Following state-led litigation and lengthy court debates about games of skill versus games of chance, the Online Gaming Act, 2025, bans all such games and threatens to unplug the sector for good. Indrajit Basu reports
India’s booming real-money gaming (RMG) industry was recently jolted by a sudden and seismic shift. The Promotion and Regulation of Online Gaming Act, 2025, signed into law on the 22 August, outlawed all online real-money gaming nationwide. An industry once touted to be worth about USD2.5 billion a year, employing millions and drawing an estimated USD3 billion in foreign investment, now faces an existential crisis.
This is not just another rule change. Overnight, the fight over RMG in India has suddenly shifted beyond the questions of entertainment or addiction.
Legal experts warn the new law risks straying into constitutional overreach – eroding judicial precedent, weakening federal principles, and stretching rules to their limits. The standoff has also crystallised into a clash between state and central authorities, a test of how digital economies should be regulated, and a struggle to balance citizen protection with fundamental rights.
“The act creates a profound constitutional tension by asserting central authority over a traditionally state-governed domain, [which] represents a significant federal overreach that violates article 246(3) of the constitution,” says Salman Waris, the New Delhi-based managing partner at TechLegis. Waris’ firm specialises in technology, media and telecommunications, and he counsels foreign and Indian RMG clients.
Article 246(3) of the Indian Constitution gives states exclusive power to make laws on certain subjects, including gambling. This means only state governments – not the federal government in New Delhi – can decide whether to allow or ban gambling activities, unless the constitution specifically permits central intervention.
According to Ashish Deep Verma, the New Delhi-based managing partner at Vidhisastras, “The act complicates this landscape by imposing a uniform national ban on online money games, regardless of whether they are based on skill or chance, if they involve monetary stakes.” Verma has been involved in advising RMG companies on transition strategies, product redesign and regulatory engagements following the passage of the law.
Constitutional conflict
“By collapsing the distinction between skill and chance in online games, the central law directly clashes with state laws and judicial precedents that had previously allowed skill-based games,” says Verma.
Authorities, however, cite union list entries – e.g. entries 31, 42, 51 and 97 on broadcasting, interstate trade, strategic industries and residuary powers, which empower parliament to legislate where central control serves the public interest – to justify central intervention. Legal experts doubt this argument will survive constitutional scrutiny.
Underscoring the federal structure’s core purpose, Aakanksha Munjhal, a Bengaluru-based partner at Saikrishna & Associates who advises leading RMG and fantasy sports platforms, points out: “The idea and purpose of this division of powers is to prevent the concentration of powers with either the centre or the states and, more logistically, to vest each legislature with the power to legislate upon those subjects that it is best positioned to, or concerned with.”
Munjhal cites the Supreme Court’s landmark ruling in SR Bommai v Union of India, which emphasised that federalism is an essential part of the constitution’s basic structure, declaring that “the states are supreme” within their allocated sphere. This precedent now looms large over the current dispute, she says.
Precedent erased
Probably the most controversial part of the new law is that it throws out a rule that has been used to regulate gambling for more than 50 years. Since the Public Gambling Act of 1867, Indian law has made an important distinction: Games that require skill, judgement and strategy, such as chess or certain card games, are treated differently from pure gambling games, like slot machines or lotteries.
The law has always allowed skill-based games, while restricting pure chance-based gambling.
According to Delhi-based L Badri Narayanan, an executive partner at Lakshmikumaran and Sridharan, the Supreme Court first articulated the “preponderance of skill” test in the landmark case of State of Bombay v RMD Chamarbaugwalla (1957), establishing that games where skill substantially outweighs chance are protected as legitimate business activities. Narayanan has been representing RMG companies before the high court and the Supreme Court since 2015.
Munjhal agrees and adds that the court held in the Chamarbaugwalla case that parliament never intended to prohibit legitimate competitions of skill and read down the law to exclude them.
This principle was repeatedly affirmed in subsequent cases involving rummy, fantasy sports, and other skill-based competitions.
Amol Apte, a Mumbai-based partner at Lex Prudence, notes that the new act marks a clear break from established precedent. “The act overturns five decades of rulings on the distinction between skill and chance,” he says. Apte has been advising the Federation of Indian Fantasy Sports on making a regulatory pivot following the passage of the Online Gaming Act. He also advises RMG companies and was previously the vice president of legal at Dream11, one of the largest companies in the sector.
Recent state-level attempts to ban skill-based online games were also struck down by various high courts. The Karnataka High Court, for instance, in All India Gaming Federation v State of Karnataka, invalidated amendments that prohibited skill-based games, while the Madras High Court, in Junglee Games India Pvt Ltd v State of Tamil Nadu, struck down Tamil Nadu’s blanket ban for violating article 19(1)(g) of the constitution, which gives citizens the freedom to work or run a business of their choice.
