Ban on Real Money Gaming

Context:

The Lok Sabha passed the Promotion and Regulation of Online Gaming Bill, 2025 offering a legal framework to regulate online gaming companies in India.

UPSC Relevance:

Questions are asked on recent rules and regulations in the economic sector in Prelims.

PYQ 2022:

Q: With reference to foreign-owned e-commerce firms, operating in India, which of the following statements is/are correct?

1. They can sell their own goods in addition to offering their platforms as market-places.

2. The degree to which they can own big sellers on their platforms is limited.

Select the correct answer using the code given below:

A) 1 only

B) 2 only

C) Both 1 and 2

D) Neither 1 nor 2

Status of Online Gaming in India:

• The online gaming industry is a sunrise sector in the country, with a collective enterprise valuation of over Rs 2 lakh crore.
• Projected $9 billion market by 2029
• According to a report by FICCI and EY from March 2025, online gaming companies in India collectively earned a revenue of close to $2.7 billion in 2024.
  • These companies typically make money by taking a cut from a user’s winnings. 
  • As per the report, more than 155 million Indians engaged with real money gaming 2024, marking a 10 per cent increase over 2023. 

• It currently supports over 2 lakh direct and indirect jobs.
• CEA Nageswaran has highlighted recently that as per the NPCI data released earlier this week, UPI payments for digital games amounted to Rs 40,992 crore in April-July, which is almost equal to the amount spent in drug stores and pharmacies via UPI. So, Indian’s spending on real money games is not small. This number may go higher once we include credit and debit card transactions.
• According to a PwC report, with one of the cheapest internet mobile data prices in the world, Indian smartphone users, exceeding 650 million, have developed a robust culture of data consumption for the purposes of entertainment and playing games. In 2023, an average Indian citizen was consuming 24.1 GB of data per month – an increase of 24 per cent over 2022.

Regulation in India

• “Betting and gambling” is a state subject under entry 34 of the List II (State List) of the Seventh Schedule of the Indian Constitution and state legislations define betting and gambling related offences.
• Note : Lotteries fall under Union List.

• However, since online money games are concerned with digital space , the central government may regulate them via financial and technological regulations.
• Further ‘Police’ and ‘Public Order’ are State subjects as per the Seventh Schedule of the Constitution of India. The States/UTs are primarily responsible for the prevention, detection, investigation and prosecution of crimes including for action on illegal betting and gambling through their Law Enforcement Agencies (LEAs).
• Section 112(1) of the Bharatiya Nyaya Sanhita, 2023 (“BNS”) which came into effect from July 1, 2024, punishes unauthorised betting and gambling with minimum 1 year of imprisonment that may extend to 7 years and with fine.
• Online money gaming suppliers must register under the IGST Act, 2017. The Directorate General of GST Intelligence can direct intermediaries to block unregistered platforms violating the IGST Act. These apply to offshore suppliers of these games also.
• They are further Regulated under IT Act and the Digital Personal Data Protection Act, 2023.
• The industry also faces a 28 % Goods and Services Tax (GST) with proposals to increase the rate to as high as 40 %.
• Government vide Finance Act, 2023 has introduced income tax at the rate of 30 %  on the net winnings in the online games with effect from assessment year 2024-25.

Rationale of banning the online gaming:

• Mounting national security worries – these platforms serve as potential messaging and communication grounds for terror organisations.
• The industry was increasingly accused of fuelling money laundering and law evasion including the use of digital wallets and cryptocurrencies for money laundering and offshore entities circumventing Indian tax and legal obligations.
• Addictive tendency of gambling and betting against social well being.

Impact:

• If the Bill is implemented in its current form, experts say it will be a death blow to the online real money gaming industry, which is projected to be a $9 billion market by 2029. 
• The government has calculated that banning online money games will result in a revenue loss of about Rs 15,000 crore to Rs 20,000 crore.

Highlights of the Bill:

• An ‘online money game’ has been defined as a service played by a user by paying fees, depositing money or other stakes in expectation of winning which entails monetary and other enrichment in return of money or other stakes; but shall not include any e-sports. This is an expansive definition, and is likely to cover all major gaming platforms like Dream II, Winzo, MPL etc.
• The Online Gaming Bill, 2025 classifies online games into four types—e-sports, social games, educational games, and online money games.
  • E-sports are competitive video games played in tournaments, similar to traditional sports. Games like PUBG, FIFA, or Valorant are examples. The government wants to promote e-sports as a skill-based activity that can create careers.
  • Social games are casual games played for fun and entertainment, often with friends such as Ludo King, Candy Crush, and online chess. These games are safe but will still be regulated for user safety, age-appropriate access, and data protection. 
  • Educational games are designed for learning and skill-building. They include math quizzes, coding games for kids, or apps like Duolingo. The Bill supports such games for their positive value.
  • Online money games, where players deposit money and play for cash rewards, will be completely banned because of their addictive and harmful effects.
• The government will prohibit any person from offering online games in India, failing which they could be imprisoned for up to three years, and penalised Rs 1 crore.
• Prohibition on promoting such platforms, by  social media influencers. They will lso face jail time of two years, and a penalty of Rs 50 lakh.
• The government will also prohibit banks and financial institutions from facilitating financial trans-actions on such platforms. 
• The Bill has envisioned the creation of a central authority to promote competitive e-sports, while ensuring overall compliance with the law.
• The online gaming Bill too allows for authorised officials to carry out search operations at physical and virtual places, even without a warrant.
• The Bill applies to all online money gaming platforms irrespective of whether they are games of skill or chance, a distinction the industry had lobbied hard for in the past.

State-wise Online Gambling and Betting Status:

• States like Goa, Sikkim, and Nagaland present regulated frameworks permitting legal online gambling within defined conditions.
• Bans in states like Andhra Pradesh, Telangana, and Tamil Nadu extend even to skill-based games.
• The diversified legal landscape has created regulatory uncertainty and compliance challenges for online gaming operators.
• The central government’s 2025 online gaming bill proposes a country-wide ban on real-money gaming, which could override state variations if enacted fully.