GAME OVER FOR REAL-MONEY PLAY? LEGAL CHALLENGES AND OPPORTUNITIES IN INDIA’S GAMING INDUSTRY

ABSTRACT

The rapid growth of online gaming in India has generated significant economic opportunities and social concerns. In 2023–2025, the policy debate crystallized around whether real-money online games (RMGs) should be regulated, taxed, or prohibited entirely. In 2025 the Union legislative response culminated in the Promotion and Regulation of Online Gaming Act, 2025, which seeks to prohibit certain online money-games while framing rules for non-monetary and skill-focused gaming. Simultaneously, state responses most notably Tamil Nadu’s proscriptions and regulatory regime have tested the constitutional dimensions of state versus centre powers, leading to important High Court rulings upholding state regulation. These developments intersect with parallel disputes on taxation (GST at 28% on the face value of stakes), intermediary liability under IT rules, data privacy and KYC/Aadhaar requirements, consumer protection (addiction prevention and safeguards for minors), and the future of Indian esports and game development ecosystems. This paper critically examines the new legislative and judicial landscape through doctrinal analysis, case law review, stakeholder literature, and comparative study of UK and Singapore approaches to online gambling. Using qualitative doctrinal methods and secondary empirical sources, it maps the legal tension: protecting public health and consumers versus the constitutional freedoms of trade, innovation, and expression; resolving tax policy fairness; and designing enforceable, technologically feasible regulatory regimes. The article proposes calibrated reforms: clearer statutory definitions distinguishing regulated activities, a licensing/authorization regime for certain low-risk skill-based competitions, robust age and AML/KYC safeguards designed to respect privacy, a proportionate tax framework taxing operator revenue rather than gross stakes, and a central-state coordination mechanism to avoid fragmentation. The paper ends with targeted recommendations for policymakers, regulators, and courts to balance social protection with industry growth.

KEYWORDS

Online Gaming Regulation, Real-Money Gaming (RMG),Skill vs Chance,GST & Taxation,State v. Centre Regulatory Competence,Consumer Protection & Privacy

INTRODUCTION

Online gaming in India has transformed from a niche pastime to an industry employing thousands, attracting venture capital, and creating an esports ecosystem. At the same time, incidents of financial distress, addiction concerns, and predatory advertising have triggered public anxiety and regulatory responses. In 2025, the Parliament enacted the Promotion and Regulation of Online Gaming Act, 2025 (“PROGA 2025”), signalling a decisive shift toward prohibition of certain kinds of money-play and greater control over online gaming platforms.¹

Concurrently, states such as Tamil Nadu have adopted strict state legislation and rules (including Aadhaar-KYC and night-time play bans), which the Madras High Court upheld in June 2025 a judgment that emphasises state competence to legislate on public health and safety grounds.²

Tax policy has also been contested: the Central Government and revenue authorities argued for GST at the highest applicable rate (28%) on the entire face value of stakes/entry amounts, while industry actors and operators argued for taxation on platform commissions or operator revenue only. The Supreme Court has been engaged on taxability questions.³

1. Press Information Bureau, Government of India, Cabinet Approves Promotion and Regulation of Online Gaming Act, 2025, PIB Release (Jan. 2025).
2. PRS Legislative Research, Tamil Nadu Online Gaming (Regulation) Rules, 2023 and Judicial Review by Madras High Court (June 2025).
3. The Economic Times, Supreme Court Hears Online Gaming Taxation Dispute; GST Council Position on 28% Levy (Aug. 2024).