Clash of rights
Small wonder that legal experts are sounding the alarm over the new law’s enforcement provisions. Section 16 of the act gives officers sweeping powers to conduct warrantless searches and arrests on “reasonable suspicion”, reaching into digital spaces and encrypted communications.
“The act empowers officers to ‘enter any place’ and ‘search and arrest without warrant’ any person suspected of violations,” says Waris. “Officers may ‘override any access control or security code’ when necessary.” These powers, he argues, violate fundamental rights, including article 21 – the right to life and liberty; and article 19(1)(d) – freedom of movement.
Verma, at Vidhisastras, draws parallels to established criminal procedure: “By contrast, the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), successor to the Code of Criminal Procedure, 1973, adopts a framework for search warrants with built-in safeguards. Under sections 96-97 of the BNSS, searches generally require a magistrate’s warrant.”
The new act further holds company directors and officers personally criminally liable, effectively presuming guilt and reversing the usual burden of proof. Experts say this approach is far harsher than in other corporate laws.
“The blanket liability provision exceeds established corporate law principles, where personal liability typically requires direct involvement or wilful misconduct,” says Waris.
The rationale: Safety first
The government has defended the ban with a narrative of social harm and national security. The Union Minister of Electronics and Information Technology, Ashwini Vaishnaw, claimed that online money games had harmed 450 million Indians (RMG players), causing losses exceeding USD2 billion and contributing to depression and suicides.
Vaishnaw also cited evidence linking gaming platforms to money laundering, terror financing and tax evasion. Officials claim gaming platforms serve as communication channels for terrorist organisations, and facilitate illicit fund transfers.
The government points to tragic incidents including 47 suicides linked to online gaming addiction in Tamil Nadu between 2019 and 2024. The act also points to serious social, financial, mental and health harms, especially affecting young people and those from poorer backgrounds.
Lakshmikumaran & Sridharan’s Narayanan, accordingly, thinks that the government may be justified to some extent. “The government wants to responsibly promote safe online gaming in the form of e-sports and online social gaming without the element of ‘stake’,” he says. “The centre’s rationale for this ban on online RMG has been stated as the need to secure ‘public interest’.”
But critics assert that the government’s security concerns make a stronger case for regulation than for prohibition. “India’s stand on anti-money laundering and counter-terrorist funding-related grounds actually supports a regulatory regime that creates a safe and well-governed mechanism for RMG to conduct KYC [know-your-customer], diligence and such other compliances,” says Apte.
Economy, innovation at risk?
The industry warns the ban could hit hard and fast. The RMG sector, sources cite, had drawn USD3 billion in foreign investment and supported more than 200,000 jobs, with forecasts suggesting losses of more than 400 startups and USD1.5 billion to USD2 billion in revenue.
Major platforms have moved swiftly to comply with the new law. Dream11, for instance, reportedly suspended all cash contests, while RummyCulture paused its “add cash” and gameplay features, and Mobile Premier League shut down its cash-based features entirely. The rapid industry transformation demonstrates both the law’s immediate impact and companies’ commitment to legal compliance.
Mumbai-based Arun Prabhu, a partner at Cyril Amarchand Mangaldas, who advises clients in the RMG space, warns of wider consequences. “The impact of the act will likely be increased caution in investing in sectors where there is a perception of moral hazard, or where regulatory action is anticipated,” he says. “Both employees and investors will likely be far more cautious about backing any sectors where litigation, however remote, around sectoral validity remains open.”
The concern extends beyond gaming to India’s broader startup ecosystem. Saikrishna’s Munjhal emphasises the speed of the legislative process as particularly problematic. “The extremely expeditious, if not altogether rushed, manner in which the act was tabled, passed by both houses of parliament and eventually published in the Gazette, is likely to dent confidence going forward in India’s investment ecosystem.”
Law versus constitution
Multiple petitions challenging the act’s validity have been filed across various high courts, with the Supreme Court now consolidating all cases for a unified hearing. The legal challenges focus on several key constitutional grounds.
Munjhal outlines some primary arguments: “In Karnataka, Head Digital Works argued that the act violated fundamental rights, including article 19(1)(g), by banning online skill-based games such as rummy and poker. In Madhya Pradesh, Clubroom 11 Sports and Entertainment contended that the act was arbitrary and disproportionate, highlighting the absence of stakeholder consultation and alleged infringement of rights under articles 14, 19 and 21.”
