15 years of Gambling Insider: An antifragile trajectory
The online gaming industry in India has witnessed tremendous growth over the past decade, navigating multiple legal and structural challenges along the way. In so doing, the Indian online gaming sector has shown not just resilience, but a remarkable ability to absorb disruption, adapt quickly and thrive, demonstrating what mathematical statistician Nassim Nicholas Taleb calls antifragility: the capacity of a system to evolve and improve in the face of shocks, stress and volatile ecosystems. This growth has been fuelled by a sharp increase in mobile-first users, a robust digital payments infrastructure, greater internet penetration and a young, aspirational demographic constantly seeking new and immersive digital experiences. The Covid-19 pandemic catalysed a major leap in user engagement.
The regulatory framework has also evolved alongside the sector’s growth. Most states follow the Public Gambling Act, 1867 or have laws that address only physical gambling. Sikkim was the first Indian state to regulate online gaming by enacting the Sikkim Online Gaming (Regulation) Act 2008, which introduced a licensing regime for all online games offered within the state of Sikkim. Thereafter, for more than a decade, no specific regulatory attention was paid to online gaming as an activity. However, due to the pandemic-propelled popularity of the sector, the Central Government recognised the need to provide regulatory clarity to the sector. Thus, in April 2023, the federal Ministry of Electronics and Information Technology (“MeitY”) introduced a new central framework for online gaming by amending the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Rules 2021”).
These amendments (“Online Gaming Rules”) introduced a co-regulatory mechanism, whereby the MeitY would recognise independent self-regulatory bodies (“SRBs”). The SRBs would in turn verify whether an online real money game could be provided to the general public, as per the criteria provided in the Online Gaming Rules. In this backdrop, and in sync with and as a tribute to Gambling Insider’s remarkable 15 years of covering thought-provoking content on global gaming, we examine four prominent inflection points for the Indian gaming industry: namely (i) delay in implementation of the Online Gaming Rules and having a uniform online gaming law throughout the country; (ii) application of the Goods and Services Tax (“GST”); (iii) the draft Digital Personal Data Protection Rules (“Draft DPDP Rules”) and (iv) the potential application of the Prevention of Money Laundering Act 2002 (“PMLA”) to the online gaming sector.
Dhruv Jadhav
Online gaming rules: The promised land of a centralised regulatory regime
The Online Gaming Rules were meant to be the regulatory panacea for the online gaming sector in the form of a centralised regime. The Rules’ implementation required the Central Government to recognise at least three SRBs. However, till date the MeitY has not notified even a single SRB. Although reportedly at least four SRB applications have been made to the MeitY. As per news reports, the Central Government reportedly has apprehensions about (a) potential “industry influence” in the SRBs, and (b) that co-regulation may not be sufficient to regulate the burgeoning online gaming industry.
This delay in implementation is compounding the uncertainty for the industry
States are seeking to regulate through state-specific legislations and are taking differing views on the legality of games. In February 2025, the state of Tamil Nadu notified state-specific regulations imposing various restrictions on real money games, including a midnight to 5 am login ban and mandatory government document-based KYC for all users. These regulations are presently under challenge before the regional High Court and the judgement will be pronounced soon. Notably, the Central Government has submitted before the High Court that, since no SRBs have been designated, the Online Gaming Rules are presently not enforceable and consequently states can regulate online gaming within their territories. In other states like Chhattisgarh and Haryana, there is a complete lack of clarity on whether certain games are permissible or not under the respective new online gambling laws.
GST: The damocles sword
One of the most consequential developments for the sector has been the shift in how the GST is levied on real-money online gaming. In 2023, the Indian Parliament introduced a host of amendments to the GST legislations (“2023 Amendments”). The 2023 Amendments introduced the concept of “online money gaming” i.e. online games where players deposit money or money’s worth with the expectation of winning money. Previously, games of skill were taxed at 18% on the platform fee component only, while games of chance attracted 28% GST on the entire bet amount. Now, a uniform 28% GST applies to the full face value of all user deposits for all real-money online games, irrespective of skill-chance. Foreign online real-money gaming companies need to now register and pay GST in India or risk being blocked by the ISPs/TSPs on orders of the GST department. Additionally, the Central Government has taken a view that the 2023 Amendments are ‘clarificatory’ in nature and apply retrospectively since 2017. Thus, the GST authorities have served notices demanding a (mind-boggling) total of INR 1.1trn (approx. $13bn) from the sector in retrospective GST dues.
The Supreme Court of India has transferred all challenges against the 2023 Amendments to itself and is presently hearing the arguments. The SC will, inter alia, adjudicate upon (a) the retrospective GST demand notices and (b) the constitutionality of the 28% GST levy. If the decision of the Supreme Court favours the revenue, it could have a far-reaching adverse impact on the viability of the online gaming industry in India.
Shashi Shekhar Misra
PMLA: Winter is coming?
The PMLA forms the core of the Indian legal framework to combat money laundering.Reportedly, the Ministry of Finance (“MoF”) is contemplating categorising online gaming companies as “reporting entities” (“REs”) under the PMLA. In March 2023, the Central Government included virtual digital assets platforms as REs. This indicates the Government’s intent to extend anti-money laundering (“AML”) obligations to emerging tech sectors that handle large volumes of user deposits. In September 2024 in Paris, the Indian Government advocated for online gaming companies to be included within the FATF AML-CFT framework. As of now, game-of-chance operators are included in the ambit of the PMLA. If this proposal is implemented, online skill gaming companies would also need to comply with various PMLA obligations. These include registration and reporting suspicious transactions to the Financial Intelligence Unit-India, undertaking KYC compliances and maintaining records of all transactions for a period of five years. Non-compliance entails fines extending from INR 10,000 (approx. $117) to INR 1,00,000 (approx. $1,170) per instance of non-compliance.
For many platforms, especially start-ups and smaller operators, compliance with the PMLA could be prohibitively expensive. Most gaming companies lack the internal infrastructure to manage AML obligations and rely on costly third-party compliance providers. Additionally, certain compliances can create friction in the user journey and result in user drop-offs. The combined effect of these two repercussions could be severely debilitating for the sector.
Draft DPDP rules: Unanswered questions
The MeitY released the Draft DPDP Rules on 3 January 2025 for public consultation. Industries across sectors are now awaiting MeitY’s notification of the final DPDP Rules and the enforcement of the DPDP Act MeitY has assured the industry that the Government would provide a transition period of about 2 (two) years to ensure compliance.
The Draft DPDP Rules enumerated key compliances for data fiduciaries. Before a platform processes a child’s data, it must ensure it has obtained the parent’s consent. It must also verify the parent’s age using reliable credentials. For cross-border transfers, platforms are accountable for ensuring compliance with any additional restrictions imposed by the government, including controls on access by foreign agencies. While the Draft DPDP Rules provide adequate flexibility for businesses to balance innovation while protecting user interests, certain aspects such as the manner of obtaining verifiable parental consent are still unclear and would likely depend on the evolution of industry practices.
All eyes on the regulators & the Supreme Court
The need for coherence and balance in policymaking for the sector has never been greater. A fragmented approach split across state and central laws would only stifle innovation. The test ahead is not just for the industry, but for the State itself: if the sector has so far proven to be antifragile, it is time for the law to demonstrate the same adaptability by moving toward a central, simple and proportionate regulatory architecture which enables the industry to grow, bolsters investor confidence and protects the end user’s interests.
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