The ancient Indian epic Mahabharata tells the story of a great war between rival factions that was set in motion by a game of dice. The episode serves as a cautionary tale about the attraction and dangers of gambling. Inspired by such teachings, Indian law has long sought to act as a guardian of fair play in gaming. Yet today India finds itself facing a regulatory gamble of its own.

India’s online gaming industry has become one of the fastest-growing sectors of the digital economy. The industry generated nearly 3.7 billion USD in revenue in 2024 and is projected to reach 9.1 billion USD by 2029 with a compound annual growth rate of 19.6%. it also has a massive user base of around 488 million gamers and has created more than two million jobs. Within this broader industry, online money gaming is the largest source of revenue. In 2024, it contributed over 86% of the industry’s total earnings. Applications like Dream11, Rummy Circle, and WinZo have gained millions of players and significant investments, making online money gaming a significant economic activity. Its swift growth has been a concern of addiction, economic damage, and money laundering. The debate is no longer about the need to regulate online gaming, but the question is how the industry can be regulated in a way that does not compromise its economic potential while ensuring consumers are protected. In this context, India has passed the Promotion and Regulation of Online Gaming Act, 2025 (PROGA). It entered into force on 1^st May 2026 and is the first national policy on online gaming in the country. Not surprisingly, it has been the focus of much constitutional and regulatory discussion.

 The debate is at the heart of today’s gaming law in India. The essay focuses on four issues: the difference between games of skill and games of chance; the federal division; the limitation of self-regulation; and whether social games that are based on cash rewards are considered “online money games” under PROGA 2025. It suggests that the best way to strike a balance between constitutional principles, economic growth, and public interest is a cooperative federalism system.

The Skill Vs. Chance Distinction: An Almost Seven-Decade Judicial Foundation

The distinction between games of skill and games of chance has long formed the basis of gaming regulation in India. Section 12 of the Public Gambling Act, 1867, excludes games of skill from its scope, reflecting the view that such activities are different from gambling. In R.M.D. Chamarbaugwalla v. Union of India, the SC recognized that almost all the games involve both skill and chance factors. To address this overlap, the court adopted the preponderance test. A game is classified as one of skill when skill predominates over chance and vice versa. Varun Gumber v. Union Territory of Chandigarh determined that fantasy sports on Dream 11 are games of skill based on the preponderance of skill and judgment, which was upheld by the Supreme Court later.

On the contrary, PROGA 2025 overlooks the distinction between skill and chance by prohibiting online money games under sections 5 and their advertisement under section 6. Violations are punishable with imprisonment of up to three years and fines of up to 1 crore under section 9(1), and up to two years and 50 lakhs under section 9(2) respectively. Critics argue that the act violates Article 14 by arbitrarily clubbing games of skill and chance into a single OMG category, contrary to the principle of equality, the antithesis of arbitrariness given in the case of E.P. Royappa v. State of Tamil Nadu. Furthermore, the act also violates Article 19(1)(g) by imposing a blanket ban on previously lawful trade despite the availability of less restrictive regulatory measures like licensing, age verification, and regulatory oversight.

The government’s reasoning behind this ban is rooted in issues like addiction, algorithmic manipulation, and financial damage. However, History demonstrates that prohibition is often counterproductive. The volume of money bet on illegal gambling sites in the UK is estimated to have almost tripled from £16.6 billion in 2019 to nearly £44 billion in 2023, after the strict provision was introduced by the UK government. This implies that the limitations can drive consumers to black markets instead of simply ending the demand.

Federalism And Gaming Regulation: State Vs Centre

Separation of powers of the Union and the States in legislation of PROGA remains the central point of contention. Under Entry 34 of List II of the 7^th schedule, betting and gambling are within the exclusive domain of state legislatures. However, the Union seeks to justify it on the basis of Entry 31 of List I, which deals with communication networks and  Article 248 read with Entry 97, which grants parliament residuary powers.

 It is hard to justify reliance on Entry 31 in the doctrine of pith and substance. The technological infrastructure is not just regulated, as in sections 5,6,8 and 9. They mostly deal with the banning and punishment of the offer, promotion, funding and facilitation. The terms ‘encouraging’ and ‘assisting’ in the Act further suggest the intent of regulating gambling act instead of the communications network. The act’s preamble further cites addiction, losses, and manipulation as harms traditionally associated with gambling, reinforcing that PROGA targets gambling rather than communication networks. Therefore, the true nature and dominant purpose of the act is the regulation and prohibition of gambling, while its effect on communication networks is merely ancillary.