The challenges raise fundamental questions about the balance between federal and state powers, say experts. Narayanan highlights the core issue by pointing out that the constitution gives parliament the power to make laws on certain subjects (list I), and state legislatures the power to make laws on others (list II). “However, the parliament has framed the law for a matter reserved under entry 34 of list II [the state list], thus violating the federal distribution of powers,” he says.
The arbitrary distinction between online and offline gaming is another major constitutional concern. “The act prohibits only online RMG, and state-specific offline RMG establishments continue to be legally operative,” says Narayanan. “There is an inconsistency between the legal framework for the two mediums, physical and virtual, of the same activity.”
Alternative paths
Legal experts suggest several alternatives that could address the government’s concerns while preserving legitimate business activities and constitutional principles.
Verma, of Vidhisastras, proposes a regulatory approach. “The government could be persuaded by courts, expert committees or stakeholder pressure to carve out a regulated space for skill-based gaming instead of a total ban,” he says. “For instance, introducing a licensing regime for online skill games – platforms that meet stringent criteria, independent fairness audits of algorithms, robust KYC and age verification, deposit limits and addiction mitigation measures might be allowed to operate with oversight.”
A co-regulatory framework represents another promising avenue. Explaining the potential, Waris of TechLegis says such a framework with industry input “could balance government and business goals. Restoring distinctions between skill-based and chance-based games could preserve legitimate platforms. Technological solutions like blockchain and AI-based addiction detection, plus financial safeguards like escrow and KYC, could address concerns without sector elimination.”
Pointing to earlier efforts, Prabhu, of Cyril Amarchand Mangaldas, says a co-regulatory framework in this space was evolved by the Ministry of Electronics and Information Technology, and promulgated through the online gaming intermediary rules some time ago. “The act is indicative that there is no legislative appetite for a co-regulatory framework for online RMG, at least at the central level,” he says.
Treaty and global impact
The blanket ban may also have international ramifications, particularly for foreign investors who poured big dollars into Indian gaming startups. According to Verma, of Vidhisastras, this could even force aggrieved international investors to enforce bilateral investment treaties (BITs) for seeking recourse.
“Some foreign investors might examine whether India’s ban violates protections under BITs or trade agreements,” he says. “If a company from a country that has an investment treaty with India suffered significant losses, for example a forced shutdown, they might claim India’s act is an ‘expropriation’ or unfair treatment, and seek arbitration.”
India has faced several BIT claims in the past, including high-profile disputes such as Vodafone and Cairn Energy, where retrospective policy measures triggered multibillion-dollar arbitration awards. Such precedents underscore the legal risks: aggressive policy shifts can invite costly treaty challenges, drain government resources, and complicate India’s global investment narrative.
“Treaty claims are complex and typically a last resort, but the mere possibility adds pressure,” says Verma.
The road ahead
As India’s digital prowess sits in legal limbo, the courts will ultimately decide the fate of the digital gaming sector.
With several petitions questioning the act’s validity already filed with the Supreme Court, “there are two possible options for industry stakeholders,” says Munjhal. “They can either pivot to permitted games under the act, such as online social games or e-sports, as many platforms have already done, or they may challenge the constitutionality of the act before the courts and pray for it to be struck down.”
Whatever the Supreme Court rules, it will not just affect companies and thousands of jobs – it will set crucial precedents for how federal and state governments share power over digital issues.
“Online gaming has cemented its place as one of the fastest-growing segments of the digital economy,” says Narayanan. “It leads the pack in terms of growth, revenue, taxes paid and, most importantly, in the thousands of well-paying skilled jobs it generates.”
Another regulatory issue, according to Verma, is how effectively the ban can be enforced in practice. History shows that outright prohibitions, whether on gambling, alcohol or other vices, often give rise to underground markets.
Adds Waris: “[An eventual] ban could also force 568 million gamers to unregulated offshore platforms [through virtual private networks], increasing security risks and stifling domestic innovation.”
Still, as technology races ahead of regulators, experts see this clash as a defining moment for constitutional law and digital rights in India – one with an impact that will echo for decades.
“The online real-money gaming ecosystem was once celebrated as part of the sunrise economy, and garnered [millions] in investment on account of the belief that the government will aim more towards balanced regulation, and not blanket prohibition,” says Munjhal.
“However, the expedited manner in which the act was presented and passed completely, and almost overnight, eroded the value of these investments,” she says. “These actions will inevitably have an effect on future investment in the Indian startup ecosystem as regulatory uncertainty and borderline capricious lawmaking will weigh heavily in investors’ minds before plunging resources into the Indian economy.”