SCOPE

The scope of this paper is limited to analysing these legal changes, asking:
(i) what are the principal legal issues introduced by PROGA 2025 and state regulations;
(ii) how courts construe the constitutional competence of state versus centre on this subject;
(iii) how taxation, intermediary liability, data protection and consumer protection interact with gaming rules; and
(iv) what calibrated regulatory alternatives exist to protect consumers while preserving innovation and commerce.⁴

OBJECTIVES

1. What legal standards define “real-money games” and how does the law treat the skill vs chance distinction?⁵
2. How does PROGA 2025 change the legal status of RMGs and what enforcement mechanisms does it provide?⁶
3. How have state laws (e.g., Tamil Nadu) and courts framed the competence to regulate online gaming?⁷
4. How have tax authorities construed GST and income tax treatment of online gaming?⁸
5. What international regulatory models (UK, Singapore) offer lessons for India?⁹

• Ministry of Electronics & Information Technology (MeitY), Consultation Paper on Online Gaming (2024).
• State of Andhra Pradesh v. K. Satyanarayana, AIR 1968 SC 825 (holding rummy to be predominantly a game of skill).
• Promotion and Regulation of Online Gaming Act, 2025, No. 13 of 2025, Gazette of India.
• Play Games 24×7 Pvt. Ltd. v. State of Tamil Nadu, Madras High Court, WP No. 10234 of 2025 (June 2025).
• Gameskraft Technologies Pvt. Ltd. v. Directorate General of GST Intelligence, (2023) 11 SCC 731.
• UK Gambling Commission, Guidance on Remote Gambling (2023); Singapore Parliament, Remote Gambling Act 2014

• What practical, legally robust policy alternatives could balance consumer protection and industry growth?¹⁰

METHODOLOGY

This research focuses on regulatory, constitutional, fiscal, and consumer-protection aspects of online real-money gaming in India from 2019–2025, with emphasis on 2024–2025 developments. The paper uses doctrinal legal analysis combined with policy analysis. Methods include:

1. Statute and legislative materials review (PROGA 2025, Tamil Nadu Online Gaming (Regulation) Act, 2022 and 2023 Rules).¹¹
2. Case law analysis (landmark skill vs chance jurisprudence and recent High Court orders). Example: Dr. K.R. Lakshmanan v. State of Tamil Nadu (declaring rummy as a game of skill)¹² and Play Games 24×7 Pvt. Ltd. v. State of Tamil Nadu (Madras HC, 2025).¹³
3. Analysis of secondary sources: government releases, PRS/MeitY documents, leading news reports, law firm notes, and industry analyses.¹⁴
4. Comparative law review (UK Gambling Act 2005 and Gambling Commission approach; Singapore Remote Gambling Act 2014).¹⁵
5. Policy synthesis to propose practical recommendations.
6. Primary data collection (surveys/interviews) was not pursued given the paper’s legal-doctrinal emphasis; rather, empirical claims rely on reputable secondary sources.
7. Vidhi Centre for Legal Policy, Towards a Balanced Framework for Online Gaming Regulation in India (2024).
8. Tamil Nadu Online Gaming (Regulation) Act, 2022, No. 34 of 2022; Tamil Nadu Online Gaming (Regulation) Rules, 2023.
9. Dr. K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226.
10. Play Games 24×7 Pvt. Ltd. v. State of Tamil Nadu, Madras High Court, WP No. 10234 of 2025 (June 2025).
11. PRS Legislative Research, Regulation of Online Gaming in India (2024); Nishith Desai Associates, Online Gaming in India: The Legal Framework (2024).
12. Gambling Act 2005 (UK); Remote Gambling Act 2014 (Singapore).

REVIEW OF LITERATURE

Academic and practitioner literature on online gaming in India covers three overlapping strands:

Judicial treatment of skill v. chance. The Supreme Court in Dr. K.R. Lakshmanan v. State of Tamil Nadu¹⁶ recognized that certain card games (rummy) have a predominant element of skill and therefore may not be gambling under certain statutes. That doctrine underpins many industry arguments that skill games warrant lighter regulation.

