The Promotion and Regulation of Online Gaming Act, 2025 and Draft Rules Issued Thereunder: An Overview

Introduction

Ostensibly driven by concerns of negative societal impact, public health, safety, and criminal activity, the Central Government announced (what it publicly projected) a prohibition on online gaming, particularly financial rewards-based online gaming.

The Promotion and Regulation of Online Gaming Act, 2025 (“PROG Act”) came into force after receiving the President’s assent and notification issued on 22^nd August  2025.

While the PROG Act seeks to regulate India’s online gaming sector and prohibits “online money games”, in real terms, it could perhaps be more accurately categorised as a ‘reordering’ of the online gaming ecosystem in India, as the Act did not impose a ban on online gaming per se, but instead established a regulatory framework that excludes certain types of games while allowing others. The PROG Act is also responsible for the emergence of national sporting federations as essential players in the online gaming ecosystem.

In itself, this level of regulatory restructuring and intrusion is significant, demonstrating a readiness to intervene in business sectors in a deep and meaningful manner.

Classification of Online Games

The PROG Act applies to all online gaming services offered in India as well as those operated outside India.

The PROG Act defines an ‘online game’ as any game played on an electronic or digital device, which is managed and operated as software through the Internet or any other kind of technology facilitating electronic communication.

The PROG Act classifies ‘online games’ into the following categories:

• E-sports: An online game which is played as part of multi-sports events, involves organised competitive events between individuals or teams, conducted in multiplayer formats governed by predefined rules, recognised under the National Sports Governance Act, 2025, and registered with the Online Gaming Authority established under the PROG Act. The outcome of such a game must be determined by factors mentioned in the PROG Act, but must not involve the placing of bets, wagers or any other stakes by any person.
• Online Money Game: An online game, irrespective of whether it’s a game of skill or chance, played by paying fees, depositing money, or other stakes in expectation of winning in return for money or other stakes. Online money games do not include e-sports.
• Online Social Game: An online game that is not an online money game or e-sport and does not involve any staking of money/other stakes with the expectation of winning in return for money/other stakes. However, an online social game can be accessed via a subscription fee and is offered solely for entertainment/recreation.

Other Important Definitions

• Online money gaming service: A service offered by a person for entering or playing the online money game.
• Other stakes: Anything recognised as equivalent or convertible to money, including credits, coins, tokens or objects, etc., whether real or virtual, which is purchased by paying money directly, indirectly, as part of, or in relation to, an online game.

Other Key Provisions

• Recognition, Registration, and Promotion of e-sports and online social games: The Act empowers the Central Government to recognise, register, and promote e-sports, and support the development of online social games that are offered for entertainment or skill development without staking of money or other stakes. The steps may include issuance of guidelines and standards for conducting e-sports events, training and research activities for advancement of e-sports, introducing incentive schemes, awareness campaigns etc. to encourage innovation and establishment of new e-sports platforms, and other measures. The Central Government can also create mechanisms for registration of online social games, support initiatives to increase public access to “safe and age-appropriate social gaming content,” as well as undertake awareness programmes to highlight positive use of online social games for recreation and skill development, among others.
• Prohibitions:
  • Online money games/gaming service: The PROG Act prohibits any person from inter alia, aiding, abetting, inducing offering of an online money game or online gaming service.
  • Advertising any online money game/gaming service: Making or causing the making of an advertisement in any media that promotes or induces any person to play an online money game or indulge in online money gaming is also prohibited.
  • Facilitating any payment transaction for any online money gaming service: The Act prohibits banks, financial institutions, or any other person facilitating financial transactions or authorisation of funds from permitting, aiding, abetting, inducing any transaction or authorisation of funds towards payment for any online money gaming service.
• Online Gaming Authority: The Central Government is empowered to either constitute a new authority or designate an existing authority or agency to perform the functions under the PROG Act. This authority would have the power to summon, make inquiry similar to a civil court, as well as recognise, categorise, and register online games in the manner prescribed.
• Power to investigate, search and seize: Additionally, the Central Government can authorise officers to exercise powers of investigation, search any physical/digital place, and arrest any person without a warrant if reasonably suspected of having committed an offence under the PROG Act.
• Blocking of online money gaming service and compliance with directions: Any information generated, transmitted, received or hosted in any computer resource in relation to online money gaming service would be liable to be blocked for access by the public in the prescribed manner in the event of failure to comply with the prohibitions mentioned above. This is notwithstanding the provisions of the Information Technology Act, 2000. Further, strict compliance with the directions of the Central Government is mandated for every person.
• Nature of offence: The offence pertaining to the prohibition of online money games and online money gaming services, and the prohibition of transfer of funds would be non-bailable and cognizable, notwithstanding the provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023.
• Penalties: The PROG Act prescribes civil and criminal penalties for offering online money gaming services, engaging in any payment transaction, and making advertisements on online money games. Additionally, it also prescribes a penalty for failing to comply with any direction or order issued by the Central Government or the Online Gaming Authority.

Our View

The recognition and regulation of e-sports and online social games is a welcome move. However, the PROG Act imposes a blanket ban on online money games, without differentiating between ‘games of chance’ and ‘games of skill’. This distinction is crucial in Indian gaming law jurisprudence, as it determines the validity of such games. Notably, some games now prohibited can still be played offline with monetary stakes, which remain subject to various state laws on gaming and gambling. Consequently, the ban on online money games might lead users to seek out unregulated alternatives.

Additionally, the definition of “other stakes” is broad and vague, as it may potentially include tokens and other in-game purchases that would have otherwise also been available for purchase using money. This may lead to the classification of a game as an online money game and eventual prohibition.

The PROG Act requires compliance with every direction of the Central Government in relation to online money games. This confers excessive powers to the Central Government to issue any direction without providing any guidance or safeguards in respect of the nature of directions. This issue is further complicated by the fact that the PROG Act was enacted without prior stakeholder consultation.

The regulation of online games and the blocking powers under the PROG Act introduce mechanisms parallel to those provided under the Information Technology Act, 2000. However, the PROG Act clarifies that the legislation is in addition to and not in derogation of existing laws, and in case of any conflict, the provisions of the PROG Act will prevail. The practical implications of this overlap will become apparent over time.

The PROG Act had been challenged before the Karnataka High Court before it became the law. At that time, the Court refused to grant a stay against the notification of the PROG Act and asked the Government to file its response. Reportedly, the Government submitted that since the law has been passed following the constitutional procedure, the Court should not interfere to halt the implementation of the law. Thereafter, petitions against the PROG Act were also filed in other states, which have now been transferred to and are pending before the Supreme Court.

In the meantime, on 2^nd October 2025, the Ministry of Electronics and Information Technology released the Draft Promotion and Regulation of Online Gaming Rules, 2025 for public consultation till 31^st October 2025. The Draft Rules seek to operationalise provisions related to inter alia, the Authority on Online Gaming, recognition, categorisation and registration of games, penalties, and grievance redressal mechanisms etc.