Draft Rules for Online Gaming

A Legal Ban and a ₹1 Crore Fine: Draft Rules for Online Gaming Target Real Money Games

On October 4, 2025, the Ministry of Electronics and IT (MeitY) released draft rules under the Promotion and Regulation of Online Gaming (PROG) Act, 2025. These rules propose a sweeping ban on real money gaming (RMG) apps like poker, rummy, and fantasy sports, while permitting only recreational e-sports and non-monetary social games. Violations could result in penalties as steep as ₹1 crore and a three-year imprisonment for offenders — marking the most stringent approach Delhi has taken to online gaming thus far.

Why This Framework Is Radically Different

India's previous regulatory attempts at gambling and online gaming were fragmentary, caught between outdated laws and inconsistent judicial orders. The 1996 Public Gambling Act still applies in several states, offering an ambiguous distinction between "games of skill" and "games of chance." Courts historically categorized rummy and even fantasy sports as skill-based games, allowing platforms like Dream11 to flourish while escaping gambling bans. This incoherence ends now. The PROG Act makes no distinction between skill and chance; it categorically bans all RMG platforms — a precedent-setting move.

The rules also consolidate oversight under national institutions, bypassing state-level interpretations. The establishment of the Online Gaming Authority of India (OGAI) ensures centralized regulation, leaving no room for states like Tamil Nadu and Karnataka to clash with operators in court. This national framework signals a shift from traditional state autonomy on gambling laws to a federal intervention resembling the GST consolidation framework.

The Institutional Machinery Behind the Rules

At the heart of the draft rules is OGAI, a regulator envisioned with quasi-judicial powers. Its mandate includes:

• Registration Functions: Certifying games and monitoring revenue streams to ensure compliance with the Act.
• Penalties: Imposing fines based on revenue impact and user losses — the rules even propose holding entire company staff accountable.
• Cancellation Powers: The authority can revoke certification if a listed social game transforms into gambling through betting or wagers.

The Ministry of Electronics and IT will retain overall regulatory control. However, sector-specific roles involve coordination with the Ministry of Youth Affairs (for e-sports) and the Ministry of Information & Broadcasting (to classify social games). Crucially, the rules introduce a three-tier grievance redressal system, extending the IT Rules, 2021: internal company mechanisms, the Grievance Appellate Committee (GAC), and OGAI for final appeals.

Data Tells a Different Story

Despite the government framing this as an effort to curb addiction and financial ruin, recent data on social and gaming apps reveals a nuanced reality. According to the NITI Aayog 2024 Gaming Report, the online RMG sector contributed ₹11,400 crore in tax revenue in FY 2023-24. Fantasy sports alone attracted over 200 million users, many low-risk players who spent minimal amounts on stakes. The blanket ban on RMG, while ethically motivated, ignores the differentiated risks involved in various subcategories.

Additionally, addiction is not exclusively linked to real money games. E-sports platforms, often defined as non-monetary, also pose risks due to prolonged screen time and dopamine-driven behavior loops. Yet the draft rules exempt e-sports entirely from heavy oversight. This selective regulation could undermine the government’s stated goal of protecting youth from gaming-related harm.

The Unaddressed Questions

The implementation feasibility of these rules is questionable for several reasons:

First, the draft rules lack clarity on enforcement capabilities. How will OGAI distinguish between non-compliant real money gaming advertisements and legitimate promotional activities? Many companies use foreign servers or third-party vendors for advertising, complicating jurisdictional reach. Without detailed cross-border cooperation mechanisms, enforcement risks being toothless.

Second, state-level resistance remains a potential roadblock. Gambling revenue constitutes sizable contributions in states like Goa and Sikkim, which rely on regulated betting for regional tourism income. Will these states accept federal supremacy under the PROG Act, or contest for autonomy as they did during the lottery bans of the early 2000s?

Finally, by banning fantasy sports — a proven contributor to revenue — the rules remove incentives for industry giants. If legal skill-based games like Dream11 can no longer operate, will this encourage an unregulated parallel industry? South Korea’s 2018 gaming crackdown unintentionally pushed gambling underground, leading to untraceable financial flows. If India repeats this mistake, the rules may achieve the opposite of their intended effect.

What India Can Learn from South Korea

South Korea faced a comparable dilemma in 2018, when the government introduced the Game Industry Promotion Act to curb gambling disguised as online games. The Act banned web-based lottery games and imposed restrictions similar to India's draft rules, with penalties up to ₩500 million (approximately ₹3 crore). Yet South Korea balanced this intervention by promoting regulated e-sports leagues through public funding and tax rebates, preventing industry stagnation.

India’s blanket prohibition of real money gaming, while ethical in its intent, omits this complementary measure. Without pathways for companies to innovate legally, India's gaming industry risks losing ₹22,000 crore projected revenues by 2027, as estimated by EY and FICCI’s joint report last year. Learning from South Korea’s dual approach is critical to ensuring enforcement does not damage long-term economic prospects.

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