The Promotion and Regulation of Online Gaming Bill, 2025, passed by the Rajya Sabha on Thursday, threatens to upend the vibrant, multi-billion-dollar online gaming sector in India. By banning all online money games outright, the government has missed the opportunity to take a calibrated approach to regulating a sector that employs over 200,000 people and contributes significantly to the national exchequer.

The Statement of Objects and Reasons to the bill cites concerns such as addiction, money laundering and user safety among other concerns to justify the prohibition on online money games.

There always has been a plethora of options to regulate the gaming sector, ranging from creating a licensing framework for operators of real money games, imposing deposit and loss limits to protect users to implementing strict know-your-customer measures and anti-money laundering provisions. Similar models have been successfully adopted around the world.

Such an approach would have provided the government with the necessary oversight while allowing the industry to grow responsibly.

Instead, a rushed and unilateral law has been enacted, one that will now face years of legal challenges. But even a successful legal challenge will come too late for many businesses that would have already been forced to shut down.

The ban is likely to be the death knell for more than 400 Indian companies and threatens to wipe out an industry that was projected to reach a valuation of $9.1 billion by 2029. The loss of revenue from the gaming market could cost the government an estimated Rs 20,000 crore in annual Goods and Services Tax and income tax.

The bill not only threatens current jobs but could also stifle talent development. Game developers, graphic designers and engineers – a highly skilled workforce – will be forced to either move to other sectors or leave the country.

The gaming sector provides a unique opportunity for India to lead the world in digital regulation. But choosing prohibition over partnership threatens to reverse the course on many laudable steps the government has adopted to create an enabling environment for innovation in India.

Furthermore, a prohibitionist approach is a gift to the black market. With the ban on regulated, compliant Indian businesses, the demand for these games is unlikely to vanish. Instead, users may migrate to unregulated, illegal offshore platforms that operate without any safeguards, age verification, or consumer protection.

This creates a far more dangerous environment, making users vulnerable to fraud, data theft and financial exploitation. It also starves the government of tax revenue and makes it impossible to monitor illicit financial flows.

The gaming bill could also ward off foreign investors. The gaming industry was viewed as a sunrise sector attracting significant inflows from foreign investors despite the regulatory uncertainty around real money games. However, the move to prohibit online money games and in effect shutter the operations of an entire sector without consultation is likely to dissuade investors from taking risks to invest in sectors that thrive on innovation and push the boundaries of what is permissible.

The gaming industry is dynamic, with segments ranging from e-sports and casual social games to much-debated real-money games. Any legislation concerning this sector, therefore, demands a nuanced understanding of its intricacies.

Previous conversations about the legislation had explored a measured approach, like getting the sector to establish self-regulatory organisations and making a distinction between games of skill and games of chance.

Good governance demands that regulations are proportionate and well-considered. In a complex digital economy, this means working with those who have built the technology and understand the market dynamics.

The lack of consultation has led directly to several flaws in the bill itself. Most glaringly, the gaming bill fails to make a clear distinction between games of skill and games of chance. This is not a trivial legal point, but the very foundation upon which the industry has operated for years.

Several courts, including the Supreme Court, have upheld the legality of skill-based games such as poker and fantasy sports. By lumping all real-money games into the same category, the gaming bill ignores judicial precedent and shows a fundamental misunderstanding of the sector.

The implementation of the gaming bill should be put on hold until a more workable solution is found. Good regulation is not about wielding a regulatory hammer but about building a stable and predictable framework that fosters innovation and protects citizens in a way that is smart, effective, and sustainable.

Puneeth Nagaraj is a technology and regulatory lawyer practicing in Delhi and Bangalore.

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