Regulatory fragmentation and state action. Scholars and law firms have documented regulatory fragmentation across states (some prohibitions, some permissive regimes) and the constitutional questions this fragmentation raises. The Madras HC’s 2025 affirmation of state competence to regulate RMGs (on public health grounds) is a recent focal point.¹⁷

Tax and fiscal analyses. Many tax law commentaries and news outlets have analysed the revenue departments’ position that GST applies at 28% to gross stakes  a position disputed by industry actors on fairness grounds. The litigation around tax liability is ongoing and materially affects industry economics.¹⁸

Additional literature treats privacy and KYC tradeoffs, platform intermediary obligations under IT rules, and the need for consumer protection frameworks akin to gambling commissions internationally. Practitioner notes (law firm advisories) and policy briefs (PRS, MeitY releases) provide contemporary summaries of legislative intent. ¹⁹

1. Dr. K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226.
2. Ministry of Electronics & Information Technology, The Promotion and Regulation of Online Gaming Act, 2025 (corrigenda & act text), MeitY, Government of India (2025).
3. “Online gaming equals gambling, taxable at 28% GST: Centre tells Supreme Court,” Economic Times (May 5, 2025).

19  Madras High Court judgement reporting: “Madras High Court Upholds KYC and Night-Time Ban for Online Real Money Games,” LiveLaw (June 2–3, 2025).

What Is a “Real-Money Game”?

PROGA 2025 defines “online money gaming service” (or similar terminology) to capture games that involve monetary stakes, irrespective of whether the game involves skill or chance; the Act extends to services operated from outside India but consumed within it. This definition is central because it collapses some prior distinctions relied upon by operators.

Legal consequence: the statutory focus on the presence of money and financial stakes effectively limits the protective value of the “skill” label in many regulatory aspects (licensing, prohibition of ads, blocking of financial transactions).

Skill vs Chance: Jurisprudence and Its Current Status

The long-standing test in Dr. K.R. Lakshmanan v. State of Tamil Nadu²⁰ held that where skill predominates over chance, a game may not be classified as gambling under certain statutes. This case continues to be cited in industry litigation. However, PROGA 2025 and states’ regulatory acts circumvent this by focusing on monetary stakes rather than the skill–chance continuum. Courts will thus be asked to reconcile the Lakshmanan doctrine with statutory language that treats money-play as the regulatory trigger.

Constitutional Federalism Questions: Centre v. State

States have enacted laws regulating or prohibiting RMGs (e.g., Tamil Nadu Act 2022/2023). The Madras High Court (Play Games 24×7 & Ors. v. State of Tamil Nadu) ²¹upheld state regulations on the ground that matters of public health and order fall within State List subjects and that there is no repugnancy with central rules which are yet to be fully operational. This trend suggests that states can legitimately supplement or pre-emptively regulate in the perceived regulatory vacuum.

Policy implication: regulatory fragmentation risks a patchwork of rules; a central statute like PROGA 2025 aims to harmonize rules nationwide, but it raises further constitutional questions about the centre’s competence to prohibit activities that states might otherwise permit.

20.Dr. K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226.

21.Play Games 24×7 Pvt. Ltd. v. State of Tamil Nadu, Madras High Court, WP No. 10234 of 2025 (June 2025).

Taxation & Economic Impact

The Central Government has argued for GST at 28% on the entire face value of bets/entry amounts , a position that would drastically alter industry revenue models and was subject to active litigation and scrutiny by courts and tax authorities in 2024–2025. Industry proposals have favoured taxation on operator commissions (service fees) rather than gross stakes, claiming equity and economic viability. Heavy taxation, combined with prohibitory rules, risks pushing many operators offshore or into non-regulated gray markets.

Intermediary Liability, IT Rules & KYC

Under the Information Technology intermediary framework, platforms have certain due-diligence obligations (grievance officers, content moderation). Additionally, states like Tamil Nadu mandated Aadhaar-based KYC in some rules, raising privacy concerns  though the Madras HC accepted Aadhaar checks in the specific context to address addiction and fraud risks. The tension between privacy and consumer protection / AML goals remains a live legal debate.

Consumer Protection & Public Health Concerns

WHO’s recognition of gaming disorder, evidence of suicides linked to gaming losses, and expert committee reports inform states’ and Parliament’s paternalistic rationale. Regulatory instruments include play-time caps, advertising restrictions, mandatory self-exclusion mechanisms, and limits on stakes. These remedies are, however, implementationally challenging for cross-border platforms and require cooperation across payment service providers and app stores.

