, while gambling was not afforded the same constitutional protection.
The distinction subsequently became an important principle in Indian gaming jurisprudence, including in the treatment of fantasy sports.
Before the PROG Act, courts including the Punjab & Haryana High Court and Bombay High Court held that the particular fantasy sports format offered by Dream11 was predominantly a game of skill rather than gambling. The rulings did not establish a blanket exemption for all fantasy sports, but demonstrated the importance of the skill-versus-chance distinction under the previous framework.
The PROG Act fundamentally changes that position for real-money gaming. Where users stake money or other value with an expectation of monetary or other enrichment, the activity can constitute an online money game regardless of whether it involves skill, chance or both.
The prohibition also extends beyond operators themselves. Advertising an online money game or facilitating payments for one can each constitute a criminal offence. Offering or facilitating payments can attract imprisonment of up to three years and/or a fine of up to INR 1 crore (approximately $106,000), with higher penalties for repeat offences.
The provisions also apply to offshore operators making such games available to users in India, while the regulator can direct banks and payment providers to stop processing related transactions and block non-compliant websites and apps.
Monetising social games
So, is there any part of the online gaming market left viable under the stringent new law? Yes – only a select few, but they still represent “meaningful, commercial space”, says Kamath.
Online social games can be monetised through subscriptions, one-time access fees, advertising and in-game purchases, provided no payment functions as a stake or wager. Registered esports games can also charge participation or registration fees and offer performance-based prize money, provided no betting or wagering is involved.
The market had already begun adjusting before the framework took effect, Kamath notes.
“Leading real-money operators such as Dream11, MPL, Zupee and PokerBaazi suspended their cash games within days of the Act being passed in August 2025 – well before it came into force in May – and several, including Dream11, have since moved to free-to-play, advertising- and sponsorship-led models,” he says.
Separately, Kamath points to the Supreme Court’s 27 May ruling upholding the 28% GST (sales tax) on the full value of deposits on real-money gaming platforms, including for past periods, as sending “the same signal from a tax perspective”. Where money is staked, he says, “the skill element offers little protection.”
The constitutional challenge to the Act remains pending before the Supreme Court, but the law remains in force and businesses must plan on that basis.
Areas in the law remain ‘open to argument’
Kamath says the scope for “creative structuring” to remain legally compliant is “very limited”, stressing that “businesses should not treat any of the following as a safe harbour”.
The Act, he explains, looks at the underlying economic dynamics of a game rather than simply how it is labelled, including how money enters the system and whether users have an expectation of monetary or other enrichment.
In determining whether a game is an online money game, the Authority can consider factors including its revenue model, how fees are used, whether in-game rewards can be redeemed, transferred or monetised outside the game, as well as its technical architecture, gameplay mechanics and user interface.
That said, Kamath notes that “some areas remain open to argument”.
The Act does not define what constitutes a “game” or “gameplay”, leaving the “outer boundary of the law” unclear for adjacent formats such as opinion trading, lotteries, promotional contests and prize-based quizzes.
Even if such activities can be argued not to constitute real-money games, Kamath stresses that they should not automatically be regarded as unregulated. Different legal regimes may apply depending on the format.
For businesses looking for sustainable routes within the new framework, Kamath’s advice is straightforward: “The more sustainable routes are those that remove the stake altogether.”
He points to genuinely free-to-play formats funded by advertising or sponsorship, subscription-based access where the fee is not linked to winning, and registered esports.
He also cautions that virtual currencies should not automatically be assumed to fall outside the Act, as tokens that cannot be cashed out but can be used to play other games or purchase items otherwise available for real money may still constitute “other stakes”.
Ambiguity for unintended non-compliance
The 2026 rules establish two distinct regulatory processes for online games: determination and registration.
Determination is essentially the Authority’s procedure for classifying a particular game, most importantly deciding whether it constitutes an online money game. The process can be initiated by the Authority itself, by an application from a service provider, or at the request of the central government in relation to an online social game or category of social games.
Factors considered can include whether users pay fees or stakes, whether there is an expectation of monetary winnings, the game’s revenue model and how rewards or in-game assets can be redeemed or monetised.
Registration, by contrast, is a form of formal regulatory recognition that applies where the rules require it. Registration is mandatory for games intended to be offered as esports, while online games or categories of online social games must register once the central government notifies them for registration.
Importantly, registration is specific to each game and each service provider, rather than providing blanket registration across an operator’s portfolio.
But alongside the new framework, Kamath sees “a number of areas of uncertainty” that could create confusion for operators, game providers and other stakeholders, potentially resulting in “inadvertent non-compliance”.
Who carries the compliance burden?
There is uncertainty over who carries the compliance burden. The definition of an online game service provider is broad enough, if read literally, to potentially extend beyond developers and publishers to app stores and platform aggregators. “The better view is that obligations sit with the business actually offering the game,” Kamath says, but adds that the issue still requires clarification.
The route to esports registration is another unresolved area. A game can be registered as esport only if it is recognised under the National Sports Governance Act, 2025, but the criteria and process for such recognition had not been prescribed when PROG took effect. This could create particular uncertainty for tournaments that charge entry fees and pay performance-based prize money.
Kamath also highlights practical issues around payments. The final rules require providers to notify the Authority of “any change” to how payments are facilitated before implementing it. Read literally, this could potentially capture routine operational changes, such as adding a new payment partner.
The government also has broad discretion to require categories of online social games to implement registration, taking into account factors including the risk of harm to users, participation levels, transaction volumes and even the provider’s country of origin or headquarters. While this gives regulators flexibility, Kamath says it can reduce predictability for businesses, particularly foreign publishers.
The new regime is not simply a binary question of what is prohibited and what is permitted. For operators and service providers, Kamath’s message is to tread carefully around classification, monetisation, payments and registration while the regulatory framework continues to develop.
For the Authority, the same areas point to where further guidance may be needed to close potential gaps and reduce the risk of inadvertent breaches.
What lies ahead?
As gaming business models evolve, Kamath expects the boundary between social and real-money games to become a major area of regulatory scrutiny in India.
The Act does not prohibit virtual currencies or in-game items, but treats credits, coins and similar items bought with money as “other stakes” if they are used in wagering. Cosmetic purchases such as skins and add-ons should generally remain permissible where there is no link between payment and the chance of winning.
He cautions that regulatory approval should not be viewed as permanent clearance. “A determination or registration is best seen as a snapshot”, not a permanent green light, Kamath notes. He expects the Authority to focus on “the revenue model, how money flows through the product and how rewards can be used”, suggesting operators should build regulatory checks into their monetisation plans.
Kamath expects the framework to favour larger, well-capitalised players in the near-term, as compliance requirements around user safety, grievance redressal, data retention and other obligations may be easier for established companies to absorb.
Foreign operators could also face additional costs and uncertainty around local data storage, payments and other regulatory requirements.
He also expects consolidation among former real-money operators, with some companies likely to exit or restructure while others repurpose their technology and user bases for free-to-play, casual and esports products.
However, Kamath says the outlook should not be viewed solely through the lens of compliance.
India’s national recognition of online social games and esports, combined with a large gaming audience and continued investment in the wider sector, remains an attraction. “The key to unlocking that investment will be operational clarity from the Authority,” particularly around esports recognition, payment verification and data retention, he says.