Adarsh Somani & Sahil Kothari
The passage of the Promotion and Regulation of Online Gaming Bill, 2025, marks a watershed moment in India’s online gaming industry. The Bill stems from legitimate concerns of addiction, financial distress, fraud, and even the misuse of platforms for money laundering or terror financing.
On the one hand, the Bill promotes e-sports, educational and social gaming, acknowledging their place as legitimate components of India’s digital economy, and on the other hand, it imposes a sweeping prohibition on all online money games, irrespective of whether they are games of skill or chance. The expeditious passage of Bill raises a million-dollar question: whether the government has the competence to do so? This question will certainly be tested in courts, especially because the courts have distinguished between games of skill and games of chance and the former has enjoyed protection under Article 19(1)(g) of the Constitution. The courts have also repeatedly struck down blanket bans that do not respect this distinction.
Further, the legislation also raises questions of legislative competence. Gambling and betting fall under the State List. By asserting central supremacy and providing that its provisions prevail in case of conflict, the Bill arguably encroaches on the State’s powers. This creates a fault line in India’s federal structure, one that could become a flashpoint in future litigation and political debate.
Alternative ways to address the government’s concerns do exist. For instance, the alcohol industry, which carries significantly higher risks of addiction, health concerns and social costs, has been subjected to regulation through licensing regimes, age restrictions, taxation and advertising controls. This approach has enabled governments to mitigate harm while simultaneously securing substantial fiscal revenues.
In any case, difficulty of regulating a new industry ought not to become the justification for banning it altogether. If anything, complexity should serve as an impetus for more thoughtful and innovative frameworks.
The online money gaming sector has been an outsized contributor to tax collections, particularly the indirect taxes. The revenues from online gaming sector surged by nearly 400% post-amendment. Annual GST inflows, which once stood below Rs 3,000 crore, rose to approximately Rs 14,000 crore post-amendment in the GST law. The outright prohibition, therefore, risks a substantial shortfall in the exchequer’s revenue base. Industry calculations suggest the government could lose more than Rs 20,000 crore annually in tax revenue.
Impact of online gaming ban
The impact does not stop at revenues. The industry has matured into a large-scale employer, generating over ~200,000 direct and indirect jobs in technology, design, legal compliance, customer service, marketing, media, and payments. The abrupt criminalisation of this activity threatens to dismantle not only these livelihoods but also the wider startup ecosystem that has flourished around gaming.
The irony is stark, while the Bill seeks to protect families from financial harm, it simultaneously shutters hundreds of companies, jeopardises gainful employment and constrains the State’s fiscal capacity to discharge its obligation.
The policy shift comes at a curious juncture. The government had earlier supported the industry by permitting foreign investment and shaping tax frameworks in consultation with stakeholders, recognising its contribution to revenue and employment. Now, with the sector being more mature, it is suddenly cast as inconsistent with socio-economic objectives. Legitimate concerns certainly exist, but these are more effectively addressed through measured regulation than through outright prohibition, which may only push users towards unregulated and unsafe platforms.
Companies facing existential uncertainty
Companies, once preparing for IPOs, now face existential uncertainty. The sudden reversal in policy risks undermining the confidence, not just in gaming but across the wider technology ecosystem and global investors. This is especially so during the time India is attempting to secure bilateral agreements with various countries, which may shake investor’s confidence.
The Bill has cleared both Houses of Parliament and got the Presidential assent on Friday. Yet, its enforceability may only mark the beginning of a longer battle. Legal challenges appear to be inevitable, with courts likely to examine whether the prohibition infringes constitutional freedoms, encroaches upon State’s powers, or rests on definitions that are overbroad and arbitrary. Until clarity emerges, uncertainty will continue to weigh on platforms, consumers and investors.
The real test of policymaking lies in balancing protection with progress. India’s digital economy depends not only on entrepreneurial energy but also on regulatory wisdom. The government may yet find it necessary to revisit this legislation, not to dilute its intent but to recalibrate its execution and harmonise protection with progress.
Adarsh Somani is partner, Economic Laws Practice
Sahil Kothari is associate partner, Economic Laws Practice
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