Regulation, Not Bans, Can Protect Online Gamers

The Promotion and Regulation of Online Gaming Act, 2025, whose Rules became effective on May 1, 2026, treats real-money online games as inherently criminal. State-level bans in Tamil Nadu and Karnataka show that this approach is constitutionally vulnerable and operationally counter-productive: it drives users to unregulated offshore sites rather than safer Indian operators. A licensing framework with KYC, self-exclusion tools, risk-based taxation and a treatment fund is the regulatory architecture the Union should now build.

The Act and Its Architecture

The Promotion and Regulation of Online Gaming (PROG) Act, 2025 — operationalised by Rules that came into force on May 1, 2026 — does three things:

1. Prohibits “online money games” — any online game in which money or anything of monetary value is at stake.
2. Permits “online social games” (no monetary stakes) and “online esports” (competitive skill-based formats).
3. Establishes an Online Gaming Authority of India (OGAI), empowered to register, classify and monitor online games and intermediaries.

The framework supersedes — or sits alongside, depending on the eventual judicial reading — the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, which had earlier introduced self-regulatory bodies for online gaming intermediaries through 2023 amendments.

The Constitutional Question

Entry 34, List II — A State Subject

The Constitution places “betting and gambling” in Entry 34 of the State List. From colonial-era Public Gambling Acts to the Sikkim Online Gaming (Regulation) Act, 2008, regulation has historically been by State legislatures. The Union’s justification for the PROG Act draws on:

• Entry 31, List I — posts, telegraphs, telephones, wireless, broadcasting and “other like forms of communication”.
• The Information Technology Act, 2000, which already governs intermediaries.

The Union’s argument is that online games — by their very medium — fall within Union competence over communications. This is plausible but not settled. A State could credibly argue that whether one is playing rummy at a kitchen table or on a phone screen, the subject matter remains “betting and gambling” — and that the medium does not transfer the field to the Union List.

The Skill-Chance Doctrine

Indian courts have, for nearly six decades, drawn a line that the PROG Act blurs:

The PROG Act, by treating all real-money online games as “money games”, folds together formats the courts have separated. That is the doctrinal weakness on which it will be tested.

What the Market Actually Looks Like

The Indian online gaming market — across fantasy sports, rummy, poker and casual gaming — has been estimated by FICCI-EY at roughly $3-4 billion in FY2025, with projections of around $9 billion by 2028. Direct employment in the sector is estimated at the tens of thousands of jobs, concentrated in technology, product, and customer support roles.

Two policy shocks have already hit this market:

• GST at 28 per cent on full face value of contest entry, effective October 2023 — a major reset of the unit economics.
• PROG Rules, May 1, 2026 — converting the regulatory uncertainty into a near-prohibition.

The risk is not that the activity stops. The risk is that it migrates — to offshore betting sites such as 1xBet, Parimatch and Stake, which do no KYC, recognise no Indian self-exclusion request, pay no GST and provide no consumer redress. The Reserve Bank’s earlier advisories on payment flows to offshore betting and the Enforcement Directorate’s actions against money-laundering through cricket betting are evidence that this migration is already underway.

Public Health — Real, but Mis-Diagnosed

The public-health concerns motivating the PROG Act are not imaginary. Behavioural-addiction clinics at NIMHANS and similar centres have reported a rising case load of problematic online gaming. Young users, easy credit through digital wallets, in-game currencies and aggressive personalised marketing combine to produce a recognisable harm pattern. Match-fixing in cricket and a steady drumbeat of cases under the Prevention of Money Laundering Act add a financial-crime dimension.

But the remedy must match the diagnosis. Behavioural addiction is treated by exclusion and counselling, not by ban; financial ruin is prevented by deposit limits and KYC, not by prohibition; money laundering is checked by reporting obligations and banking-channel control, not by criminalisation of users.

What International Regulators Have Learned

The ideological starting points differ — Singapore is highly restrictive, the UK historically liberal — but the regulatory grammar has converged: licensing, KYC, deposit and loss limits, mandatory self-exclusion, and a treatment fund financed by industry levy. None of these regulators has chosen prohibition as the primary tool, because prohibition creates a black market regulators cannot see.

A Calibrated Indian Architecture

A workable Indian model could combine:

• Licensing under OGAI for skill-based real-money games, with classification (rummy, poker, fantasy sports, esports tournaments).
• Mandatory KYC and age verification at registration, linked to Aadhaar offline e-KYC or DigiLocker.
• Deposit and loss limits, with cooling-off periods on limit increases.
• A national self-exclusion register — an Indian GAMSTOP — across all licensed operators.
• Risk-based taxation that recognises platform commission as the value-add, not the full contest entry pool.
• A problem-gambling treatment fund financed by an industry levy, channelling resources to NIMHANS-type clinics and tele-counselling.
• Strict enforcement against offshore platforms via IT Rules, payment-channel disruption and ISP-level blocking.
• Cooperative federalism — a Union-State coordination mechanism so that State concerns (Tamil Nadu’s social profile of harm differs from Goa’s) are reflected in licensing conditions.

UPSC Mains Analysis

GS Paper 3 — Economy and Technology. The online gaming debate is a case study in regulating a digital sector with public-health externalities, federal complexity and significant economic stakes. It touches GST design (full face value vs platform commission), employment, FDI flows, and India’s positioning as a digital services exporter.

GS Paper 2 — Polity and Governance. The constitutional contest between Entry 34 of List II and Entry 31 of List I, the federal balance, and the role of judicial review in policing over-breadth (Karnataka HC, Madras HC) make this a model question on Centre-State legislative competence.

Conceptual bridge. Regulation, when it is well-designed, expands the State’s visibility into a sector; prohibition contracts it. For a digital activity that crosses borders at the speed of light, visibility — through licensing — is the precondition for protection.

Editorial Insight. A ban does not delete a market; it relocates it — usually offshore, beyond the reach of Indian KYC, Indian tax, and Indian courts. If the State is serious about protecting young Indians from problem gambling, it must first be willing to see them — and that requires a licence book, not a prohibition list.

Sources: The Hindu, PRS, PIB