In India, online gaming has always existed in a strange twilight zone, both celebrated as a fast-growing digital economy sector but eyed suspiciously by regulators. Skill or chance? Entertainment or addiction? Business opportunity or social problem? The industry has always been plagued by these questions.
In August of 2025, the Indian government finally introduced the Online Gaming Act, 2025. It’s the first central law to regulate the ever-elusive online gaming industry, thus marking a turning point in debate. According to some, it could hinder creativity and make it difficult to tell the difference between entertainment and gambling. Others see it as a “gamechanger” since it provides a certain amount of clarity and credibility.
What does this law mean, then, for the profitable gaming sector in India? For the crores of players who log in every day, and the start-ups and investors betting billions on this space? Let’s break it down.
WHY DID INDIA NEED THIS LAW?
To understand the Online Gaming Act, we need to rewind a little. India is home to over 500 million gamers, per KPMG estimates. The industry has seen explosive growth, driven by cheap data plans, smartphones, and the popularity of fantasy sports, rummy, poker, and e-sports. By 2025, it was projected to become a $8.6 billion industry.
But here’s the problem: the law hadn’t kept pace.
The Public Gambling Act, 1867 a colonial-era law was still being used to regulate games of chance. As it falls under State Subject, States have issued different, often conflicting rules: while Tamil Nadu and Telangana banned online rummy, states like Sikkim and Nagaland issued licenses for it. While courts had repeatedly ruled that games of skill (like rummy or fantasy sports) are not gambling, but left it to states to regulate.
This patchwork created chaos. Players didn’t know if their favourite app was legal in their state. Start-ups operated in constant fear of litigation. Additionally, state governments contended that they were losing tax money while dealing with fraud and addiction complaints.
Therefore, the Online Gaming Act, 2025, which was finally passed by the Union government, was hailed as a long-awaited Hail Mary to provide consumer protection, consistency, and clarity.
WHAT DOES THE NEW LAW SAY, THEN?
The Online Gaming Act, 2025, which was notified in August, creates a central framework for regulating all online money games. Its main characteristics are as follows:
- A Central Licensing Authority
- A new national regulator will grant licenses to online gaming platforms.
- Any game involving money must be registered, regardless of arguments of skill or luck.
- Prohibition on “online money games of chance”
- It is forbidden to engage in games like slots, roulette, and of pure betting.
- Licenses made only available for games that require a high level of skill.
- KYC and player protection are now required.
- Platforms must use Aadhaar or a comparable KYC to confirm players’ identities.
- Time tracking and spending limits are used to combat addiction.
- Limitations on Advertising
- No deceptive advertisements that promise “easy or free money.”
- Risk disclaimers must be included in games, just like in mutual fund advertisements.
- Dispute Resolution Mechanism
- A grievance redressal mechanism for players.
SIGNIFICANT PENALTIES
Offering chance-based gambling services or operating without a proper licence can result in fines of up to 50 crore or even serious jail time or both.
To put it bluntly, the government has made a clear distinction between skill and chance, making the former legal and the latter illegal.
WHAT MAKES THE LAW CONTENTIOUS?
Legal challenges have already been raised in response to the Act’s implementation. A number of gaming companies have petitioned the Karnataka High Court, claiming that the complete prohibition of games that use chance money infringes upon their right to conduct business as guaranteed by Article 19(1)(g) of the Constitution.
CRITICS ALSO RAISE KEY CONCERNS:
- Skill vs. chance is a sort of a grey area. Courts have ruled that rummy and fantasy sports involve skill, but what about poker? Or mixed-genre games? The Act’s definitions may lead to fresh litigation.
- Over-centralisation. States like Tamil Nadu contend that Centre may be overreaching and that gambling and betting are state matters per the Constitution.
- Impact on start-ups. Licensing, compliance, and penalties may deter smaller innovators, leaving the market to big, well-funded companies.
- Player freedom. Should adults be prevented from spending their own money on chance-based games if they wish to?
In other words: while the Act tries to bring clarity, it may have opened new battlefronts.
INDUSTRY REACTIONS: CAUTIOUS OPTIMISM, DEEP WORRIES
The industry’s reaction is mixed sort of a blend of relief and fear.
Relief because at last there is a national law, which provides predictability for investors and players. Fantasy sports giants like Dream11 and MPL welcomed the move, saying it gives legitimacy to the sector.
Worry because the ban on chance-based games may wipe out entire categories like online poker, teen patti, and casino-style apps, which form a big chunk of revenues.
Some experts point out that India is taking a more restrictive approach than countries like the UK, where regulated online casinos exist. Instead of taxing and monitoring, India has chosen prohibition.
WHAT THIS MEANS FOR PLAYERS
For the average gamer, the Act will change the online experience in several ways:
- You’ll need to complete mandatory KYC before playing money games.
- Some of your favourite apps (like poker or casino games) may suddenly disappear.
- Fantasy sports, rummy, and e-sports will continue, but expect more responsible gaming warnings, spending caps, and time limits.
- Refund and grievance systems will make it easier to complain if you’re cheated.
In other words, playing may feel safer but also more restricted.
WHAT THIS MEANS FOR START-UPS AND INVESTORS
For start-ups, the Online Gaming Act is both a boon and a burden.
The Boon: Finally, investors get clarity. Instead of worrying about state bans, a single central license creates confidence for global VCs and private equity funds. The law could attract new foreign investment, much like UPI did for fintech.
The Burden: Compliance costs will rise. Applying for licenses, setting up KYC systems, and ensuring data protection will require serious money and manpower. Smaller start-ups may struggle to survive.
Some industry insiders call it a “survival of the fittest” moment only well-funded players may thrive.
THE CONSTITUTIONAL QUESTION
One of the biggest unresolved issues is federalism. Under the Constitution, “betting and gambling” fall under the State List, meaning states have the power to regulate. By creating a central regulator, is the Union government overstepping?
This is why several companies (and perhaps even states) are challenging the law in court. The Karnataka High Court is set to hear petitions questioning the Act’s validity. Depending on the outcome, the matter may well reach the Supreme Court.
This makes the Act not just a gaming industry issue, but a test case for Centre–State relations.
LOOKING AHEAD: REGULATION OR PROHIBITION?
The Online Gaming Act of 2025 is at a critical juncture. It aims to prevent addiction and safeguard consumers, two legitimate concerns, but it runs the risk of over policing a sector that depends heavily on innovation.
Legal experts speculate that, like lotteries and alcohol, India may eventually adopt a regulated model for all money games, including chance-based ones. Prohibition merely drives the activity underground. The Online Gaming Act 2025 may be a gamechanger, but the final round will be played in courtrooms, boardrooms, and living rooms across India.
Author Details: Apoorva Lamba (3rd Year Student Madhav Mahavidyalya, Jiwaji University, Gwalior)
Link to similar articles: https://jpassociates.co.in/understanding-the-citizenship-amendment-act-2019-caa/