Further, the union justifies PROGA through Article 248, read with entry 97 of List I, arguing that online gaming is a novel digital activity. The relevant question is not the medium but the nature of the activity. Since the nature of gambling has remained the same, online gambling cannot become a residual subject because it is done through a digital medium. In State of Kerala v Asianet Satellite Communications, the SC made it clear that a mere change in the medium of delivery will not affect the essential character or nature of an activity.

The Status Of Cash-Reward Social Games Under Proga

The definition of an online money game under PROGA creates a significant challenge when applied to social games that offer cash rewards. The Act explains such games by considering the payment of entry fees or stakes and the possibility of obtaining a monetary gain. This type of form-based approach deals with the involvement of money and not the nature of the activity itself. Consequently, fundamentally different games can be handled in the same manner.

 The problem is clear in three situations- firstly, when a subscription-based game occasionally provides prize draws, it is not likely to be considered an online money game as the subscription fee is paid for access to the platform rather than staked on a particular outcome. Secondly, a free to play trivia game which offers cash prizes falls into the regulatory grey area. Players compete for money but do not pay a fee or stake anything, placing the game outside the literal wording of the definition. Thirdly, a puzzle or quiz platform would be classified as an online game if it charges an entry fee and offers cash prizes even when success depends mainly on skill. Such differences are significant as games serve different functions and work in different ways. Unlike gambling, in games like puzzles, trivia, the reward is given on the basis of skill and performance. Nevertheless, PROGA deals with them in the same manner because of the entrance charge and cash prize.

A possible solution would be to incorporate the preponderance of skill tests into PROGA’s framework. Under this test, the nature of a game should be determined by examining whether skill or chance predominantly influences the outcome, instead of relying only on the existence of an entry fee or cash prize. The assessment may consider factors such as the role of a player’s knowledge, training, judgment and strategy in determining success. Where these elements substantially outweigh chance, the game should be classified as a skill-based game and excluded from the scope of online money game, irrespective of the monetary rewards offered. It would prevent the unintended regulation of educational and competitive platforms such as puzzles, quizzes, and chess, etc. Such an approach ensures that PROGA regulates only those games that genuinely pose gambling-related risks.

The Best Regulatory Model: Cooperative Federalism

India’s online gambling regulation has oscillated between two extremes: fragmented state-level regulation, which created regulatory inconsistency and arbitrage, and a highly centralized PROGA framework, undermined state autonomy through a blanket ban on online money games. Neither approach effectively balances federalism, consumer protection, and economic realities.

A more constitutionally sound way to balance these interests lies in the model of cooperative federalism. While gambling and betting are state subjects under Entry 34 of the State list, at the same time, the borderless nature of online gambling necessitates national standards on consumer protection compliance and offshore enforcement. Thus, parliament should establish a framework law addressing these concerns, while preserving state authority to permit, prohibit, or license online money games.

This experience of other countries points in the same direction. In Canada, gambling is mainly regulated by the provinces, while the federal government intervenes only on issues of national importance. Similarly, the EU’s Digital Services Act sets common rules for online platforms, but the decisions on online gambling are left to the individual member states.

 However, if regulatory uniformity appears necessary, parliament should use the constitutional tool described in Article 252 that provides for a better regulation option by permitting the Parliament to legislate on state-list subjects upon the request of two or more states, rather than the centralized approach that takes all the rights from the states to regulate their own subject.

Conclusion

The above analysis highlights four main issues in India’s online gaming laws. The distinction between skill and chance is undermined by PROGA’s outright ban, exposing the legislation to serious constitutional challenges under Article 14 and 19(1)(g). The Constitution’s federal structure assigns authority over betting and gambling to the states, and both Entry 31 and the residual powers under Article 248, along with Entry 97, do not give power to the Union to legislate on a state subject. The SRB experiment, while innovative, failed due to the conflict of interest in self-regulation by the industry. In the meantime, uncertainty between legitimate skill-based competitions and social gaming platforms is created by the ambiguous terms of PROGA.

There is no need for conflicting rules from states or a complete ban. A more balanced solution would be a national safeguard that will protect consumers and allow each State to regulate online gaming in its own way. The true risk isn’t online gaming, but whether India can regulate it without sacrificing the constitutional principles of its federal democracy.