The Aakhya Weekly #161 | Ban Hammer Strikes India’s Real Money Gaming Industry
In Focus: The End of the Online Gaming Money Spinner
On August 21st, the Indian Parliament passed the Promotion and Regulation of Online Gaming Bill, bringing about a sweeping prohibition on Real Money Gaming (RMG) platforms. For many, this sparked panic—would popular video games like Counter Strike or PUBG suddenly vanish? The short answer is no. The Bill doesn’t target conventional video games or e-sports titles. Instead, it specifically bans RMG operations of platforms such as WinZO, Dream11, MPL, and Zupee, which have led the industry’s money-based gaming formats.
This legislation represents one of the most decisive moves the Indian government has made in the digital gaming sector. However, to understand how we reached this point, we need to look at the history of online gaming regulation in India, the rationale behind the ban, and what the way forward might look like.
A Brief Legislative History
India has long grappled with the blurry line between gaming and gambling. The distinction was first clarified in the State of Bombay v. R.M.D. Chamarbaugwala (1957) case. The Supreme Court held that games of mere chance could be considered gambling, while games that “depend to a substantial degree upon the exercise of skill” would not. This became the touchstone for Indian gaming law.
Decades later, the Information Technology Act, 2000, opened a new chapter by giving the government digital oversight tools. Although not designed for gambling, certain provisions of the Act—such as Section 67 (prohibiting obscene content) and Section 69A (granting powers to block websites)—were later invoked to crack down on illegal online gambling platforms. Yet, as digital formats evolved, so did the grey areas. In practice, the difference between “skill” and “chance” in online formats became increasingly murky. Many RMG platforms exploited this ambiguity to operate freely. To fill this regulatory vacuum, states began creating their own rules.
Sikkim was one of the first to introduce the Sikkim Online Gaming Act, 2008, which required online gaming companies to obtain licenses.
Tamil Nadu later enacted stricter laws, including the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, followed by the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022.
At the central level, the government amended the IT Rules, 2021, in January 2023, proposing a co-regulatory framework with Self-Regulatory Bodies (SRBs). This framework introduced mandatory KYC checks, age verification, and a three-tiered oversight mechanism as referenced in the Aakhya Weekly #29
Taxation was another evolving battleground. Until mid-2023, 18% GST was imposed on skill-based games, while games of chance faced a 28% rate. In July 2023, however, the 50th GST Council Meeting removed this distinction, imposing a flat 28% GST on all online gaming—applied retrospectively from July 2017. This triggered chaos, as gaming companies suddenly faced massive tax liabilities. Gameskraft Technologies, for instance, received a staggering ₹21,000 crore notice.
While these regulations tightened the noose, there had never been a complete nationwide ban. States like Telangana, however, experimented with one. The Telangana Gaming Ordinance, 2017, banned all stake-based games, whether ‘skill-based’ or ‘chance’, making it the first state-wide prohibition. In that sense, India already had precedents for a hardline stance. Nevertheless, the new central Bill surprised many. After all, online gaming contributes 86% of India’s gaming revenues, generating around ₹31,000 crore annually, and employing nearly 200,000 people. For an industry of that size, prohibition is akin to an economic earthquake.
The Government’s Rationale
So why take this drastic step? The government has cited two primary reasons: mental health and national security.
The Mental Health Crisis
RMG platforms thrive on addictive design. They rely on reward loops and persuasive algorithms that condition players to keep pouring money in. Unlike casual gaming, the monetary stake amplifies both the thrill and the risk, often driving players into compulsive cycles.
The consequences have been severe. Between 2019 and 2024, Tamil Nadu alone recorded 47 suicides linked directly to online gaming. At the national level, Union IT Minister Ashwini Vaishnaw informed Parliament that nearly 45 crore Indians have been negatively affected by RMG platforms, collectively losing around ₹20,000 crore. For policymakers, these figures painted a grim picture: online gaming wasn’t just entertainment—it was a public health hazard.
Security and Financial Risks
The second rationale is national security. Investigations by the IT Ministry linked certain online gaming platforms to money laundering, terror financing, and tax evasion. Terror outfits, officials argue, have begun exploiting in-game chats for recruitment. Vulnerable individuals—particularly those financially ruined by RMG platforms—could be easily manipulated with the lure of quick money.
While confirmed cases in India remain scarce, the potential risk was enough for the government to act pre-emptively.
Industry Fallout
The impact has been swift. Most major RMG companies have complied with the new Bill:
Dream11 suspended all real money operations.
WinZO, Zupee, PokerBaazi, My11Circle, and Probo—all shut down their money-based formats.
Gameskraft Technologies announced the complete shutdown of RummyCulture.
Others, however, are gearing up for legal battles. Companies like A23 are preparing to challenge the Bill in the Karnataka High Court. Regardless, the era of large-scale RMG in India is effectively over. For many firms, this means pivoting business models entirely, shifting towards non-monetary skill-based games, e-sports, or even game development.
What Could Come Next?
Interestingly, the Bill doesn’t stop at prohibition. It also seeks to promote e-sports and video game development—a sector where India lags far behind countries like South Korea, China, or the United States.
This pivot could have some silver linings:
A Boost for E-sports
With RMG out of the picture, competitive skill-based gaming may finally get the spotlight. India has a vast young population, and with the right infrastructure, it could become a serious player in global e-sports.Growth of Game Development
Despite its IT strength, India has yet to have a large-scale dedicated video game development industry. Redirecting resources and talent from RMG into game design, production, and publishing could open up new economic frontiers.Startups and Innovation
With nearly 200,000 employees now facing uncertainty, the government may need to create incentives for gaming and tech startups. Nurturing local studios could help absorb displaced talent and position India as a hub for the creative industry.
This transition won’t be easy. Many workers and investors tied to RMG may not find immediate alternatives, leading to short-term economic pain. But if guided correctly, the ban could indirectly accelerate the growth of India’s legitimate gaming ecosystem.
A Double-Edged Sword
Prohibition is rarely a perfect solution. History shows that outright bans often drive activities underground. If people want to gamble, they usually find a way. By shutting down legal RMG platforms, India risks pushing users towards unregulated, possibly unsafe offshore sites. This could worsen the very problems the government aims to solve. That’s why many argue a regulated environment with safeguards, caps, and transparent taxation would have been more effective than a blanket ban. The GST Council’s flat 28% tax was already squeezing the industry, and tighter regulation could have struck a balance between revenue, consumer protection, and innovation.
Conclusion
As a gamer, I do welcome the ban. All too often, we read media headlines about “Online Gaming” that blur the distinction between RMG platforms and Video games, creating massive misunderstandings about the video games industry. With this ban, it is clear that the Government acknowledges and realises the differences between the Online Gaming industry and the Video games industry.
But the government’s solution still feels blunt. Gambling impulses won’t vanish overnight; they may simply migrate to darker corners of the internet. The ban may curb some harms, but it risks creating others.
India now faces a choice. If prohibition is to work, it must be paired with strong promotion of healthier alternatives, e-sports, creative game development, and tech-driven innovation. Otherwise, this ban could be remembered not as a bold step forward, but as another missed opportunity in shaping India’s digital future.
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From political roadblocks and shifting governments in the UK to India’s careful trade considerations, he explains how both sides overcame challenges, navigated post-COVID realities, and found common ground to bring this landmark deal to life.
Check out the links below to access the full podcast.
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