The online gaming sector may face higher compliance costs if the draft Promotion and Regulation of Online Gaming Rules, 2025, released for consultation by the ministry of electronics and IT on Thursday, gets finalised on the same lines.
Rising compliance & regulatory burden on gaming startups
While the framework is being seen as a step towards long-awaited regulatory clarity, analysts and legal experts said that registration, reporting obligations, and in-house grievance systems will see costs rising, especially for smaller firms.
For instance, Rule 17, requires gaming companies to notify the proposed Online Gaming Authority of India (OGAI) of any “material change” in game features or revenue models. Analysts said that the provision is intended to prevent legitimate games from being converted into prohibited online money games, but smaller players may find it onerous.
“The compliance cost and burden will definitely rise but then the rules are for greater public good and strengthening the proposed regulatory authority,” Pavan Duggal, cyber law expert, told Fe. “However, these draft rules are for consultation so one needs to wait and see their final shape,” he added.
“Even adding a new ad format or tweaking monetisation could technically trigger a compliance event. This could lead to constant legal review, filings, and possibly new hires,” said Prateek Gupta, founder of Blue Ivory Business Solutions and Gamio Technologies, adding that costs could rise by 20–30% for early-stage firms.
Some lawyers feel that, as a result, product rollouts may slow down. “Frequent notifications for gameplay or revenue changes will prove onerous, especially for entities that operate on fast product cycles,” Aditya Bhattacharya, partner at King Stubb & Kasiva, said.
“If every update or monetisation feature requires notification and review, patches or game updates could be delayed. For an ecosystem that thrives on speed, even small slowdowns can disrupt tournaments and raise costs across the chain,” said Shiva Nandy, founder and CEO of Skyesports.
The rules also propose in-house grievance redressal systems with escalation mechanisms. Companies will need to record complaints, resolve them within timelines, and periodically update the regulator on outcomes. According to legal advisors, such obligations may divert resources away from product development. “This framework could create another layer of red tape which could stifle innovation,” said technology and gaming lawyer Jay Sayta.
According to industry executives, the definition of “material change” should be narrowed. “Features that introduce monetary stakes should be considered material, while cosmetic changes or user interface updates should not trigger reclassification,” according to Rohit Agarwal, founder & director of Alpha Zegus. He said that startups need digital single-window filings and fixed response timelines to avoid open-ended delays.
Industry’s mixed response
While voicing such concerns, several industry leaders welcomed the broad direction of the framework. Parth Chadha, co-founder and CEO of STAN, described it as “a progressive step” that could bring more brand partnerships. Nazara Technologies’ Joint MD and CEO Nitish Mittersain said regulatory certainty “can accelerate growth, attract global investment, and strengthen India’s position in the global gaming landscape”.
The recognition of esports by the ministry of youth affairs & sports has been particularly welcomed. “This will boost investor and sponsor confidence,” Akshat Rathee, co-founder and managing director of NODWIN Gaming, said.
The draft rules also address the winding down of real-money gaming. Rule 24 provides companies with a 180-day window to return player balances stuck on platforms prior to the law’s enactment. According to experts, this would require KYC checks and fund-return mechanisms.
Under the draft, OGAI will register, classify, and monitor games, with powers to suspend or penalise operators.
The government has invited public comments on the draft until October 31. Industry bodies are expected to seek narrower definitions of “material change,” simplified processes for filings, and wider recognition of esports titles.