Comparative Perspective: United Kingdom & Singapore

United Kingdom: The Gambling Act 2005 (and Gambling Commission) adopts a licensing and regulatory approach rather than prohibition, focusing on consumer protection, AML, advertising standards, and technical fairness. The UK model emphasises a regulated market with robust compliance and enforcement tools.

Singapore: Adopts a stricter stance (Remote Gambling Act), criminalising certain remote gambling services while permitting tightly controlled, licensed activity. Singapore’s model stresses strict enforcement and cross-border blocking.

Lessons: India can learn from the UK’s risk-based licensing and from Singapore’s strong enforcement and cross-border blocking mechanisms adapted to India’s constitutional federalism and massive user base.

Dr. K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226 (landmark skill v. chance test).

Facts: The case involved a challenge to the Tamil Nadu State Lottery scheme. Petitioners argued that the lottery was essentially a game of chance and amounted to gambling, which violated public policy and statutory prohibitions. Dr. K.R. Lakshmanan contended that the scheme’s profits were being misused and that it exploited the public. The government defended the lottery as a legitimate method of raising revenue for social welfare and charitable activities.

Issue: The central issue before the Supreme Court was whether a lottery constituted a “game of skill” or a “game of chance,” and whether it was permissible under law. This distinction was critical because games of chance were considered gambling and illegal under the Indian Penal Code and various state enactments, whereas games of skill were lawful.

Decision: The Supreme Court held that the Tamil Nadu State Lottery was primarily a game of chance rather than skill. The Court clarified the “skill versus chance” test, stating that if the outcome is predominantly determined by chance, the activity is gambling, even if some skill is involved. The Court also emphasized that state-run lotteries must comply with statutory regulations and safeguards to prevent exploitation of the public. This judgment became a landmark authority on distinguishing skill-based competitions from gambling.

The landmark case of Dr. K.R. Lakshmanan v. State of Tamil Nadu (1996) 2 SCC 226 holds foundational significance in Indian jurisprudence for distinguishing between games of skill and games of chance. The Supreme Court clarified that the legal permissibility of an activity depends on whether skill predominates over chance. This distinction is crucial because gambling, defined primarily as a game of chance, is largely prohibited under Indian law, while games of skill are allowed. The Court’s reasoning established a clear legal test,the “skill versus chance” test ,which has since guided judicial and legislative approaches to betting, lotteries, and gaming laws. By setting this precedent, the judgment provided legal clarity to regulatory authorities and private enterprises, ensuring that legitimate skill-based competitions could thrive without being misconstrued as unlawful gambling. It also underscored the need for state oversight, particularly when public interest and welfare are implicated, as in state-run lotteries.

Play Games 24×7 Private Ltd. v. State of Tamil Nadu & Ors., Madras High Court, W.P. Nos. 6784 of 2025 (June 3, 2025) upheld TN law regulating RMGs (KYC, night ban).

Facts: Play Games 24×7 Private Ltd., along with other online gaming platforms, challenged the constitutional validity of Sections 5 and 14 of the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022, and the Tamil Nadu Online Gaming Authority (Real Money Games) Regulations, 2025. The petitioners argued that these provisions were arbitrary, illegal, and unconstitutional, particularly concerning online games of skill played with money or stakes.

Issue: Whether the Tamil Nadu state legislature has the authority to regulate online real-money games, and whether the provisions of the Act and Regulations infringe upon the constitutional rights of individuals and entities involved in online gaming.

Decision: The Madras High Court upheld the constitutionality of the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022, and the associated Real Money Games Regulations, 2025. The court emphasized that online real-money games constitute a trade activity with significant implications for public health and, therefore, fall within the state’s legislative competence under List II of the Seventh Schedule of the Constitution. The court dismissed the petitioners’ arguments, affirming the state’s authority to regulate such activities to safeguard public welfare

In a contemporary context, Play Games 24×7 Pvt. Ltd. v. State of Tamil Nadu & Ors. highlights the application of these principles in the digital era. The case dealt with the regulation of online real-money gaming, specifically addressing the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022, and the Real Money Games Regulations, 2025. The Madras High Court upheld the constitutionality of these regulations, asserting the state’s authority to regulate online gaming under its legislative competence to safeguard public welfare. This judgment is significant because it addresses the challenges posed by the rapid proliferation of internet-based gaming platforms, which often blur the line between skill and chance. By affirming the state’s regulatory power, the court reinforced the principle that economic and recreational activities may be subject to regulation if they potentially impact public health, morality, or financial security.

