On August 22, 2025, the Hon’ble President assented to the Promotion and Regulation of Online Gaming Act, 2025 (the “Act”). The Act aims to promote e-sports and social/educational gaming, while prohibiting online money games, creating a central authority to classify/register games, and equipping the Government with enforcement and blocking powers.
Applicability & reach
The Act extends to the whole of India and also applies to all online money gaming services offered within the territory of India or operated from outside the territory of India.
What’s prohibited vs. what’s promoted
- Definition & scope: An “online money game” is any online game whether based on skill or chance, or both, played by a user by paying fees, depositing money or other stakes with the expectation of a monetary or other enrichment. Note that “other stakes” means anything equivalent or convertible to money and includes credits, coins or tokens (real or virtual).
- Blanket prohibition: No person may offer, aid, abet, induce, or otherwise engage in offering an online money game or online money gaming service.
- Advertisement ban: Any advertisement in any media that promotes online money games is prohibited.
- Payments interdiction: Banks, financial institutions, and any facilitator must not process or authorise any transaction towards payment for an online money gaming service.
- Positive space: The Government will recognise e-sports within the sports-governance framework and register e-sports with the Authority as a competitive sport (with prize money and participation fees permitted, but no wagering) and facilitate the development of “online social games” which can monetise via access or subscriptions as long as there is no stake and no expectation of monetary gain.
The authority on online gaming
The Central Government shall constitute/designate an authority under the Act (“Authority”) with powers to:
- determine whether a game is an online money game (on application or suo motu);
- recognise/categorise/register online games; and
- issue directions, guidelines and codes of practice, compliance of which is mandatory for any offering/organising/facilitating online games.
The Government may also prescribe the Authority’s composition, procedures and grievance-handling.
Offences & enforcement toolkit
- Core penalties:
- Offering online money gaming services: up to 3 (three) years’ imprisonment and/or ₹1 (one) crore.
- Advertising: up to 2 (two) years and/or ₹50 (fifty) lakh.
- Facilitating payments: up to 3 (three) years and/or ₹1 (one) crore.
Repeat offences shall result into higher minimum imprisonment terms/fines.
- Cognizable & non-bailable: Offences under the payments and offering prohibitions as more particularly set out under section 5 and section 7 of the Act are cognizable and non-bailable.
- Corporate liability (with an important carve-out): Officers ‘in charge of’ the business are liable unless they prove lack of knowledge or due diligence. Independent/non-executive directors not involved in decision making are protected.
- Blocking power: Information related to online money gaming services may be blocked for public access, dovetailing with the Information Technology Act, 2000 regime.
- Search, seizure, arrest (including in digital/virtual spaces): Central/state authorised officers may enter any place (physical or digital) and search/arrest without warrant for offences under the Act with Bharatiya Nagarik Suraksha Sanhita, 2023 safeguards.
- Override: The Act is in addition to other laws and has overriding effect in case of inconsistency.
Finance Perspective
- For lenders to the gaming and adjacent consumer-tech sectors, the Act is a steep change. India-facing real-money business models now face a legal hard stop, and monetisation pivots toward e-sports or social-game subscriptions will require time, capex, and new distribution. This has immediate consequences for covenants, cash flows, and collateral values.
- In term sheets and facility agreements for lenders having exposure in the gaming and adjacent consumer-tech sectors, it would be imperative to hard-wire the following:
- an explicit illegality and event-of-default construct tied to any offering that falls within “online money game” as defined by the Act or subsequently categorised by the Authority,
- a covenant to geoblock India for any legacy real money gaming titles, together with compliance undertakings on advertising and payment flows,
- information rights that require prompt sharing of any notices, classification rulings or show-cause communications, and
- a negative covenant on introducing or re-introducing convertible virtual items that could be construed as “other stakes”.
- Re-rate portfolio risk. For portfolios with multiple real money gaming exposures (equity, VC-backed credit lines, and revenue-based facilities), down rounds and working-capital squeezes may be expected as ad inventory and payment rails disappear. Lender may provide bridge financing only where warranted, tied to clear milestones (e.g., Authority recognition for e-sports, monthly active users/paid-subscriber targets for social titles), with tight drawdown conditions and a defined conversion or takeout path.
What lenders and payments players should do now (practical to-dos/checklist)
- Re-underwrite merchant/buyer books for exposure to “stakes/winnings” mechanics, consider consent requirements for pivots, cash controls during transition and update screening lexicons to catch disguised descriptors and virtual-asset references.
- Add “classification by Authority” as an objective trigger in covenants and events of default; require prompt notice of any ruling or inquiry.
- Amend marketing and partnership contracts to exclude promotion of money gaming and to provide step-in termination rights on breach.
- Calibrate TRA/escrow and waterfall to prohibit India-facing stakes and to allow rapid shut-off of problematic flows.
- Seek classification/registration where needed and align with directions/codes prescribed by the Authority under the Act and maintain a compliance file for board oversight.
- For boards, minute a standing directive on compliance and document the diligence framework. This will support the statutory due-diligence defence and protects independent/non-executive directors.
A neutral view
The Act opts for clarity over calibration. It flatly bans money-stake online gaming, while nurturing e-sports and social/educational gaming and centralising gatekeeping via an Authority. For public-interest objectives (consumer protection, financial integrity, youth safety), the architecture is decisive and enforceable. For industry, it is a stark pivot. Real money gaming models must exit or transform, and capital will likely flow into e-sports infrastructure, social-game studios, and adjacent creator/ed-tech plays. It remains to be seen if the industry is able to come out with any innovative products to counter the impact that the Act is having on the online money gaming industry.
Authored by:
Ms. Himali Dixit, Senior Associate
Mr. Aditya Khadria, Partner
Mr. Indrajit Mishra, Senior Partner