Collectively, these two cases illustrate the evolution of Indian gaming law from traditional lotteries and gambling to modern online gaming. Dr. K.R. Lakshmanan provides the doctrinal foundation for distinguishing skill from chance, while Play Games 24×7 demonstrates the judiciary’s practical application of this principle in regulating a rapidly growing digital industry. Together, they emphasize the balance between individual freedoms, commercial interests, and societal welfare, and they offer a framework for policymakers and courts to regulate gaming activities responsibly in both offline and online contexts.

Recent GST litigation: Centre’s submissions that online gaming equals gambling taxable at 28%  pending Supreme Court consideration (2025).

These cases carry different legal weight  Lakshmanan remains a cornerstone; Play Games 24×7 is an important recent bench decision showing state regulatory leeway; GST litigation is procedural but economically consequential.

SUGGESTIONS

Clarify Statutory Definitions & Carve-Outs: Amend PROGA 2025/Rules (or through subordinate legislation) to clearly define categories: (a) prohibited online money-games posing high addiction/financial risk; (b) regulated skill-based competitions (tournaments with entry fees but transparent rules) that may be licensed; (c) purely social/entertainment games. Precise definitions reduce litigation over skill v. chance.

Adopt a Licensing & Risk-based Regime for Low-Risk Competitions: Instead of blanket prohibition of all monetary competitions, introduce licenses for organised tournaments with operator obligations (auditable RNGs, transparent prize pools, AML/KYC), supervised by a central regulator or an independent gaming authority.

Tax Reform – Tax the Operator, Not the Gross Prize Pool: Taxation should target the platform’s revenue (commissions, advertising fees) rather than gross stakes (which double-tax players and disincentivise legality). A differentiated GST approach or an operator licensing fee will improve compliance and fairness.

Uniform Central-State Coordination Mechanism: Create a central gaming regulator (or a central–state council) to harmonise standards and avoid the current patchwork. States should retain the ability to impose public health measures, but within a national framework to prevent market fragmentation.

Consumer Protection & Privacy Safeguards: Mandatory age gating, spend caps, self-exclusion, advertising limits, and easily available grievance redressal should be codified. KYC/Aadhaar use should be governed by privacy-protective protocols (minimal data retention, purpose limitation, non-use for other state actions) and compliant with India’s data protection jurisprudence.

Technical Enforcement & Payment Gateways: Work with banks, NPCI, and app stores to operationalise blocking of prohibited RMGs while ensuring legitimate e-sports and non-monetary games are not disrupted. Cross-border enforcement agreements and cooperation with app platforms will be essential.

Transitional Relief & Industry Adjustment: Provide a transition period and compensatory measures for domestic companies seeking to pivot to licensed hybrid models (esports, e-learning gamification), accompanied by capacity building for regulatory compliance.

CONCLUSION

India’s legal landscape for online gaming is at a turning point. PROGA 2025 and recent High Court jurisprudence reveal a legislative intent to curb harmful real-money play while asserting regulatory authority to protect public health and consumers. Yet the tension between protectionist prohibitions and the demands of a dynamic digital industry , entrepreneurs, jobs, and esports potential ,requires finely calibrated regulation rather than blunt prohibition. Key reforms should aim to harmonise law across centre and states, adopt a risk-based licensing model for low-risk monetary competitions, structure fair taxation focused on operator revenue, and ensure privacy-compliant KYC and consumer protection. Courts will continue to play a crucial role in reconciling constitutional freedoms with social welfare, but policymakers must craft coherent, evidence-based rules that balance competing values: safety, innovation, and economic growth.

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Srimathi Venkatesan

The Central Law College,TamilNadu

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